Free Utility: A Race to the Bottom

In the rapidly evolving world of web3 communities, the concept of utility has become a pivotal factor in determining the value and longevity of a project. While offering utility to NFT holders has gained popularity, there is a critical issue that needs addressing—the race to the bottom when it comes to pricing utility.

As creators, it's essential to understand that providing utility for solely the cost of the original NFT purchase leaves little room for sustainable revenue streams. In this blog post, we'll delve into the challenges faced by creators in developing and maintaining utility, the actual costs involved, and why a fair revenue model is crucial for the longevity and growth of their projects.

The Illusion of Free Utility

Creators often feel compelled to offer utility for free to attract and retain their audience. While this may seem like a noble approach, it can have unintended consequences. Free utility erodes the creators' ability to generate income and invest in their projects, hindering their capacity to provide the promised utility over time. Building a sustainable and recurring revenue stream is necessary for creators to continue offering valuable services and develop new utility functions to keep their community engaged and grow their audience.

Recent data suggests that the average profit for creators from collection sales lasts for a relatively short period, typically ranging from three to six months. This limited timeframe stands in stark contrast to the community's expectation that utility will be available in perpetuity. By offering free utility without a sustainable revenue model, creators inadvertently limit their ability to continue providing the promised services beyond the initial phase.

While the initial mint of an NFT collection can generate significant profits, it is often a temporary boost. Over time, the demand for the collection might dwindle, leading to a decline in sales. This puts the creator in a precarious position, as they are left with diminishing revenue streams to support ongoing utility provision. Without a fair revenue model in place, it becomes increasingly challenging for creators to allocate resources towards maintaining the utility and exploring new avenues for innovation.

The Economics of the Creator Economy

In today's digital landscape, the creator economy has become a powerful force, enabling individuals to monetize their talents, ideas, and creations like never before. However, it is crucial to understand the economic realities that Creators face, beyond the illusion of free utility.

One key statistic that sheds light on the financial aspects of the creator economy is the average income earned by Creators. Recent studies indicate that approximately 70% of web3 Creators earn less than $500 per month from their creations. This highlights the stark reality that many creators face financial challenges in generating sustainable income from their work.

To compound this issue, the cost of living continues to rise in many regions. Inflation, housing costs, and other essential expenses place additional burdens on Creators, making it even more crucial for them to establish fair revenue models that provide adequate compensation for their efforts.

It is also important to recognize the hidden costs associated with providing utility to the community. These costs go beyond the initial creation of the NFT and encompass ongoing maintenance, technical support, and the need for continuous innovation to keep the audience engaged. Creators may have to outsource technical and creative talent, invest in web hosting and software, and dedicate substantial time and resources to ensure the sustainability of their offerings.

Hidden Costs of Providing Utility

While the concept of free utility may initially sound enticing, it is essential for Creators to understand the hidden costs associated with providing ongoing value to their community. These costs go beyond the mere creation of an NFT collection and extend into various aspects that ensure the sustainability and growth of the creator's offerings.

Time Investment
Creating and maintaining a thriving NFT project requires a significant time commitment. According to a survey, 53% of artists reported spending 25 or more hours per week creating and managing their NFTs¹. Additionally, a report by The Creative Independent found that 76% of artists spend more time on administrative tasks, marketing, and managing their online presence than on actual creative work².
Technical Expertise
In many cases, creators must rely on technical experts or outsource certain aspects of their project. According to a study by Electric Capital, 31% of developers in the Web3 ecosystem outsource development work, indicating a reliance on external expertise³. Collaborating with skilled professionals to handle complex technical aspects can be a substantial expense for creators.
Creative Talent
Building a captivating and unique NFT collection often involves collaborating with artists, designers, and other creative professionals. According to a report by NonFungible.com, the average royalty fee paid to artists on the Ethereum blockchain is around 10%⁴. This fee represents a significant portion of the creator's revenue and highlights the financial commitment to compensating creative talent.
Web Hosting and Infrastructure
Hosting an NFT project necessitates a robust and reliable infrastructure. According to a study by CoinDesk, the average monthly cost for hosting and maintaining a simple NFT marketplace is estimated to be around $500⁵. As projects grow in scale and complexity, these expenses can increase significantly.
Ongoing Innovation
To keep their audience engaged and maintain a competitive edge, creators must continuously innovate and introduce new features or utility to their NFT project. According to a survey by DappRadar, 45% of developers in the NFT space consider ongoing development and innovation as their highest cost⁶. This ongoing investment is crucial for the long-term success and relevance of the project.

By accounting for these hidden costs, Creators gain a more accurate understanding of the financial realities involved in providing sustainable utility. It becomes clear that the notion of free utility is an illusion that can hinder a creator's ability to meet ongoing expenses and deliver on the promises made to their community.

Empowering Creators

At Aspen, we firmly believe in empowering creators to be paid and treated fairly. We advocate for an ecosystem that allows creators to provide sustainable utility and continue adding value over time — but utility isn’t free. By establishing fair pricing structures for utility, Creators can secure their financial stability, reinvest in their projects, and nurture an engaged community.

Aspen's Revenue Tools are purpose-built to support and uphold these fundamental creator rights. We provide creators with the tools, resources, and knowledge they need to navigate the financial aspects of their web3 endeavors successfully. From royalty recovery programs to subscription models, marketing automations to ongoing monetization, Aspen equips creators with the means to build sustainable businesses and establish recurring revenue streams.

^{SuperRare, "The State of the Artist," March 2021.
The Creative Independent, "A Study of the Artist Economy," November 2020.
Electric Capital, "Developer Report: Web3 Developer Survey," September 2021.
NonFungible.com, "NFT Market Report Q4 2020," January}