• 13 July, 2024

What Are Utility NFTs and Why Are They Important? 

NFT was first launched around 2014, but it was only around 2021 that it became popular and broke into the mainstream. At that time, it was often referred to as worthless as it couldn’t offer any ounce of functionality. But all this changed with the launch of utility NFTs. This article offers a detailed view of utility NFTs and their importance in regard to the NFT market.   

What Are Utility NFTs?

Initially, NFTs were criticized for being worthless and with no intrinsic value, which led to the advent of NFT 2.0 or utility NFTs. Utility NTFs represent a major shift in the concept of digital ownership, as they offer their holders various benefits, rewards, exclusive privileges, and more. These NFTs attach tangible value and practical application to digital assets, transforming them from collector items into tools offering rewards, access to events, and unique experiences. Unlike traditional NFTs, utility NFTs rely on their practical functionalities and real-world applications to drive value. 

To put it into perspective, in order to incentivize user participation and engagement, they develop models in which holding or using these NFTs grants exclusive features or governance rights within decentralized applications. This fosters mutual cooperation between developers, users, and token holders, driving community growth. 

For example, in gaming, these NFTs can represent characters, in-game items, or abilities, allowing players to own and trade these assets and access different platforms. In art, artists can sell NFTs, granting access to exclusive artwork, participation in special events, or a share of the income generated from the artist’s work.  

How Do Utility NFTs Work?

Utility NFTs are built on platforms that support self-executing smart contracts, which are useful for automating functions like reward distribution and feature access. These NFTs have their predefined functionalities encoded into the contracts, ensuring smooth execution within the blockchain ecosystem. While some NFTs may be single-use, such as concert or event passes, most of the NFTs have continuing functionalities, becoming an integral part of the broader network of digital ecosystems. These ecosystems include gaming platforms, virtual worlds, or DeFi projects.  

Many NFTs also have dynamic attributes programmed into smart contracts, which allow them to change or evolve over time based on specific events or conditions. Furthermore, utility NFTs also come with long-term commitments, like unique community member engagement, reward distribution on achieving milestones, and more. 

Additionally, utility NFTs are designed to be interoperable, allowing them to communicate perfectly with various decentralized applications and platforms in an ecosystem. This enhances their versatility and utilization across different ecosystems. 

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Why Are Utility NFTs Important?

Utility NFTs play an important role in fostering broader adoption and accessibility within the blockchain community. By offering tangible benefits and real-world applications, these NFTs go beyond traditional collectors and enthusiasts. It makes them accessible and attractive to a diverse range of people. Furthermore, adding practical functionalities into digital assets (NFTs) associated with a brand is helpful in brand building and fosters customer loyalty.  

By creating a sense of exclusivity and social belonging among token holders, utility NFTs help foster a community of loyal customers. As customers engage with the brand through NFTs, they slowly develop a deeper connection and commitment to the community, contributing to long-term loyalty and engagement. This tool enables brands to build good relationships, drive engagement, and establish loyalty within their customer base. They also open doors to innovative revenue streams and funding models, allowing creators to leverage NFTs for access, exclusive content, and more, unlocking different methods for monetization. 

Utility NFTs are revolutionizing the way investors and users perceive NFTs’ worth by offering practical value and functionality. Through offering functionality, they justify their value beyond speculation, attracting a large user base and increasing market interest in NFTs. They display the potential to go above meaningless speculation to represent rights and in-game assets.  

What Are the Use Cases of Utility NFTs?

Gaming Applications

Utility NFTs are becoming increasingly popular in the gaming industry because they represent various in-game assets, special abilities, or characters. These NFTs give players the opportunity to buy, sell, and trade these assets within the ecosystem, creating a lively and dynamic economy. 

Physical Assets Tokenization

Utility NFTs are also being used to tokenize real-world assets like luxury goods, real estate, and others. This allows assets to be divided into smaller tradable units, enabling fractional ownership. Furthermore, this makes assets that were initially difficult to sell easier by making them more accessible to large audiences.  

Exclusive Access Rights

Some utility NFTs, like digital collectibles, offer their holders exclusive access to events, real-world merchandise, governance rights, and more. Through the combination of tangible benefits and digital ownership, these NFTs gain practical value and foster loyalty and engagement.  

Discounts and Promo Codes

Some utility NFTs, like digital collectibles, provide their holders with exclusive access to events, services, real-world merchandise, or governance rights. By combining digital ownership with tangible benefits, these NFTs gain additional practicality and value.

Music and Entertainment

Smart contracts linked with music utility NFTs can automatically distribute royalties. In addition to providing access to exclusive content, these NFTs allow holders to become a core part of a music label, record label, or streaming platform. 

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Examples of Utility NFTs


LinksDAO is at the forefront of building a global community of golf enthusiasts within the web3 space. The platform intends to create a new way to experience and enjoy the game of golf. By holding NFT tokens, community members gain access to exclusive events like tournaments and special events. In addition, members can propose new ideas and vote on new developments on the platform, enhancing the utility of LinksDAO’s NFTs and creating an active community.  

Vee Friends

VeeFriends, an NFT initiative launched by Gary Vaynerchuk, has incorporated utility within its NFTs. Token holders can attend the VeeCon convention, an international conference tailored for NFT enthusiasts. This conference offers holders exclusive benefits like interaction with other enthusiasts, exchanging ideas, learning from each other, and mentorship lessons from Gary. By integrating NFTs as event tickers, they offer a unique and valuable experience for the community.


Doodles is an NFT project by Burnt Toast that stands out for its community-centric approach. It offers token holders the utility to cast votes for upcoming releases and activities. The project comprises 10,000 hand-drawn collectibles featuring vibrant characters with various traits. When a community member owns a Doodle, they are eligible to participate in the voting process and can have a say in the project’s future direction. Furthermore, the initiative has established the Doodlebank, a treasury governed by the community where money is kept for future growth and development.  


Utility NFTs represent a significant change in the landscape of NFTs, offering opportunities for creators, brands, and users to earn tangible benefits. By unlocking novel ways to engage with customers, they foster loyalty and community growth. With the differences in the digital and physical worlds constantly being bridged, utility NFTs help shape the future of commerce and ownership.   

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