Dipping your toes into the world of digital assets? You’d be spot on to give non-fungible tokens (NFTs) a second glance. Certain key attributes can make an NFT not only valuable but potentially skyrocket in worth over time. We’re talking about rarity, utility, and demand – the triple threat of NFT investment. In this Cryptopolitan guide, we’ll dive deep into these attributes, offering you a clear roadmap to discern if an NFT value is a good fit for your portfolio. So let’s get started, shall we? We’re excited to help you navigate this vibrant digital landscape.
How are NFTs created?
We’re excited to share with you that, yes, it’s entirely feasible to craft an NFT – regardless of your technological know-how! Be it artists, game enthusiasts, innovative businesses, or talented musicians, anyone can bring their NFT vision to life. Think of it as a creative adventure, where you’re the master sculptor, molding your unique product into a Non-Fungible Token on the blockchain.
This exciting transformation process is often referred to as ‘minting’. Once you’ve minted your masterpiece, you’re free to trade your unique non-fungible tokens in the marketplace of your choice. It’s like opening the door to a new world of possibilities!
However, it’s important to be aware of the costs involved. Much like the unpredictability of a roller coaster ride, the gas prices on the Ethereum blockchain don’t have a fixed rate. They can be quite high sometimes, so it’s crucial to keep this in mind as you embark on your NFT journey.
What Is an NFT?
Let’s start with the basics—what is an NFT? NFT stands for Non-Fungible Token, and it’s essentially an asset that is unique. unlike other digital assets like Bitcoin or Ethereum, each NFT is unique and can never be replicated. This makes them incredibly valuable, as there is a finite number of them.
So how do you know if an NFT is valuable? There are a few things to look for: Rarity, utility, demand, brand recognition, and counterfeiting prevention. If an NFT has all of these qualities, it’s likely to be a good investment.
NFTs are created using a process called “minting.” This involves using special software to create a unique digital currency that can be attached to a digital file. The file can be anything from an image or video to a piece of music or even a virtual world. Once the NFT is minted, it can be sold or traded like any other digital asset.
Minting an NFT is a relatively simple process but requires specialized software and hardware. The most popular minting platforms are Ethereum, EOSIO, and Wax. Each of these platforms has its own unique features and capabilities, so it’s important to choose the right one for your needs.
Ethereum is the most popular minting platform, thanks to its wide range of features and ease of use. EOSIO is a newer platform that offers faster transaction speeds and lower fees. Wax is geared towards gamers and provides some features specifically for them.
Both beginners and seasoned digital investors, collectors, and enthusiasts are learning their way around the NFT market to exploit its potential fully. The value of an NFT is affected by several distinct variables. What makes NFTs valuable? We’re going to look at some of these elements today to assist you in deciding if they’re viable investments for you.
Understanding the Value of Non-Fungible Tokens
In the crypto space, there are two sorts of tokens: fungible and non-fungible. Money-like tokens are fungible. Any one-dollar bill may be used to replace a one-dollar bill, regardless of the bill’s serial number.
On the other hand, non-fungible tokens are unique digital art that any other token cannot replace. The attraction of NFT is a result of the verification of its ownership and uniqueness as well as of its interoperability, which ensures its usability in a variety of applications. New business models and application cases are becoming possible as a result of these characteristics.
In that regard, the scarcity of NFTs makes them valuable. According to the scarcity principle, the less easily accessible something is, the more likely it is that we will want it and pay a greater price for it.
Finally, this explains why NFTs are so valuable. If an NFT finds something valuable and there is only one original of it, people will pay a lot for it.
Why are NFTs Worth Anything?
NFTs are only composed of computer code. An NFT is a digital representation of traditional art, such as an original painting or a studio-recorded song.
NFTs are useful since they confirm an asset’s non-fungibility. Because of this, these assets are special and one of a kind. Picasso’s artwork is one example of non-fungibility. Because of this, even if everyone can reproduce his paintings, the original work is still special and distinct.
Why do some NFTs have value while others don’t?
Even though each NFT is distinct and fosters scarcity, the same idea loses its effectiveness when millions of NFTs are produced every day. When there are too many possibilities, each NFT is not given enough attention to become highly valuable and popular.
A speculative buying frenzy is being sparked by the hourly influx of fresh assets into the NFT exchanges. In forums and chat rooms, thousands of people discuss the items they want to purchase in an effort to artificially inflate the price before selling when they feel they have made a profit. This method is known as “pump and dump.”
As a result, assets that don’t endure a pump-and-dump movement, aren’t created by well-known artists or celebrities or aren’t subjected to a strategic marketing effort have a lower likelihood of experiencing great financial success.
What Makes an NFT Valuable?
The formation of what people consider to be “valuable” is influenced by various circumstances. One of the most prevalent critiques of NFTs is that they lack value because they are intangible and typically reflect digital currencies rather than actual, physical goods.
But there is one point on which we can all agree: since we spend a lot of time in the digital environment, it stands to reason that consumers would naturally value digital goods. The benefit of blockchain technology and NFTs is that we can finally provide value to digital goods by tying ownership and validity to them.
While there is no assurance that any certain NFT will be highly valued, there are a number of things to take into account to give you a decent idea of its prospective worth. When deciding if a particular NFT is a wise investment, some NFT investors pay close attention to the creator value, possible future value, and buyer interest.
Others will take into account the asset’s current market value based on other tokens the developer is selling and how they might affect it. What makes NFT unique can be answered by mentioning a few universal elements, such as:
1. Full ownership rights
2. An NFT’s utility
3. NFT rarity
4. The community around a particular NFT
5. Honorable mentions by bigwigs in the crypto space
- Ownership rights
The proof of authenticity offered by an NFT is one of the things that makes it valuable. Anyone can copy and paste any pixelized ape NFT and share it, but this has no value. The original NFT, however, does have value because it is the only one that can be proven to be authentic.
You possess all legal rights to your real NFT, just as you would possess all legal rights to a piece of property you have paid for and been given the deed to. Even if a complete stranger were to stop and take a selfie in front of the house, it wouldn’t be worth anything. The fact that you are in possession of the verifiable deed.
- NFT rarity
Another aspect to take into account when determining an NFT’s value is its rarity which makes the NFT assets unique. In actuality, scarcity raises value. This implies that uncommon or special NFTs can dramatically increase the value of well-known NFT collections.
Marketing some NFTs as “limited edition” collections is one strategy to raise the token’s value because many investors enjoy the concept of owning something that no one else does.
However, two NFTs with comparable properties but different values can be found in a collection. The 59-card Lebron James Top Shot NFT series, one of which sold for an astounding $387,600, is a great illustration of this.
Additionally, certain NFTs are more distinctive than others. The previously stated Bored Apes from the Bored Ape Yacht Club serve as a prime illustration of this. Due to their distinctiveness from one another, this small collection of cartoon monkeys has grown to become one of the most well-known NFT collections.
Because there are only 10,000 individual tokens in the collection, their scarcity and NFT rarity, which determine their worth, are increased by their low supply. Additionally, some qualities within collections are rarer than others. For instance, in BAYC, just 77 of the 10,000 Bored Apes in the project are wearing the “King’s Crown” headgear.
The value may increase when a trait is highly sought after due to rarity or beauty. One key factor that determines an NFT’s value is its authentication and provenance. Non-fungible tokens offer a way to track an asset’s provenance using the blockchain. This gives buyers and sellers of NFTs confidence that the asset is genuine and has not been tampered with.
- An NFT’s utility
When an NFT is useful, its value increases. They can be put to use for any of the following purposes: Art can be shown anywhere you desire, just like a painting. You can exhibit them as PFPs or in online galleries (profile pictures), through music, owners can obtain song rights without the assistance of middlemen that rob the songwriter of a significant portion of their earnings.
Moreover, some NFTs are made specifically to be used as images or objects in games in the metaverse.
What makes an NFT underlying value is a response to the inquiry, is not just restricted to digital tokens. Some NFTs are additionally connected to tangible goods or benefits. The worth an NFT has in proportion to whatever tangible assets and benefits it may have is referred to as its “NFT utility.”
The NFT’s wide spectrum of utility often has an impact on this non-fungible asset’s value. Digital artists may include original artwork in NFTs they sell, providing the purchaser with a physical object in addition to the digital token itself.
- The Community
Looking into the community of an NFT is one of the easiest and quickest ways to figure out whether it might be a valuable asset. A vibrant and engaged community is a good sign that an NFT might have value. Some factors to consider when looking at the community are:
– The size of the community
– How active the community is
– The level of engagement within the community
– Whether the community is growing or shrinking
NFTs that have a strong community behind them are more likely to be valuable because there is more interest in the asset. A community can also help to drive up the value of an NFT by providing support and developing new uses for the asset.
Some NFTs have communities that are dedicated to using the asset in a certain way. For example, the community behind the game Cryptokitties is focused on breeding and trading virtual cats. This use case has helped to drive up the value of Cryptokitties NFTs.
NFTs that are used in games or other applications can also be valuable because they provide utility to the user. In-game items that are stored on the blockchain as NFTs can be used in the game or traded with other players. These items might be rare or have special abilities that make them more valuable.
Some NFTs are valuable because they represent a stake in one company or an asset class. For example, an NFT might represent a share in a virtual world or a piece of digital real estate. These NFTs can be bought and sold like any other digital asset, and their value will depend on the underlying project.
NFTs that are used to represent physical assets can also be valuable. For example, an NFT might represent a ticket to an event or a physical product. These NFTs can be traded like any other, and their value will depend on the underlying asset.
NFTs can also be valuable because they offer access to a service or a community. For example, an NFT might represent the membership to a club or a subscription to a service. These NFTs can be traded like any other, and their value will depend on the underlying service or community.
Some NFTs are valuable because they are works of art or pieces of digital content. These NFTs can be bought and sold like any other asset, and their value will depend on the artist or creator.
NFTs that have a use case that is not yet developed can also be valuable. For example, an NFT might represent a future service or product. This specific NFT can be bought and sold like any other asset, and its value will depend on the underlying service or product.
- Honorable mentions
The four pillars of NFT value have been examined, but it would be irresponsible of us to neglect to highlight the following factors:
Creator(s) of an NFT: Trust and value are inextricably related. It’s critical to consider the credibility of the individual or group responsible for the desired asset. Can they fulfill the utility they have promised? Do they even qualify as people? Doxed individuals and groups add additional value to NFTs.
Personal perception: The worth ultimately rests with you. What do you see, do you like it? Would you like to have it? Are YOU prepared to invest?
NFT Marketplaces: There are a variety of platforms that facilitate the buying and selling of NFTs. The most popular NFT marketplaces are OpenSea, Rarible, and Foundation. Each marketplace has its own quirks and should be studied before you buy or sell an NFT on it.
In general, the more you know about an NFT and the factors that influence its value, the better equipped you will be to decide whether or not to buy it.
How to Choose NFTs to Invest in
Research is the key to the success of most investors. By learning about the sources of the assets, whether they want to invest via conventional methods or crypto, they may improve their chances of engaging in a fair and advantageous transaction. For NFTs, the same principle must be used.
What should be on your research checklist is as follows:
- The Project
It’s a good idea to comprehend the project’s objectives and road plan if you want to invest in an NFT-based project or business. You must have a thorough awareness of the project’s potential as an investor to maintain the project’s appeal and demand. Some points to remember are:
- What goals does the project’s originator have for it?
- Do they intend to grow in the future?
- What is the meaning of the brand?
- How are they planning on attracting attention?
- The Creator
NFT’s digital ownership significantly influences the nifty gateway as an investment. It is crucial to research the prospective developer and understand their background, particularly if they aren’t well-known or well-known in the sector. Here are some inquiries you might try to address:
- What other NFTs have they produced?
- What were the results of those initiatives?
- What are the opinions of other customers regarding their work?
- The Community
A robust and supportive community is always behind a good endeavor. A good community that supports a creator and their work can be identified by regularly polite and insightful conversations on the project’s social media. Spam that is sent frequently and appears to be generated by a bot can raise the alarm.
Seek out communities that have active community managers facilitating them. Getting involved in the community and spending time with the users and, if possible, the NFT’s creators is another excellent piece of advice.
- The Product
Examining an NFT’s information is a fantastic way to determine its value before making a purchase. The metadata of an asset contains details on the piece’s characteristics, such as its name, image, or video. The NFT’s smart contract allows you to verify its metadata directly, or you can extract it using the marketplace where it is listed.
In addition to the NFT’s metadata, you should also consider the team behind the project and their ability to execute on their roadmap. A project’s website, social media channels, and online presence can give you a good idea of the team’s professionalism and commitment to the project.
The product or service that an NFT represents is also an important consideration. If an NFT is used to represent a physical asset, you should consider the underlying asset’s value and whether it is likely to appreciate in value over time.
- Your budget
This recommendation is unrelated to research, yet it’s worth noting that your investments must be accessible and suit your budget at all times.
It’s never a good idea to put something on the line that you can’t afford to lose, so use your head rather than your heart when it comes to NFTs. Don’t go overboard and make logical investments in search of NFTs that won’t take up too much of your money.
NFT projects are a new and exciting digital assets class, but they come with all the same risks as any other investment. It’s important to diversify your portfolio to mitigate these risks. Consider investing in a variety of assets, including traditional stocks and commodities, to diversify your risk
What makes an NFT Worth Buying?
Without looking at how to determine whether a certain item is worth purchasing, we cannot explore what makes an NFT worthwhile. We’ve already noted that non-fungible tokens are unstable, making it challenging to separate those with a prospective high value from those whose value may decline after purchase (from an investment perspective).
How can you tell whether an NFT is worthwhile to purchase? When buying an NFT, keep the following in mind and ask yourself these questions:
- Characteristics of the asset
- Who is the NFT’s seller?
- The NFT market’s NFT seller pricing performance and liquidity
- Platform transaction costs for NFT
NFT Uniqueness
Consideration of the token itself and whether it possesses special qualities that are hard to come by on the market are part of what makes an NFT valuable. These NFTs might be rare, increasing their potential worth in the long run.
In some cases, the NFT ownership history has a distinctive skill set or strong online presence, which could help the token soar in popularity. It frequently takes a keen eye and understanding of what to look for when investing to identify a profitable NFT. Both the present and the future are being assessed.
The primary value driver for most NFTs is uniqueness. Just like with physical art, the value of an NFT comes from its rarity and its ability to be one-of-a-kind. This is why many NFTs are created using blockchain technology, which allows for the creation of digital assets that cannot be duplicated.
Platform transaction gas fees
Another factor that can influence the value of an NFT is the transaction gas fees associated with the platform where it is listed. For example, Ethereum’s transaction fees are typically much higher than those of other blockchain platforms. This means that buying or selling an NFT on Ethereum may be less attractive than doing so on a different platform.
NFT Seller Price Performance
Another important consideration is the price performance of the seller. If a seller has a history of selling NFTs at a profit, they are likely to be more trusted, and their assets are more likely to be in demand.
The success of the seller based on the performance of other NFTs they’ve sold might have an impact on the value of a product you’re thinking about purchasing. It’s always a smart idea to look at a seller’s account profile when browsing these online NFT marketplaces. These profiles can provide you with information regarding previous sales and ownership histories of other NFTs.
The data available can show you how volatile an NFT seller’s assets are on the market, allowing you to make a more informed decision about whether that specific token is worth your investment.
Liquidity and the NFT Market
The liquidity of an NFT is an important consideration when determining its value. Liquidity refers to the ease with which an asset can be bought or sold on the market. An asset is considered to be more liquid if it can be sold quickly and at a relatively close price to the last sale price.
NFTs that are less liquid is more difficult to sell and may be subject to larger price swings. This increased volatility can make it more difficult to predict the future value of an NFT.
When considering the liquidity of an NFT, you should also take into account the size of the market for that particular asset. A smaller market will typically have less liquidity than a larger one.
As a result, investors in NFT may find it difficult to turn a profit due to a lack of liquidity. However, there is still significant room for expansion in this industry, and its size may have an impact on the price of some NFTs. You now know that some NFTs have higher potential token values the more rare and distinctive they are.
Conclusion
When considering trading NFTs, there are several factors that you should take into account, such as the uniqueness of the asset, the transaction fees associated with the platform, the seller’s price performance, and the liquidity of the market. Each of these factors can have an impact on the value of an NFT art.
When making a decision, it’s important to do your research and consult with other buyers and sellers to get a sense of what the market is like and what people are willing to pay for an NFT. With the right information, you’ll be able to make a more informed decision about whether or not an NFT is worth your investment. Make sure you do your research before investing in the digital world.
