While it may seem that pixelated JPEGs and gorilla cartoons like the infamous Bored Apes became the poster children for NFTs, people want and expect much more than just art or speculative trading. Our research shows that consumers value real benefits, utilities, price and ease of transactions (i.e. paying with a credit card). 

Will 2023 be the year of Utility NFTs?

The web3 and blockchain industries continue building better safety and security infrastructure at the same time as enterprises develop stronger B2B technologies. We consider these two developments critical pillars for mass adoption. To move the needle even more, major brands like Nike, Starbucks and Walmart have taken the first steps with their own strategies for onboarding current and new users to Web3. However, something quite obvious is still missing – a deep understanding of consumer needs, preferences and behaviors.

Important questions still remain, which we will dive into with this report. Who are the broader NFT consumers, and what do they want from Web3? But also, what role do they see NFTs playing in their lives? Who are the companies and brands innovating in web3, pushing the industry forward, while building products and services with web3-backed technology that consumers need today?

NFTs have proven their potential to revolutionize commercial relationships between businesses and their consumers, and this new wave of digital transformation is already affecting multiple industries. Commercial NFTs – smart contracts representing tangible, measurable value, business benefit, or utility – are what consumers really want.

Key takeaways 

1. 2022 NFT Market Overview: a resilient and growing industry

DappRadar is the leading dapp discovery and blockchain asset management platform that allows people to track the activity of NFTs and many other crypto assets. NFT sales is one of the key metrics tracked on the platform, which highlights the number of NFTs sold on certain blockchains and marketplaces. DappRadar also tracks the number of unique traders, which represents the count of unique wallets involved in trading NFTs.

The NFT market in 2022 generated a total of $24.7 billion worth of organic trading volume across blockchain platforms and marketplaces, which is only a slight dip from the $25.1 billion recorded in 2021. Considering the significant 60% drop in ETH price YoY, this indicates an impressive resilience of the NFT market activity throughout 2022. This also signals that the behaviors of the crypto and the NFT markets become more independent from one another.

In 2022, there was a significant increase in both NFT sales and unique traders count. The number of unique traders increased by 19.75% compared to the previous year, reaching 6.9 million in total. This exponential increase in unique traders suggests that the NFT market has been able to attract a new set of participants, which is a very good sign for the industry’s future.

In addition, NFT sales saw a 67% increase this year, reaching 107 million. It’s important to note that 38.65 million of them were conducted in new channels, rather than through incumbent marketplaces. These transactions were done directly through brand platforms, wallet to wallet, by new players like Reddit, and some with fiat payments in place of crypto-only options. This indicates a significant rise in demand for diversifying ways to use and acquire NFTs and a growing variety of market alternatives.

Furthermore, another important reason for the growth in the NFT market in 2022 was the increased focus on utility and measurable benefits. NFTs launched in 2022 put focus on offering more utility to users, which made them more attractive to broader audiences. To grow further, NFTs need to provide even more real-world applications, beyond unlocking exclusive content or experiences.

2. Alsomine NFT consumer research: what do consumers want beyond PFPs and Digital art?

Alsomine, an Israeli tech start-up launching the first e-commerce & analytics B2C platform for commercial NFTs and digital collectibles with real-world benefits, surveyed 341 people during November-December of 2022 to better understand what today’s NFT consumers really want.

Alsomine’s research found that NFTs offering real utility and benefits to consumers are the biggest driver for the NFT market growth today. There is a need to make benefits far more accessible to both veteran and new NFT users.

The research identified two main gaps in the NFT market for consumers: an information gap and an access gap. Consumers need to understand, validate, and trust the offerings of each NFT, but they are not interested in spending considerable time learning and adapting their habits. The new wave of NFT users requires easy, frictionless access to NFTs, including the ability to purchase NFTs without being forced to open a wallet separately or use cryptocurrency. When considering the wider uses for NFTs, the price point for individual NFTs has to match similar value offers outside the Web3 realm.

The trend of Web2 companies moving towards NFTs is also important, as they seek to utilize NFTs as a way to offer unique and valuable experiences to their users. Tiffany & Co’s NFT collection is an excellent example of the combination of web2 with web3. The collection of 250 NFTs is a digital pass that is exclusively available to CryptoPunks NFT holders, which gives the holders the right to transform their CryptoPunks NFT into a custom pendant that contains exquisite gemstones and diamonds. This is clearly a very high-end offering; however, it does match the expectations for similar products offered outside the NFT space.

3. Consumers’ growing interest in tangible benefits of utility NFTs

Utility NFTs are non-fungible tokens that are designed to offer specific utility or functionalities, rather than being purely collectible. This value exists outside the NFT, hence the presence of artwork on the NFT or the lack thereof wouldn’t affect its value, unlike traditional NFTs that typically are art themselves or PFPs (profile pictures).

These NFTs can be used for a variety of purposes, such as granting access to content or events, representing ownership or membership, unlocking in-game benefits or features, providing voting rights, enabling ticketing for events and more.

Brands need to consider that with NFTs – same as with any other products or services – there are different benefits for customers that vary for different consumer segments (i.e. age, gender, interests) and can’t be substituted with on-chain data. Companies must also consider their offerings in terms of consumers’ web3 “maturity” – understanding and prior experience with NFTs or lack thereof. Different NFT benefits and experiences attract different audiences based on these range of factors – demographics, web3 maturity and value proposition.

The majority of NFT consumers (60%) haven’t heard of Utility NFTs as such, only a few 10% redeemed a utility NFT benefit, and the vast majority (92% of the respondents) see an advantage in having an NFT that offers various types of benefits and utilities.

There is optimism and continued interest in NFTs among newcomers and web3 natives alike when it comes to NFTs that offer clear utilities and benefits. 

When asked about their intent to interact with or purchase NFTs in the upcoming quarter, 57% of the responders indicated that they intend to buy/sell or redeem benefits from NFTs. 

Among the most active and experienced Nfteers (NFT users) the intent grew to 80%, with a clear emphasis on transparency in benefits and perks offered by the NFT creators.

In terms of the most important aspects of utility NFTs, the research found that people now look more for tangible benefits. Consumers indicated that the ability to have an NFT that yields them profit (or saves money) is key. 31% of the correspondents rate an NFT that can earn or save you money as the most important. Followed by “asset ownership” (22% ranked as #1) and being able to play with it (“Gaming and metaverse,” 19%) or using it to access events or gated sites or clubs (“Membership & access,” 18%). All of this indicates that NFTs are moving beyond just being nice to look at. 

There are some interesting behavioral differences among people using NFTs (Nfteers) for the less common utilities at the end of 2022. New NFT users gravitate towards NFT-based tickets more than NFT veterans, and NFT veterans show a higher appreciation for asset ownership, membership, and earnings.

4. Utility above all: discover the leading NFT projects

Both traditional brands and native Web3 companies have successfully introduced Utility NFTs to their customers. One of the most popular examples of utility NFTs comes from the decentralized virtual world The Sandbox. Here players can buy and own virtual land and develop it in unique and creative ways. Additionally, the users can have early access to Alpha seasons or exclusive APR yields for SAND staking, among many others. This is a great example of the appropriate use of Utility NFTs, with a specific target audience, that would not have appealed to a different one.

The Sandbox has gathered significant interest and investment, generating a total trading volume of $446 million since it launched.

When reviewing top projects that offer Utility, the data shows that many of the top utility NFT collections, such as CryptoPunks and Bored Ape Yacht Club, have generated billions of dollars in trading volume from tens of thousands of sales.

Looking at the top utility NFT collections in terms of sales count, game-oriented projects such as Parallel Alpha, The Sandbox, or Yuga’s Otherside sit at the top of the charts. At the same time, the Mutant Ape Yacht Club (MAYC), Beanz and Meebits were all airdropped as part of the Utility from major NFT ecosystems. These trends suggest that demand for these NFTs may be driven more by their utility value rather than a short-term financial incentive.

Although trading volume and sales count remain important indicators of demand and interest, companies have to consider other key metrics with utility NFTs:

5. Credit card convenience: a key factor for NFT buyers?

According to the Alsomine research, the ability to buy NFTs using a credit card ranks as the second most important consideration for people purchasing NFTs. The research indicates that 30% of respondents see this as their top priority – highlighting that accessibility and ease of transactions are crucial factors and real enablers for the development of the NFT market.

The research found that many of those who prioritized purchasing with a credit card were not new to the world of crypto, with 38% having a digital wallet or having bought crypto before. Women were found to be more inclined towards purchasing NFTs with a credit card, with 38% of female respondents indicating this as their preferred method, compared to 30% of the total population.

In conclusion, the ease of transactions and accessibility of credit card usage becomes a crucial consideration for potential NFT buyers, particularly women who increasingly join the NFT trading game. The survey highlights the importance of providing accessible and convenient payment options for NFTs to attract and retain a diverse range of buyers.

6. Utility NFT pricing affecting the overall NFT market

While the first generation of NFTs was predominantly seen as assets for trading by their creators and buyers, Utility NFTs are tied to product or services value, hence need to correspond with and are affected by their pricing in the real world.

According to Alsomine’s consumer research, NFT cost being below 100$ is a key concern for many Nfteers. Interestingly, this is also clearly reflected in the average NFT sales prices on the different blockchains.

In Q4 of 2022, Ethereum, which also hosts a lot of the Asset NFTs, had the highest average NFT transaction size of $464, followed by Polygon with $61, BNB Chain with $55, and Solana with $23. Gaming protocols generally had lower average NFT transaction size, with Immutable X at $29, Ronin at $14 and Wax at $4. As the price of NFTs becomes closely representing their benefits, they will become more accessible to the public.

Several Blockchains have clearly focused on Utility (and brand) focused strategy. This will most likely offer them a sound base for growth and we can see this evident in their average transaction prices, with Polygon averaging at 61$ in Q4 2022 and Flow at 19$. Both blockchain hand multiple successes with Utilitity NFTs as is evident in Reddit’s use of Polygon and the partnership between major sport leagues like the NBA, NFL or La Liga and Flow.

7. Mapping the 2022 geographical distribution of NFT users

While the Alsomine survey provides valuable insights into the behavior and preferences of potential NFT buyers, there is another data source that can provide additional insights into the industry, DappRadar’s traffic analytics.

In 2022, countries from Southeast Asia made their footprint visible in the NFT market, with Singapore having a 27% presence. The United States followed closely with 26.20%, and Japan was in third place with 22%. These three countries make up the majority of NFT traffic on the DappRadar website.

India, Germany, Indonesia, and the United Kingdom were also among the countries with a significant presence in the NFT market, although their dominance was much lower compared to the top three countries. Russia and Nigeria had a smaller share of NFT traffic, with 3.07% and 0.02% respectively.

The case of Nigeria is worth highlighting, as the African nation is amongst the countries with a higher cryptocurrency adoption rate. This is the same case with Ukraine, where nations with high crypto adoption doesn’t necessarily have a symmetric demand for NFTs.

The growing popularity of NFTs in Southeast Asia can be attributed to the rapid growth of play-and-earn games such as Axie Infinity, which has seen a surge in popularity among crypto gamers in the region.

In June 2022, Thailand held its first virtual property sale, allowing users to buy actual property inside Bangkok’s downtown area and become virtual landowners in the metaverse ecosystem. This highlights the growing trend of NFTs being used for real-world assets, and how they are increasingly being seen as a legitimate form of investment.

8. Conclusion

Utility NFTs have the potential to drive mass adoption and business model innovation in the Web3 space by creating new use cases for NFTs beyond just digital art and collectibles, as evidenced in Alsomine’s research. Utility NFTs can power decentralized applications, games, marketplaces, and other services in which ownership, identity and tradeability are key.

The NFT market continues to grow and prove its resilience, also marked by an impressive increase in both NFT sales and unique traders count. The increasing adoption of NFTs in mainstream industries, and the focus on utility have significantly contributed to this growth.

With the rise of NFT-based consumer reward programs and ticketing solutions that emerged in 2022, the importance of NFTs in various industries continues to grow. For instance, Starbucks launched its blockchain-based loyalty program and NFT community, Starbucks Odyssey, which offers coffee-themed NFTs that translate to real-world experiences. Similarly, GET Protocol provided an NFT ticketing solution that issued on-chain NFT tickets with verifiable data. These initiatives demonstrate the versatility and potential of NFTs beyond traditional use cases.

As the use cases for utility NFTs continue to expand, we can expect to see increased adoption and mainstream recognition of the potential of Web3 technologies. This could lead to more investment and innovation in the space, as well as the emergence of new business models and revenue streams for creators, developers, and entrepreneurs and established corporate players alike.

About Alsomine

Alsomine is an Israeli tech start-up launching the first e-commerce & analytics B2C platform for digital collectibles and NFTs.

Led by digital innovation & strategy leaders with robust experience in brand strategy, product development, consumer data and web3, they are partnering with major brands focused on business value and consumer engagement as key KPIs to their web3 and digital transformation journey.

Discover Utility NFTs – Join the waitlist for private beta launch https://www.alsomine.com/waitlist

About DappRadar

Founded in 2018, DappRadar is the The World’s Dapp Store: a global decentralized applications (dapps) store, which makes it easy for its base of more than 1 million users per month to track, analyze, and discover dapp activity via its online platform. The platform currently hosts more than 12,000 dapps across 49 protocols and offers a plethora of consumer-friendly tools, including comprehensive NFT valuation, portfolio management, and daily industry-leading, actionable insight.

Read more: https://dappradar.com/blog/behavior-report-what-do-consumers-want-from-nfts

Get the latest news here: Cointime channel — https://t.me/cointime_en