What $DUST, $SCRAP, and $PUFF have to do with the strongest ecosystems on Solana and what kind of Monty Python wizardry are they? Even Apecoin, on uhm.. Err, Cardano? No, Avax? Either chain, either way, these tokens all provide value to the NFT community, and a way to understand them is necessary to the assets we hold.
Here’s what you need to know in a broad overview about utility tokens and how they function.
Let’s start with the hottest project on the entire planet, Shall we begin?
Degods with its meteoric rise in 2022, led by Frank himself, and powered by the $DUST Project has paved the way for Utility tokens to act as a currency within an exclusive ecosystem. Let alone the floor price of the project itself, $DUST has dominated.
Sitting pretty healthy in the middle $2 range, where it debuted near, on the surface the token provides holders with exciting staking rewards.
Now The Basics:
Staking rewards generated by simply owning an NFT, in this case, a Degod or Deadgod, earn 5 and 15 $DUST per day (as of 03/06/22). In $USD equivalent that is $10/$30 per day. Floor price of Degods is 350 $SOL, so roughly a 102% ROI… (9x the average Real Estate rental income).
Raffling on the $DUSTIES store, any user who owns the token, can use it to bid on NFT’s, WL spots, even a first class ticket to NFT NYC all purchasable via $DUST
Minting of the new Degods collection, Duppies, will be via $DUST, and cost 375 $DUST.
Merch will be purchasable through the Degods store which they provided a sneak peak for on May 28th.
Big 3 Tickets are in the works for purchase by $DUST in the future. You read that correctly, a basketball team.
Based on all the information above, $DUST has a use case that surpasses even well adopted cryptocurrencies like… $ADA for example.
How do the major utility tokens of the NFT space hold their value so well? To start, there is an actual product or service attached to the end of each utility token expenditure. The raffle mechanic for a chance to win a highly valued NFT from another community, Merch that is exclusive to holders that provides that “brand” feel and IRL products all give this. Every one of those transactions has been paid with funds held within the treasury of Degods bringing more conviction to the holders.
Rather than a liquidity pool being funded by a treasury which runs the risk of large holders unloading their staking tokens, the funds are valued in the aforementioned utilities.
With the halving mechanism beginning and being able to mint DUPPIES with $DUST the same way Yuga Labs used Apecoin, the short term value of $DUST should be pretty solid.
The real play with these utility tokens can help encourage a die hard community where diamond hands are rewarded for loyalty. I could also see this bridging the gap between large investors down the road looking for consistent returns in the form of holding onto well established projects.
In the stage we are now, the best way to compare staking rewards is to stock dividends. Where they differ, the NFT rewards tokens are their own currency in a sense and not valued in USD which exposes NFT holders to more volatility than just the NFT and underlying asset.
How then should we look at the tokenomics for a project like STEPN, for example? The move to earn mechanism that they implement has garnered some mass attention and adoption. What benefits this ecosystem is the two separate tokens that movers can earn. Starting with the unlimited supply coin gives the Individuals starting out with the more affordable NFT, or in this case Shoe a lower earning potential until the user buys more shoes and stacks, or the user levels up through long-term use of the platform. The deflationary token is for users over a high enough level that commitment is further encouraged. Seeing the diamond hand similarities?
Where many projects fail Is by rewarding holders too much in the short term, and follow a cookie-cutter model to make a quick buck. Even with all good intentions a utility token given out by a project could ultimately lead the project to failure or getting their LP drained. Ultimately management of funds goes hand-in-hand with the need for floor price stability.
In summary, the best approach to utility tokens is looking for the most value provided for you as a holder. And the promise of a utility token that will do a 100 X like your favorite dog related Sh!#-coin, is a good indicator a project is over promising. Also to reiterate, invest in teams and builders who are truly bringing value to the space in more forms than making people money, that is more valuable than tokens worth pennies.