Although the prices of non-fungible tokens (NFTs) have fallen in line with the entire cryptocurrency market in recent weeks, there is still considerable excitement around these digital assets, especially if they involve high-profile artists. Until recently, however, the Investors they viewed these NFTs simply as speculative works of art, which caused enormous volatility.
However, we are now seeing the emergence of utility-based NFTs that go beyond traditional NFTs, and this is shifting attention to the blockchains that make them possible. This is good news for Polygon (MATIC -3,44%), which has become one of the most popular blockchains for minting new utility-based NFTs. MATIC is now one of the top 20 cryptocurrencies in the world, with a market capitalization of nearly $ 5 billion.
What utility-based NFTs are and why they matter
Put simply, utility-based NFTs combine an underlying creative asset (such as a work of art) with extra benefits, perks, or opportunities. Thus, if you own a particular NFT, you can gain entry into an exclusive VIP club simply by owning the asset. This is possible because the possession of the asset is immediately verifiable through the blockchain. But things get really interesting when you consider what blockchain allows in terms of smart contracts, which are small executable computer programs. For example, the NFT could include a smart contract that states that every owner of the underlying creative asset must participate in future revenue opportunities.
Thanks to blockchain technology, it is now possible for artists to release new music albums as NFTs. A growing roster of prominent musical artists has already done so, including Snoop Dogg, Kings of Leon and DJ Steve Aoki. In mid-May, using Polygon, EDM pop duo The Chainsmokers released a new music album as NFT. Those who purchase the NFT get perks like early access to concert tickets, free merchandise, and admission to member-only events. And here's the best part: The Chainsmokers put a smart contract into the NFT that gives fans a chance to earn a small percentage of the new album's overall streaming royalties. Whenever a fan streams a song from the album on a service like Spotify (NYSE: SPOT), NFT buyers have a chance to participate in the album's earnings.
Harness the power of Ethereum
Of course, detractors might point out that Polygon is one of several blockchains used by artists to sell new NFT albums. Snoop Dogg, for example, used Cardano (CRYPTO: ADA) when he released his latest album NFT, and others used Solana (CRYPTO: SOL). In other words, Polygon hasn't conquered the utility-based NFT market.
However, this reasoning does not take into account the fact that Polygon is a powerful blockchain built on the basis of the Ethereum blockchain (CRYPTO: ETH), which still dominates the traditional NFT market. This relationship represents a huge built-in benefit. As a result, MATIC will likely be able to leverage the size and scale of the Ethereum ecosystem to outperform rivals.