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What Drives the Value of NFTs? Their Utility or Pure Appreciation?

Ryan Cowdrey
9 min read
What Drives the Value of NFTs? Their Utility or Pure Appreciation?

How could CryptoPunks, nothing but pictures of pixelated cartoon characters possibly create more than $1.5 billion in sales volume? Those familiar with the art market might speculate that it’s the next Picasso – that there are enough people who desire one without enough supply, therefore contributing to rising values. Those familiar with the role that web3 will play in the future of our lives, speculate that owning a CryptoPunk gives you immeasurable respect in the digital landscape.

Behind every NFT project there’s an internal struggle of what will drive the value of the project. Is it the simple appreciation of the artwork and what the project means on an individual and societal level? Or is it the utility, the actual function the NFT provides?

I’m constantly battling with the idea of utility vs. appreciation when it comes to NFTs. Every time I think I have it pinned down, another project breaks the mold. Ultimately, what I’ve found and what I hope you will come to understand, is that the lines are still very blurry. Every NFT brings with it a level of appreciation and utility, which when combined determine the future of that project.


One of the many things that NFTs offer which the physical art market never could is that ownership of an NFT can grant you many different abilities or functions. In other words, NFTs can be used to represent ownership of something physical, they can act as keys to unlock new digital experiences, they can act as literal shares in a revenue-generating machine, and so much more.

Utility of NFTs play a big role in the success of said project. The add-on functions that an NFT provides to the owners can drive the value of that NFT.

Below are just a few of the common types of utilities that NFTs provide their owners.


The most basic form of utility that NFTs provide are the unlockables associated with the NFT. An unlockable is an additional piece of content or experience that is unlocked by a collector once they purchase said NFT.

For example, owning one of the 10k+ VeeFriends NFTs allows users to unlock specific experiences such as breakfast with Gary V, an invite to VeeCon for the next three years, and group brainstorming sessions. While the actual art of VeeFriends is sentimental in the fact that Gary V drew them all himself, it’s the utility that set the base value of this NFT collection.

Another example of using NFTs for unlockables is Tory Lanez’s NFT album. Buying one of the one million NFT copies allowed collectors the ability to unlock his album, which you couldn’t get anywhere else.

Furthermore, owners of the NFT QT collection of NFTs are delighted by a few unlockables after they’ve purchased our NFTs. At the minimum, they get a personalized video message from Q thanking them and talking about the piece they purchased.

Think of unlockables as any type of add-on to make the artwork feel like a key that unlocks a treasure chest of other unique things. It should come as no surprise that many celebrity entrants into NFTs really lean into Unlockables to drive the value of their NFTs.


The upgraded, more mature version of unlockables are access tokens. They’re different in the sense that access tokens give you ongoing access to an “unlockable”. Think of them as if they’re providing admission to a country club where the value is also derived by who else is in that club and what you may get out of being in that club.

For instance, I own an access NFT called Metaverse HQ. The NFT grants me admission to a Discord server (with only MVHQ members) all chatting about NFTs, upcoming releases, and investment strategies. Now, this MVHQ Discord is valuable in the sense that there are 1,200 other members in there who all care a lot about NFTs. The MVHQ gives you access to a community knowledge base that provides a lot of value. This scarce access token has appreciated nearly 1500%.

Another example is The Metakey. Similarly, The Metakey grants owners access to a Discord server with a great community of collectors. They’ve taken it a step further by partnering with other NFT creators and virtual worlds to drop exclusive NFTs only to their members. So not only does this NFT give you access to a community but also other NFT perks.

And the final area of access utility is something known as mint passes. Now, a mint pass basically gives you first rights to mint an upcoming NFT before the general population. There are a lot of NFT projects that have this baked into it. For example, by owning a Long Neckie Lady NFT, I was given 10 days to mint a Long Neckie Fella before they opened it to the rest of the world. Other more sophisticated versions include MintPass which first was redeemable for one MetaHero in the Punks Comics universe, but has come to encompass many other minting opportunities.


Another utility that NFTs can provide is access to gameplay, basically where the NFTs themselves are part of a greater game.

Axie Infinity is the most well-known instance of this, where you buy Axie NFTs which become your characters in the Axie card-based game. Each Axie has its own skills and abilities that play a major role in how you play the game – and furthermore, your ability to earn money in the game.

A lesser-known example would be The Owner’s Club NFTs. They’re the first NFT-based fantasy football game where each NFT represents a group of point-scoring NFL players. Each week, owners create a team with their NFTs and compete for cash prizes. What’s particularly great is that these NFTs have value to you for the entirety of the NFL season.

I believe this is perhaps the most compelling utility that NFTs can provide. Society loves playing games, from Shoots & Ladders to Fortnite, there’s a game out there for everyone. And by gamifying NFTs, you effectively tap into a behavior that is already well-established in the world.


There would likely be a lot more people into NFTs if the NFTs themselves generated passive income for their owners. How would that possibly work? Well there are a few ways.

First, is by having an NFT represent ownership in a revenue-generating entity. Gambling Apes is the first PFP (profile pic) NFT project that represents ownership and profit-sharing in a real (virtual) casino. The 7,777 Gambling Apes NFTs represent a rev-share in the Ape Casino, which they’re currently building in Decentraland. It’s going to be a fully-functioning casino with sports wagering, slots, and table games. And that means the NFT owners have the chance of making some real residuals from the casino, should it take off.

A second way is through licensing NFTs. There haven’t been any clear cut successes here, but there’s a lot of development happening. For example, Larva Labs, the creators of CryptoPunks, Meebits, and AutoGlyphs recently signed an agreement with the powerhouse agency UTA for representation. The agency will represent them for film, TV, video games, and publishing projects. Ideally, Punks owners will soon be able to capitalize on the IP they own and generate some income.

A third way is by having the NFT represent ownership in a physical good that can appreciate over time. One example of this is the barrel of Chateau Angelus 2020 Bordeaux En Primeur wine that sold as an NFT on OpenSea for $110,000. By auctioning the barrel as an NFT, the owner now has the luxury of not needing to physically hold the valuable wine. Cult Wines takes care of bottling and storing the wine until you either want to sell it or drink it. Should the wine itself appreciate, then they’ve effectively bought an NFT that generated a return for them.

By no means is this a comprehensive list of all the possible utilities that NFTs can provide. And that’s the beauty of the NFT market… there are innovators coming in everyday to introduce us to new ways that NFTs can be used.


Digital art has been everywhere for the last couple decades, from the CGI environments in movies to the motion graphics featured in commercials. But it hasn’t been recognized, nor appreciated. Nobody really saw value in it other than using it to create video games or films or commercials.

NFTs bring scarcity to digital art. And therefore, value. Now, there are a variety of reasons that people collect NFTs to appreciate.

NFT History / Provenance

A major component of collecting NFTs for appreciation has to do with the historical significance. We’re only 4 years into the existence of NFTs on the Ethereum blockchain (the main blockchain for NFT standards). And with that comes a lot of speculation on certain NFTs that mean something to the history and timeline of NFTs.

For many years, CryptoPunks were thought to be the first major collection to be created on Ethereum. But this past Spring 2021, someone hunted down the transaction contracts on Ethereum and found that Curio.Cards predated CryptoPunks. GaryV shouted them out on Twitter and now Curios are worth a significant amount of money. They’ve even caught the attention of Christie’s who is auctioning an entire set of Curio.Cards on October 1.

The same story goes for EtherRocks, which were created only slightly after CryptoPunks. The unimpressive clipart pictures of rocks have seen sales in the hundreds of thousands of dollars, even one going for over a million.

Provenance and historical significance is a very compelling element of NFT appreciation that will continue to push values higher.

Internet History

In many ways, NFTs are collectibles for the digital native person. Those who grew up on Tumblr pages, having fun-loving meme wars across the Internet, and participated in every stage of the Internet. In this sense, NFTs that tap into the broader history of the Internet can find themselves appreciating quite nicely.

Memes are the language of the Internet. And those who’ve played a part in writing this language (whether as the meme creator or the subject of the meme) have never been able to reap the rewards of their contributions. NFTs have finally given them their day.

  • Bad Luck Brian sold for 20 ETH
  • Disaster Girl sold for 180 ETH
  • Charlie Bit My Finger sold for over $750k
  • The dog picture which became the Doge of Dogecoin sold for 1,696.9 ETH
  • Another picture of the same Doge was later fractionalized and reached a peak valuation of over $110m

Internet history is so important and rarely talked about, however, with NFTs, Internet history can find a vehicle to carry the value it’s brought to the world.

Digital Respect

Whether you know it or not, you have a digital identity. Now most of us try our best to have our digital and physical identity match up. But that’s not for everyone.

NFTs have become the new profile pictures and many are even crafting their entire digital identities around the CryptoPunk or Bored Ape they own.

When you buy an NFT, you are connected to all the other collectors who own an NFT in that collection. You’re a part of community that all cares about the same art, the same artist, or the same long-term goal.

In that sense, NFTs can help you gain digital respect from peers. It’s a way of establishing “clout” – especially if you buy or own some very desirable NFTs.

One could argue that this form of appreciation is actually a utility. And I think it’s a bit of both. Regardless, as long as there are “blue-chip” NFTs out there desired by more people than there is supply, NFTs will be appreciated for the respect that they give you in the digital world.

Artist Speculation

Perhaps the easiest form of NFT appreciation to wrap one’s head around is the simple act of speculating on an individual. Whether it’s collecting NBA rookie cards in hopes of having the next Lebron James caliber player card or speculating on artist’s work eventually being recognized and showcased in museums and galleries far and wide, we already speculate on people. The same goes for NFTs and digital artitsts.

The most notable NFT artists to benefit from this speculation are Beeple, XCOPY, and FEWOCiOUS. The three of them cannot seem to create enough NFTs to satisfy the demand for their style of art, which is good.

It’s not just individuals that can catch this speculation, entire project teams can as well. Art Blocks, which collaborates with creative programmers to launch generative art projects, is consistently at the top of the charts for weekly sales volume. It’s interesting because they’re essentially putting their stamp of approval on a project, which carries a lot of trust with it.

What’s the assurance that Beeple’s work will be worth more in 20 years than it is today?

There isn’t. But those who’ve invested will do everything in their power to keep it relevant.

There’s a fascinating cycle between collectors, museums, and auction houses that takes place with physical fine art to keep valuations high. Collectors or foundations sell through auction houses. Auction houses do the dirty work of finding the next sucker, ahem, I mean collector. Collectors often purchase pieces already committing their art to a museum to display and care for it. And the museums keep the world interested in blue chip art.

It’s a complicated dance that NFTs and digital artists will likely adopt or fit into in some way.


Ultimately, every quality NFT project has a number of the above value drivers working in its favor. While it’s hard to pinpoint exactly what is the most effective, the projects that stay consistent and keep their collectors happy have the best chance at longevity.