Any digital asset's utility is its foundation, as a lack of a use-case for a digital asset
means demand will be low. An NFT with high utility has an immediate value that may
grow over time based on the amount of traction it acquires and the success of the underlying
project.
An NFTs' value comes from its practical use in both the digital and physical worlds.
As the two worlds become more intertwined, an asset class is required to translate the
value of the assets from the actual world to the digital world.
The real-world utility of NFTs is another element to consider. There is a benefit for
some NFTs that can be utilised to swap for real-world prizes.
NFTs are not only unique but they may also be employed to execute a wide range of activities.
In games, for instance, they can be utilised as spells or power-ups. In addition, they
can also be utilised as building materials and character apparel.
The strength of an NFT's collection is another component that adds to its value. Because
limited NFTs are part of a larger collection, the attraction of future content can alter
the value of NFTs already issued.
Play-to-Earn NFTs, such as Axie Infinity, MOBOX, and others, are good examples of utility.
In this context, NFTs play a pivotal role as in-game assets with a distinct set of traits
from which NFTs get value. As new communities of gamers arise, the value of gaming NFTs
will keep climbing inside the gaming ecosystem.
In addition, some people use NFTs as loan collateral. NFTs are deemed inaccessible in this situation
until the borrower repays the loan and interest. Once the loan is paid off, the NFT is returned.
Provenance
The NFT's roots are linked to provenance. Before considering an NFT, users must first
know who the creator is. It is necessary to research the NFT's backstory, origins of the
creator, the creator's market importance, etc.
Users can monitor their community followings and creative sites to determine their potential
for personal development, making it simple to conduct a study on a creator. The more
well-known a creator is, the more likely their work will be valued on the market.
Size of the Community
Community is an integral part of NFTs since it determines the number of prospective users
and purchasers on the open market. The greater the community, the more NFTs are drawn by
word-of-mouth. Thus, the initiative will be able to reach a greater number of buyers.
Monitoring the subscriber count and browsing the official social network pages might give
users an idea of the size of the community. Another consideration is the number of NFTs
obtainable in secondary markets. There is also a need to track the number of unique
wallets engaged in the NFT market since this could predict total market demand.
Bottom line
NFTs have grown into a multibillion-dollar business driven by art collectors and memorabilia
hunters. They are buying expensive mementos and digital works from celebrities in sports,
music, cinema and art, among others, sometimes for millions of dollars.