There is perhaps no measure of the popularity of Non-Fungible Tokens. What started as profile picture (PFP) “JPEGS” have developed into more fascinating use cases. What is more impressive about NFTs is how they have various uses and purposes and appeal to different kinds of people. For example, some users keep NFTs for their utilities, some for their aesthetic value, while other NFT collectors are in the market to trade and make a profit.
NFTs, unlike many other tradeable assets, possess the distinctive qualities of immutability and provable uniqueness. The decision of a collector to purchase such an asset hinges upon various factors. It is worth noting that there are collectors who derive enjoyment from the act of buying itself. However, it is undeniable that collectors seek NFTs that retain their value over time. Thus, the question arises: What attributes contribute to the value of an NFT?
The NFT space is renowned for record-breaking sales figures and huge profit returns, sometimes in days or weeks. In this article, we explore the basics of determining what makes an NFT valuable. Whether you are a seasoned NFT collector or a newbie, this article will give you everything you need. All you have to do is read to the end. Let’s go!
Understanding the Value of an NFT in 2023
The single event that drew the world’s attention to NFTs was the multi-million dollar sale of Beeple’s “Everydays: the First 5000 Days” and many other high-figure NFT sales that quickly followed. As a result, many people who flocked into the space did so, hoping to hit such luck too. It is no surprise that the most common use of NFTs is as tradeable assets.
The value of an NFT depends on its rarity and the demand for it. NFTs from teams like Yuga Labs often carry high price tags. For example, the Bored Ape Yacht Collection (BAYC) is one of the most expensive NFT collections. Similarly, BAYC’s sister collection, the Mutant Ape Yacht Club (MAYC), also ranks highly in the NFT market. .
However, even within renowned collections, certain NFTs command a higher price tag due to their rarity. Checking the rarity of an NFT is a straightforward process, as you can simply use a rarity calculator. It’s important to note, though, that rarity alone doesn’t guarantee a high selling price. Instead, it signifies that the NFT is a rare gem within the collection, increasing the likelihood of fetching a higher price tag.
Now that we have examined the basics of understanding an NFT, let’s look at some other things that add to the value of an NFT in more detail.
What makes an NFT valuable?
As mentioned earlier, the rarity of an NFT adds to its value. This factor applies especially in cases of NFTs within a larger collection. For instance, the BAYC NFT collection has 10,000 NFTs. While all of these 10,000 ape-like NFTs are similar in appearance, a few have qualities that make them unique from the rest. An example of such quality is the “King’s Crown,” which only 77 NFTs within the collection possess.
However, rarity in the case of 1-0f-1 or limited edition NFTs differs. These NFTs come in fewer numbers; thus, their rarity is based on the fact that only a few of them exist. There is only one edition of Beeple’s “Everydays: the First 5000 Days,” which is one of the reasons it sold for $69 million.
Consideration of utility is another important factor to keep in mind. Utility refers to the various possibilities and functionalities associated with an NFT, as well as the benefits derived from holding a specific NFT. As the NFT frenzy began to subside, collectors began paying closer attention to the utilities and advantages offered by an NFT. In response, numerous NFT projects started prioritizing this aspect when developing their collections.
BAYC holders, for instance, enjoy many benefits from having NFTs. That includes free airdrops of MAYC and Otherdeed NFTs, which are now worth thousands of dollars. Likewise, holders can commercialize their NFTs and earn passive income. The holders of BAYC NFTs can also use them as in-game characters in Yuga Labs’ Otherside Metaverse.
In an over-saturated NFT market with thousands of NFTs created monthly, chances of success are slim, especially for newer projects. Often, the name or team behind a project adds to its value. Yuga Labs is a good example of how much value reputation adds.
During the Otherside public mint, the demand for NFTs within the collection was so high that it crashed the Ethereum network. Some users even paid double the value of the NFT in gas fees just to mint the Otherdeed token. The reason why all that happened is that Yuga Labs consistently launches top-ranking collections, which add to their desirability. So without a doubt, to many collectors, Otherside Otherdeeds held a lot of potential. Since its launch, it has maintained its status as a top-ranking NFT collection, even during the crypto winter.
NFTs form part of the core of a vast and fast-expanding Web3 ecosystem. NFTs are not just JPEGs for social media but are now used for various purposes. The use cases are many, from in-game assets in play-to-earn games to tokens in virtual casinos and digital wearables.
Interoperability, therefore, refers to the ability of an NFT to be used across multiple platforms and for various purposes. This ability gives NFT holders more flexibility in putting their NFTs to many uses across multiple platforms.
Social media communities are an essential part of the NFT ecosystem. They are often found on social media platforms like Discord and Twitter. These communities are sometimes exclusive and restricted to the holders of particular NFTs, but other times, they are made open to the general public.
NFTs with strong and active communities are often highly sought after. This is because the community serves as a space where people discuss NFTs, teach newcomers how to get into the project, and hype upcoming drops. In addition, the size of a community influences the value of an NFT. For instance, there are some NFT communities with over 100,000 members. That means there will always be demand for the NFTs, and a holder looking to sell wouldn’t have to wait for so long.
Communities are also one of the ways to verify whether a project is legit or not. A sketchy or shady community often indicates that such a project is not transparent.
In summary, NFTs are highly sought after and traded on NFT marketplaces daily. While there are opportunities to make an immense profit, it is not certain that every NFT will be valuable. However, with the factors we have discussed above, users can selectively choose which NFT they will hold. Likewise, NFT creators can use these factors to improve their current and future NFT projects.
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A blockchain maximalist who believes that technology is necessary for the future we are heading to. An ardent researcher and writer who uses his writings to inform about the prospects in the blockchain space.
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