NFT x Loyalty: Exploring New Applications of NFTs through Xiao Feng’s “Three Generations of Token Models”

The NFT market seems to be shrinking!

In the past few months, NFT trading volume and activity have shown a significant decline. Taking NFTGo as an example, the platform that tracks and records NFT market data shows a series of signs of decline.

According to NFTGo’s data statistics, the recent NFT market sentiment has been in a “Cold” state, and the blue chip index has fluctuated and decreased in the past three months.

• Interpretation of the Four Quadrant Token Economic Model: Double FT Model
• Zero-Knowledge Machine Learning (ZKML): Combining the two hottest trends in technology, what kind of potential will it unleash?
• The Most Anticipated L2 ZK-Rollup——zkSync In-Depth Research Report

At the same time, in the past three months, the total market value of NFTs has fallen to 4 million ETH, a decrease of more than 20% from three months ago.

Although NFTs provide unprecedented opportunities for artists, creators, and collectors, the instability and speculation in the market have raised questions about the long-term value of NFTs.

In this context, the “Three Generations Token Model” proposed by Dr. Xiao Feng, Chairman of Wanxiang Blockchain, in the closing speech of the 2023 Hong Kong Web3 Carnival Theme Forum provides a new way of thinking and application direction for the development of NFTs, injecting new vitality and development opportunities into the NFT market.

Three Generations Token Model

Dr. Xiao Feng believes that Web3 applications inevitably need to be “tokenized.” Web3 applications are based on the value Internet, blockchain, digital wallets, and smart contracts, so “tokenization” is one of its core features. However, at the application level, a single token model is no longer applicable, and building a multi-generation token model has become a rigid demand. Therefore, he proposed the Three Generations Token Model to meet the needs of Web3 application construction and governance:

• NFT (non-fungible token), representing the uniqueness and value of products, services, and data.

• Utility Token (functional token), representing the right to use a specific network or application.

• Security Token (security token), representing the holder’s ownership, that is, the value of equity.

At the same time, he believes that NFTs are not only artworks and avatars but also self-creation, self-management, and self-certification. The value of NFTs comes from “Play NFT to Earn” and “Play NFT to Owns,” which can connect Web2 and Web3, the real world and the virtual world, offline and online, on-chain and off-chain, commodities and scenarios, etc.

Three major application scenarios of NFTs

Therefore, based on the three-generation token model, we may be able to expand the application scenarios of NFT again.

Shang2046, co-founder of Mars Finance, believes that the combination of functional tokens, security tokens, and NFTs can balance the incentive balance between project teams and early investors, and also solve the compliance issues of token issuance. Functional tokens are used to start the market and incentivize users without financing; security tokens represent project equity and are owned by the team. They can dilute equity financing, and after the project matures, they can be listed through STO tokens.

When we further refine the value and function of NFT, we can get the following three major application scenarios:

NFT is a product

In this dimension, NFT can be seen as a unique digital product, and its uniqueness and non-replaceability give it unique value. For example, digital art, music, video, game assets, etc. can all be packaged into NFTs. The uniqueness, rarity, or innovation of such products will determine the value of NFTs.

CryptoPunk #5066 – 857 ETH

BAYC #7090 – 800 ETH

BAYC #4980 – 530 ETH

Fidenza #157 – 390 ETH

Azuki #3628 – 329.69 ETH

This form of NFT can effectively support the rights of creators and help form a more fair and positive incentive creative ecosystem.

NFT is a right of use

In this dimension, NFT can be used to represent some kind of right of use. Users holding this type of NFT can enjoy specific services or permissions based on the rights represented by the NFT. For example, only users holding a certain special NFT can receive project airdrops, participate in project governance, or use the NFT as a ticket for concerts or sports events.

Sports Illustrated will cooperate with ConSensys to launch the NFT ticket platform Box Office.

OKX will create NFT entry tickets for the 2023 Hong Kong Web3 Carnival and use the OKX wallet for verification.

This application scenario connects NFT with actual services and rights, enhancing the practicality of NFT.

NFT is ownership

As the unique token on the chain, NFT can be used to prove ownership, including identity, assets, and rights.

Virtual land projects such as Decentraland and The Sandbox have each plot of land and its decorations as tradable NFTs.

All items in GameFi, such as cards, pets, and equipment, are tradable NFTs. ENS, SBlockingce ID, ONT ID, and other decentralized domain names are also NFTs, but some of these NFTs are tradable while others are not. SBT, as a Soul Binding Token, is also an NFT, but this NFT cannot be traded on the market. These NFTs are an important carrier of asset ownership, and owning an NFT represents the user’s ownership and right to use the corresponding asset. This is of great significance for promoting the digitization of assets and the widespread application of blockchain technology.

Trinity: Web3 Loyalty

In the current development of NFT technology, we are surprised to find a track that integrates the core views of “Three Generations of Coin Models” and three major application scenarios to build an application that serves the operation of projects in the entire industry, namely the NFT × Loyalty project – an application built around NFT that aims to enhance user loyalty and participation through NFT as a credential, reward, and incentive mechanism.

Based on the theory of “Three Generations of Coin Models,” NFT in the Loyalty project can be used as a unique asset with attributes and ownership to build the core mechanism of the Loyalty project:

First, the Loyalty project helps projects bind user loyalty to NFTs to create a digital asset that can be continuously accumulated and increased in value. Users can obtain corresponding categories of Loyalty NFTs by participating in brand activities created by the project, purchasing specific goods or services, and so on.

These Loyalty NFTs are created by the project party and have unique designs and attributes, such as special patterns, limited issuance, or elements related to the brand image. Each Loyalty NFT represents the user’s loyalty and contribution to the brand or platform. Users can collect, display, and trade these NFTs, which can demonstrate their loyalty and identity. At the same time, as NFTs circulate, they can help brands gain exposure and increase the NFT market value.

Meanwhile, Web3 projects can create their own equity exchange stores through the Loyalty project and provide a range of privileges and benefits for users holding Loyalty NFTs, including but not limited to exclusive discounts, paid content, customized services, member activities, priority participation rights in offline activities, etc. Brands can provide different levels of privileges and rewards based on different levels or standards of Loyalty NFTs to incentivize users’ long-term participation and continuous contribution.

In addition, NFTs have become an indispensable way of socializing Web3. Therefore, brands can use the Loyalty project to issue tradable and displayable NFTs to users, who can then convert their loyalty into their own social capital and reputation. Users who hold high-level Loyalty NFTs can display their status on social platforms and receive recognition and attention from other users. This tokenization mechanism for socialization further enhances user participation and brand promotion.

Summary

Therefore, the author believes that through the Loyalty project built on NFTs, brands can effectively enhance user loyalty and participation, establish solid user relationships, extend user lifecycles, and tap into long-term user value through reward mechanisms and social effects. Ultimately, this enhances the brand’s image, user operation capabilities, and market competitiveness.

However, currently, NFT × Loyalty projects are still in their infancy, and there are not many projects that can provide complete Loyalty program construction and services for the industry, despite Starbucks’ Odyssey. According to the author’s research, the NFT-based Loyalty projects available now are:

*Rankings are sorted alphabetically, without distinction

The NFT x Loyalty track is worth watching, as it is clearly an innovative NFT track with application scenarios. However, whether this track can be widely accepted in the future depends on the deepening of the industry’s understanding of user operations and the refinement of execution.

We will continue to update Gambling Chain; if you have any questions or suggestions, please contact us!

Follow us on Twitter, Facebook, YouTube, and TikTok.