Utility: NFTs, what is the Point?

While I wouldn't say I'm massive Non-Fungible Token (NFT) collector, I definitely have been getting involved on the periphery for some time (mostly on the WAX blockchain). Indeed, I wrote a few articles a while back about my Bitcoin Origins (BTCO) collection, which documents the stages of Bitcoin's history over various 'moments', from white paper to inceptions. Along with the NFTs collected for the usual aesthetic reasons and bragging rights there is an overarching puzzle (or puzzles) hidden within the cards that at one point led us to the winning of a whole BTC.

In case you're interested in this back story here they are:

• The Hunt for the Golden Rabbit and 1 BTC Reward: Stage 1
• The Hunt for the Golden Rabbit and 1 BTC Reward: Stage 2
• The Hunt for the Golden Rabbit and 1 BTC Reward: Stage 3...1 BTC won!

Anyway, you may have spotted a couple of the other NFT Genius projects floating around recently; Tezos OriginsRebel Rabbits. So as you can imagine with so much going on over there the BTCO crowd (who are very active in the other communities, especially Rebel Rabbits) have been taking a little backseat for a while. Despite this hiatus a few new folks still find their way to the project and just recently on the discord chat the following conversation popped up.

This got me thinking about our general expectations for a project for longevity and utility and our general need for purpose.

What do we think about when we think 'utility'? According to Wikipedia it has the following meaning:

Within economics, the concept of utility is used to model worth or value.

The dictionary definitions include:

• the state or quality of being useful; usefulness:
• something useful; a useful thing.
• Often utilities. a useful or advantageous factor or feature:
• having or made for a number of useful or practical purposes rather than a single, specialized one:

These are interesting in quite a few respects when trying to apply the idea of 'utility' to the concept of NFTs. Firstly, if we look generally at NTFs we can usually see two main components to them:

• 1. NFTs usually comprise of some sort of multimedia digital object (Video, image, music, game etc.)
• 2. Behind the attached media is a uniquely identifiable verification of ownership

If we take these ideas separately we can see that individually they may provide their own distinct forms of 'utility' based on our understanding of its definition.

NFT as Media

For an example, let's look at the image below (right-click 'save as', so I own it now, that is how this works right?)

We could say we like the way this looks, giving it aesthetic value, though this could easily vary from person to person. We could also say that this has utility because it was auctioned off for $69M. In this case it is as if the bidders expressed their measure of utility as a $ value.

Now let us say that because it has been bought for $69M then perhaps, as with other more traditional assets, it has been given a new mechanism of utility. Instead of just being a visual artwork, pleasing to the eye now it has become a store of market value.

In my mind it is like we're determining two types of utility:

• Subjective utility - This can be traits that exist already for an NFT (for example, being visually appealing), they are determined on a personal level for each individual
• Collective utility - This seems to be some sort of value driven by the market or community wide agreement. In the case of Beeple's piece, while it may not re-sell for exactly the same price it can be agreed that at a given point in time it was determined, by a collective, to have a specific monetary value.

Initially here I considered the concepts of objective utility, though I am not sure if this exists when considering NFTs because even collective utility would be derived from a group's personal views on the value of an object.

NFTs as Ownership

The second component of an NFT revolves around verifiable ownership. This, we could argue, can be consider a intrinsic utility of all NFTs. While the media and gamification of the media content of an NFT may initially have subjective utility, the function of the code underpinning the transfer/verification of ownership of an NFT is built into the foundation of it. Therefore, this level of utility is inherited by all NFTs regardless if you like or dislike the content, the truth is that they all achieve the same base utility.

For the ownership to elevate from the base level of utility it depends on a couple of different things (outside of the market derived/assigned value we saw with NFTs as Art):

• 1. The underpinning rules within the contracts (code) from which the NFT is derived
• 2. The ability (though ownership) to interact with other contracts under a pre-specified ruleset

Initially NFTs may appear to have little intrinsic utility, outside simple being able to transfer ownership between one party or another. However, when we start to build new contracts which can take NFTs as inputs to be able to perform some function then we can see that the intrinsic utility is only limited by extent of the contracts taking these NFTs as inputs. This can then feedback into aspect of collective utility, should the connecting contracts be deemed desirable by a collective it will elevate that purpose/utility/value of an NFT.

To give an example let us say that we have an NFT game where the goal is to slay a dragon. The underlying contract may take as inputs NFTs that could increase the probability that the player succeeds by such as weapons or armor. These items have utility within the context of the contracts as they can be can be chosen by the player, say based on their preferred setup, to achieve a desired outcome. However, let us say now that no-one plays this game and as such the collective utility for these NFTs are low (I'm looking at you AlienWorlds). This means that something can have/not have utility depending on the context, or angle, from which you are looking at them.

Final Thoughts

Generally speaking, it seems like the bulk of NFTs are not built with direct pre-specified 'utility' (or value). Instead, they lean heavily on the idea that subjective traits will lead to collective utility, which will be established most commonly by marketplace conditions.

More recently, we've seen a massive rise in the concepts of gamification of blockchains. The play-to-earn model of NFT games taps into ways in which NFTs may interact with contracts to achieve purpose within a game setting and therefore giving them greater base-utility. In these cases gong in with a starting purpose helps NFTs to proliferate and the project to grow.

What is clear for the overall concept of utility, however, is that to be it is neither fixed, being market or contract development driven, nor is it uniform, being very subjective in nature. This means then an innocuous question "Does this NFT have utility?" can lead us to extremely complex answers, with more still that are unrealized. On the flipside, perhaps the question isn't clear, most of the time people perhaps mean: "Can I sell this?", "Is it part of a Game?", "Are there special benefits to owning this?" etc.

It is true that the overall success of a project is often measured by the market value of the underlying assets. However, should this always be the case? At times would it be more prudent to find better ways of measuring utility? In my mind NFT game utility could perhaps be better described by the active interaction with contracts rather than a marketplace $ value of an item. This would perhaps give a better indication of whether the NFT is fulfilling the purpose for which it was created.