The Different Types of NFTs: A Simple Guide

From fashion for avatars to social profile pictures to digital collectibles, the NFT ecosystem continues to expand and evolve, even in the face of the chilly crypto winter. Here are eight different kinds of NFTs you should know.
Updated Dec 14, 2022 at 6:48 p.m. UTC
Crypto Explainer+

Betsy Farber is CoinDesk's Senior Editor, Content Operations. She does not hold a material amount of cryptocurrency.

Non-fungible tokens (NFT) have gone from a relatively obscure section of crypto to one of the most well-known in just a few years. If you asked an average person they’d probably explain that an NFT is a token that represents ownership of a unique digital artwork, and that’s certainly one kind of NFT.

As the NFT market has exploded into a multi-billion-dollar industry, the variety of NFTs has grown as well. In addition to proving ownership of physical or digital assets such as art, music, images and collectibles, NFTs are now popping up across an array of industries from fashion to play-to-earn (P2E) gaming that are forging real-world utility and building robust online communities.

Here are the different types of NFTs to be aware of and how they’re being used.

PFP NFTs

Profile picture NFTs (PFP for short), are exactly what it sounds like: An NFT that is often used as a digital avatar for a person’s profile picture on social media sites, primarily on Twitter. The first PFP NFTs were CryptoPunks, which were created in 2017 by Larva Labs, which created a set of 10,000 algorithmically generated punks with different attributes. The most famous NFTs in this genre to date are the Bored Ape Yacht Club (BAYC) PFPs, created by Yuga Labs in April 2021. The highest-priced droopy-eyed primate is Bored Ape #8817, which sold for $3.4 million dollars. The BAYC NFT collection is also notable for giving owners the intellectual property rights (IP) of their Bored Apes, thereby allowing holders to have commercial usage rights and monetize their NFTs.

Other than bragging rights, the main draw for owning one of these NFTs is often about access to exclusive NFT communities and future perks such as airdrops or other rewards. Owning a Bored Ape, for example, makes you a member of a club that includes celebrities such as Jimmy Fallon, Madonna and Paris Hilton, as well as attend real-life parties like ApeFest and other NFT-gated parties. As the metaverse continues to grow, there will likely be more use of PFPs as avatars within those platforms as well.

Generative art NFTs

Generative art NFTs trace their roots all the way to a 1960s computer-controlled abstract style of art that was created with the help of robots. Using a range of software and artificial intelligence tools, a specified aesthetic is generated using a set of artist’s requirements and an algorithm that has randomness baked in to create unique pieces that share a common look and feel.

Projects including Autoglyphs by Larva Labs, Lost Poets and Ringers, along with artists Tyler Hobbs, Robbie Barret and Matt Kane have been leaders in the space. While you can find generative NFTs on digital marketplaces including OpenSea and Rarible, the auction platform, Art Blocks, is a dedicated platform created by a big generative artist himself, Erick Calderon aka Snowfro. Art Blocks shepherds generative art creators and their work through the entire process from creation to sale.

Music NFTs

Music NFTs can seem counterintuitive; why buy a music clip when I can stream or download the song from a music platform like Spotify or iTunes? The difference is purchasing a music NFT grants ownership of the file versus buying a license that allows you to listen. Music NFTs can also forge a new relationship between artists and their fans. Fans can follow and invest in their favorite artist’s work by owning a piece of a song or album. Think of it this way: What if you were the first to buy a music NFT by a promising new artist who later rose to fame? You would have a unique form of proof of your early fandom that could also be uniquely valuable. On the other side of the equation, artists have the opportunity to engage with their fans and can offer rewards like new music, exclusive merch, experiences and concert tickets.

There are also specific projects with parameters that give NFT owners royalties on streaming rights, or owning a piece of the song, called Limited Digital Assets or LDAs. Introduced by Royal, a service that mints royalty-bearing NFTs, this first LDA on the platform was artist 3LAU’s song "Worst Case."

Soulbound Tokens

The concept behind soulbound tokens (SBT) was inspired by Ethereum co-founder Vitalik Buterin’s observation of the online fantasy game World of Warcraft’s “soulbound items,” digital items that cannot be bought or sold. Cited in a May 2022 report Buterin and colleagues, soulbound tokens are described as “non-transferable digital tokens that represent social identity in a decentralized society.” The paper outlines how accounts called “Souls” would issue individual, self-certified tokens that would function like items on a resume, identifying specific accomplishments, credentials and previous affiliations.

As of December, the use cases for SBTs are still being fleshed out. Potential uses could be, beyond functioning like a blockchain resume, managing medical records, holding digital ID or membership cards, verifying attendance and recovering lost private keys.

Cryptocurrency exchange Binance announced plans by the end of 2022 to issue a SBT on the BNB blockchain to all users who complete the know-your-customer (KYC) requirements.

Sports collectible NFTs

Sports collectible NFTs, with a reported current market valuation around $1.4 billion, have reimagined how fans buy, sell and trade sports memorabilia. This type of NFT includes transforming the traditional sports collectibles such as trading cards into NFTs, including NBA Top Shot Moments, videos that capture memorable plays during NBA games.

Autograph, an NFT trading platform co-founded by National Football League quarterback Tom Brady, offers NFTs of celebrity-signed assets, with rare-tiered items that connect fans with their idols in innovative ways like real-life experiences and other rewards.

Collectible NFTs have also invaded the digital comic book industry with projects including DC Comics’ NFT collectible release with Funko. Collectible NFT trading and ownership, for most, is about future liquidity, though nostalgia and true fandom are also a major draw to buy into a collection.

There is also a variety of sports NFTs that tap into fantasy sports leagues on platforms such as SoRare, which use NFTs to power the virtual football or baseball teams that then compete. SoRare NFTs cross over into our next entry, around play-to-earn NFTs.

Play-to-earn gaming NFTs

Play-to-earn (P2E) gaming NFTs is also known as GameFi. Online gaming has historically offered in-game assets to enhance the experience like weapons and armor to be purchased from the game developer or platform. The difference with P2E is that the equivalent cosmetic items like skins or shoes are NFTs, and most play-to-earn games require an initial purchase of one of the game’s NFTs to actually earn crypto for playing. These NFTs are usually available for purchase within the games or on secondary marketplaces like OpenSea.

Popular examples such as Axie Infinity and Gods Unchained, give players ownership over their rewards and the ability to sell and trade their in-game asset earnings. This includes in-game crypto currency rewards as well as the NFTs themselves, such as the “Axies” that are the in-game virtual pets central to gameplay on Axie Infinity, or the metaverse platform Star Atlasstructure NFTs. Star Atlas in-game tokens, ATLAS and POLIS, can be earned by completing missions. In addition, a range of NFTs can be purchased and traded on the games NFT marketplace.

There is also a sub-category of NFTs that involve real-world involvement such as Stepn, which categorizes itself as a “move to earn” game.

Fashion NFTs

Linking real-world fashion with embedded chips to NFTs offers an enticing, unique designer experience for consumers to engage in new ways with brands they love. This innovation in fashion also includes using virtual reality headsets to try on items in augmented reality settings. Major designers including Tommy Hilfiger and Dolce & Gabbana have released digital-garment-only collections sold as NFTs that could be worn by your avatar within the metaverse platform Decentraland. Similarly, The Dematerialised (DMAT), a Web3 wearable marketplace, lets users buy, sell and virtually try-on NFTs styles on the platform.

Some fashion brands and retailers such as Nike x RTFKT’s Cryptokicks, the shoe giant’s metaverse sneaker line, intend to pair physical clothing with online items to create a “phygital” experience, an emerging Web3 trend.

Utility NFTs

Some NFTs are being used to link digital tokens to real-world rewards and experiences, aka Utility NFTs. There are NFTs that fall into one of the prior categories and also add utility, adding value like membership to a club, access to IRL experiences or attachment to physical goods. There are also NFTs that are solely meant to offer access to a real-life club, tickets to an event, nightclub or other experience.

This type of NFT is influencing almost every type of existing NFTs, including the previously mentioned Bored Ape Yacht Club, which now offers exclusive access to parties and events. Projects such as PROOF collective offer benefits to future drops including the Moonbirds PFP Project.

Retailers are adding real-world utility to their NFTs. For example, Dolce & Gabbana and UNXD’s Collezione Genesi was one of the first luxury NFT collections to include digital and physical items and future experiential benefits. Other brands offering utility NFTs include Adidas’ exclusive crypto-themed clothing for its Into the Metaverse holders and Nike’s digital fashion brand RFTK, offering digital and physical items for its Clone X Collection holders.

This article was originally published on Dec 13, 2022 at 9:31 p.m. UTC

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Betsy Farber is CoinDesk's Senior Editor, Content Operations. She does not hold a material amount of cryptocurrency.


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