Can NFTs Be Utility Tokens? Why Not?

One new team is finding how much extra value can be crammed into a collectible.

Non-fungible tokens are having a moment. Which is another way of saying: NFTs’ moment will soon be over. But technological innovations have a way of enduring beyond their trendy period.

“We’re developing the post-hype NFT,” says Andras Kristof, founder of Singapore-based Galaxis, the no-code development platform formerly known as Ether Cards. “The dotcom bubble collapsed, but the internet came out of it. The ICO (initial coin offering) bubble collapsed, but DeFi (decentralized finance) came out of it. The NFT bubble will collapse, but our products will come out of it.”

That portfolio includes its latest offering, a collectibles set called “Girls, Robots, Dragons” or GRD. This self-explanatory deck of virtual cards designed by renowned fantasy artists Zoltan Boros and Gabor Szikszai turns 15 characters – five girls, five robots and five dragons – into an array of two-sided items with 107,000 unique combinations. The visual appeal, though, is only one aspect of the value baked into GRD.

These cards aren’t just NFTs for art’s sake. They are intended to hold their value by providing added utility.

Value in community

The key to valuing art, in any medium, is much the same as valuing web content: What kind of community will coalesce around it? Is it for a mass audience or a select one? How much time will they spend viewing it, thinking about it and talking about it?

And for how long? It’s upon this last question that Galaxis has chosen to focus. The most immediate answer to holding someone’s attention is to make a game of it, and Galaxis has gamified GRD as a first principle. Collecting the full set of cards entitles the participant to a share of money pooled from 20% of the total sales revenue and 25% of the royalties. Depending on the condition and rarity of the cards collected, winners can collect up to 3.5 ETH, or roughly $10,000.

Not all prizes have discernable cryptocurrency value, though. Entrants are also eligible to win a real-life acrylic work by one of the creators. Three-tone drawings and sketches are also available to be won, as are signed and numbered prints.

An even more compelling piece of community growth is denominated not in ether, not in dollars or not even in physical wall space, but in time. That prize is an hour of one-on-one teleconference time with the creators.

Also, a hundred winners will find the artists’ signatures appearing on their NFTs, providing further online bragging rights.

Tokenomics of a utility NFT

The difference between virtual collectibles and physical ones is that the physical ones gather dust. In the case of the GRD collection, though, the virtual ones gather DUST, the cryptocurrency associated with Galaxis, which currently trades at about 0.001 ETH. The longer one holds one of the NFTs, the more DUST he acquires; that is, its owner is rewarded financially by simply leaving it alone. It’s not staking because there is no lockup period; it’s more like a slow, continuous token drop.

DUST gives Galaxis the opportunity to add further value to its NFTs by what it calls “dust-proofing.” This is the protocol by which the buyers of the first 3,000 cards would be refunded the purchase price in DUST over the course of a year.

“DUST will start trickling on your card on day 1,” according to the GRD website, “and will continue to do so until the full amount is returned.”

But what happens if the secondary market beckons, and a holder is incentivized to sell? Of course, the owner would reap the benefits of that sale.

But is that entirely fair? As with any NFT offering, the question comes up about whether the artists themselves will benefit from subsequent sales. In GRD’s case, the answer is yes. The smart contract at the core of each token carves out a royalty payment every time it changes hands.

More where that came from

Galaxis, barely a year old, is proving to be a wellspring of creativity. It doesn’t so much create its own NFTs as provide a platform for artists to reach their communities by offering the utilities to mint these tokens.

In addition to GRD, the company’s other projects include Sylvester Stallone's SLYGuys, panels by actor Val Kilmer, a tokenized short animation to raise autism awareness and a collection of NFTs offered to raise money for Ukrainian defense. Such sports idols as heavyweight boxing legend Mike Tyson and recent National Basketball Association Rookie of the Year LaMelo Ball have come to Galaxis to support their NFT game.

One project team developed a player-versus-player game called Battle Royale, which integrates Chainlink’s verifiable randomness function and which is anticipated to serve as part of the platform for future tournaments.