4 types of NFTs - Part 1

NFT Info 1: NFT Types! Part 1: PFPs and Utility

Disclaimer: everything I write is my opinion, please do your own research and don't take this as financial advice. If you're interested in viewing my previous writings or learning more about the space, subscribe below! Please share with others, too!

I wanted to write on the markets and provide some timely updates and stories, and I will, but for now, I'd like to write some explanations so that way in my future writings, I can link back to these and you can have them as reference .

I love memes, so I wanted to create a chart to illustrate the 4 "classes" of NFTs available in the market. That's right. There are more than just PFP NFTs, which I mentioned in my first article (you can read that here).

PFPs

PFP, picture for proof, or Profile Picture, NFTs are the most common and the ones you've probably seen the most, whether it's BAYC (Bored Ape Yacht Club), Cryptopunks, or this guy selling selfies. These NFTs are JPEGs attached to the blockchain. These projects may provide some usage or notoriety, but realistically, they are built on speculation and social science. I think some of it has to do with FOMO or hype, but a feature that many people don't seem to understand or consider is Identity. I don't mean status symbols either, although some have PFPs have become them. The same reason you want to blend with your friends, the same reason you want to be similar to those around you. The identity of being a part of something greater is a valid component of NFT culture. I think it goes back to the roots of NFTs. NFTs have been met with speculation and scrutiny, many people don't "get" them, so those that do "get" them, cherish the others within the community. I think it may be out of hand at this point as the market is oversaturated with low-quality projects but there's a reason "blue-chip" projects sit above 10 ETH. 

I love PFPs, they put NFTs on the map, and I can say I own multiple projects. The thing that PFP NFTs do best is build community and brand. Let's say, for instance, I own a Fang Gang (I do this is my NFT). Fang Gang #4667

This project offers me a group of people who own NFTs that look like mine. Maybe we love the idea of a giant wolfpack, or we love some of our friends in the space who also love the art, whatever it may be, the community is a huge selling point for these projects. Just like friend groups in real life, people want connections to others, and PFPs provide that.  Something else to consider, which I think is a HUGE selling point, many NFTs are becoming brands like Cool Cats, Doodles, and BAYC. They offer merch and items for sale that way fans and owners can be greater connected to the project. I think some projects understand this and are building toward this. BAYC was the first to do it (which btw a lot of their news and attention is inflated by Moonpay, a crypto company facilitating all the luxury buys) but they most definitely will not be the last. It may sound silly but you'll see NFT gear or brands in local stores soon. Owning certain PFP NFTs will act as owning a share in the brand.

To you economists out there reading this and still saying, "What is this? A picture? Aren't you just paying for friends? I already paid for those in college!" Just wait, that was a significant critique of PFP NFTs, so projects started offering "Utility" AKA it was no longer just a picture. Whether through free collectibles, IRL (in real life) meet-ups/parties, or more. Utility became this next wave of NFTs. With that being said, many PFPs do have some genuinely great online communities, which is not said mockingly. I always recommend checking out a project Discord before buying into a project to get a feel for the community. S/O to the Fang Gang that does free trivia, game nights, and more, definitely livens up my workday.

UTILITY

Utility for PFP NFTs started as a joke in some ways. BAYC notoriously offered to fulfill their "club" portion of the name by providing IRL parties. See below. Here's a magazine article that talks about it.

People said that it looked like someone copy and pasted the same dude three times in the pic…which is hilarious. ^Real-life Where’s Waldo, if you can find him. I don't have an interest in IRL parties/soirees/whatever in my investing. But I won't laugh, because as they say, if you're laughing at a millionaire, then the joke is on you, and each person there owns a JPEG worth more than me.

There are NFTs with more utility and value. This class of NFT is deemed utility, but it covers a lot, and honestly, that might be its own blog post itself.

Real Estate/Digital Assets

When Facebook changed its name to Meta, people were already thinking about the Metaverse and everything it entails. Metaverse realty is an excellent example of this. Apartments, homes, and lands are places in the Metaverse where your digital home can store assets and act as a singular point for your friends to visit or host events. Decentraland, Sandbox, and NFT Worlds are the three leaders in this space. Each provides land you can buy and "develop" into an apartment or space. Metaverse land may seem trivial, but the idea of having a space in the Meta is something unique. It's fascinating, and these three lands have been bought into by companies like Samsung, Nike, Adidas, and more. People and now companies genuinely believe in the Metaverse and the idea of an interconnected web and space where your digital assets can be worth more than your physical assets. You can read a killer thread on it here. It explains the importance of the Metaverse and the collision course that we may be on.

Play to Earn

There's not just real estate. There are tokens and earning currency through P2E (Play 2 Earn) methods. This means by playing the game you can earn in-game currency that can be transferred for ETH, merchandise, or even other NFTs. Recently a project has become incredibly popular through earning the potential of tokens. P2E is nothing new, but some of the prospects in these games are insane. Fair warning, me and several friends are invested in this next project. NFT Worlds is Minecraft seed worlds tied to the blockchain. They are decentralized and you can earn 20 $WRLD tokens per hour for playing on one of their servers. Right now, $WRLD is sitting at about $.10 per token, meaning that you can earn $2.00 for playing an hour of video games... That's more allowance than some parents give, it's actually more money than some people in other countries make working a regular job. Those tokens can be used for gasless exchanges, buying in-game items or services, or can be traded back out for Ethereum. NFTs have the opportunity to completely revolutionize the gaming world. Why play video games for free, if you can get paid to play?

DAOs

One of my favorite finance writers wrote an article cataloging a recent viral incident a few weeks ago where a DAO (Decentralized Autonomous Organization) was trying to buy one of the original drafts of the U.S. Constitution. He does a great job of explaining what a DAO is and how they function. I've linked the writings below in the "Before (the auction)" and "After (the auction)".

Before & After

DAOs are essentially digital LLCs, started by a group of people to move in unison to complete a goal. DAOs can pool money to fuel investments, start projects, or create tokens to act as voting rights. They can do a lot, but they are a new and innovative way for you and your friends to come together and make financial decisions together… This can only end well, like a family monopoly, right? But really DAOs have a ton of potential and they will likely take aspects from utility NFTs to form entire economic ecosystems in DAOs. They allow you to become shareholders within an entity whether it's a group of friends or a Web3 company. Likely in the future, you’ll see DAOs making insane buys, executing great plays, and starting great projects.

If you enjoyed this, again, feel free to subscribe or share this! Part 2 will come tomorrow, with a little more fun! I'll share on Alpha and Art!!!