NFTs and blockchain technology are changing the world as we know it. We are on the cusp of digitizing the entire world and tokenizing all its assets to the blockchain. Once done, we have a 24/7 global market for anything and everything. This results in an fair distribution of wealth across the spectrum of society. The blockchain allows creators and enterprises to find communities and build direct relationships. We do not need third party intermediaries who do not add value.
NFT projects launch daily. It can become difficult to keep track of them. Every NFT project has its own set of features, utilities, and a future road map for the community. So, how can you decide the value of an NFT collection before deciding to buy it? We mentally calculate values for many things in our day-to-day life. We do this by comparing prices of products and services online.
That’s the goal of today’s post! NFT projects can get valued in both tangible and intangible ways. But before that, let’s get quick and understand what NFTs are.
What are NFTs?
NFTs or non-fungible tokens are digital goods or objects stored on the blockchain. A blockchain is a decentralized database that is tamper-proof. A single entity does not control it. Hence, think of NFTs as real-world objects stored on the blockchain. They can be anything you like. Images, video, audio, or any other forms of creative media.
How to Value an NFT
As you may have guessed, calculating the exact value of an NFT is not easy. This asset class is new, as compared to asset classes like stocks, bonds or mutual funds. Physical artworks like well-known paintings undergo thorough due diligence before getting sold. But, since NFTs and digital art have arrived on the scene, the market valuation method is new. So let us use a simple framework to value an NFT.
Evaluate an NFTs rarity
Every NFT has something unique or ‘rare’. For instance, an NFT is rare if it’s a first-of-its kind work by an artist who has a track record of experimenting. Or it could be rare when a collection creates an NFT that has more characteristics than other NFTs. Decide how personalized an NFT is for you, from an emotional attachment point of view. Do you like what you’re seeing? It is surprising how similar shopping for goods and services seems to be. Do the same for NFTs.
Second, NFTs become rare if they get used in other applications like a play to earn game. Rarity is anything that gives an NFT and edge over other NFTs. This is owing to a set of differentiators that endow it with traits and properties. Likewise, check how rare your chosen NFT is. Following such simple basic suggestions is way better than overcomplicating things. We’re attuned to rare things. Apply the same principle towards NFTs. Think as if you’re buying a personal souvenir and its ownership gets proved by the blockchain.
Evaluate an NFTs Utility
When you like an NFT, check whether it has any utility apart from the fact that you like how it looks. Many NFT projects turn out to be simple artworks. But, a class of NFT projects have a clear roadmap and vision for using their NFTs. Think, as assets and items in decentralized applications like play to earn games. Or Decentralized finance mechanisms like staking and liquidity provision. And even doubling up as event tickets or subscriptions.
Coming back to the point made above, once you find a good NFT project, check how well the community interacts. Many times, the project’s team members are happy to help you understand the utility of their project. Another thing you can do is check out the project’s whitepaper and go through the road map. NFT projects add utilities to their work once there is a healthy community in the making.
Evaluate an NFTs tangibility
Something gets said to be tangible when it gets experienced in person. Check how well your chosen NFT interacts with the real world. For instance, take the Bored Ape Yacht Club. The NFT holder gets access to events, updates and yacht parties with a closed set of people. Likewise, Gary Vaynerchuk’s Vee friends NFT is clear and specific. It says that NFT holders get access to sessions with him, access to his courses and a set of subscriptions.
Another example is the bestselling author, Mark Manson. The Book NFT can provide access to a community of book lovers. Not to forget updates and free courses to learn about healthy lifestyles. Likewise, try to understand the possibilities of tangibility in your chosen NFT. In fact, if you have suggestions of your own, suggest it to the NFT project team!
NFTs are here to stay
NFTs are going to spawn a trillion dollar Metaverse community. As an observer, you can also start learning and get involved today! Follow newsletters and be active on social media like Discord, Twitter and Telegram. This is so that you can interact with as many people as possible. Be a member of the NFT community.
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