Utility is a difficult concept to not only describe but also quantify. Blockchain projects aim to solve specific problems and their native blockchain assets have use cases in their ecosystems. These ecosystem use cases are called the utility of a blockchain asset.
Traditional assets are only demanded by investors, but blockchain assets can be demanded by investors and users.
Traditional investors find it difficult to value blockchain assets because they look at them only from the perspective of an investor. Traditional financial models like DCFs can provide the base valuation of a blockchain asset but completely miss the value prescribed to these assets by users.
How would you value Amazon shares differently if each shareholder also got perks like a free Prime membership or 10% off on purchases for being a shareholder?
For this, you have to find ways to value utility to users, for which no widely used models exist. Even using software license pricing models may be more applicable to answer this question than traditional valuation models.
The challenge during the 2017 ICO boom and the 2021 NFT boom was attaching enough utility to blockchain projects to make them sustainable. The few teams that cracked the code drove the most long-term and consistent value to their ecosystems.
All assets are valued based on demand and supply. Utility can provide a base demand for a blockchain asset. Even if no investors demand the asset, users can shore up the value by demanding it for its use in the blockchain ecosystem.
Utility is at the center of all blockchain ecosystems. Without it, there is only speculation. The more useful a blockchain project is to users, the higher the utility and value of its native blockchain asset.