It feels like two years ago, no one knew what an NFT was. Well, at least no one outside of a select group of industry insiders. The ‘first’ NFT ever minted (admittedly, that I know of), Quantum, was created in 2014 by New York-based artist Kevin McCoy who, in his own words, “was putting these ideas of art and blockchains together [but] almost no one understood what I was talking about.” Still, despite the confusion and skepticism, McCoy had faith in his idea: “… I knew it was a really important and transformative idea. It’s gratifying to see the wider world come around to the same realization.” Indeed, in less than a decade since Quantum’s original mint, NFTs have grown to become a part of pop culture, and this concept that barely existed in our minds three years ago is now fully integrated into mainstream consciousness. Quantum itself sold for $1.47 million as part of a now controversial auction at the world-renowned Sotheby’s.
Too much, too quickly
Despite their recent surge in popularity, the NFT space can still feel very much like the wild west. Every time I log into Twitter, I find myself drowning in a sea of new projects all being shilled using the same share, like, and comment method we’re all familiar with. This could quickly become overwhelming for someone taking their first steps in non-fungible tokens, permanently putting them off.
Even while saturated, there is still substantial potential in the market, and there are many collections that you may find suitable for your needs. There are no strict rules, but there are certain criteria you should always consider before buying into a collection.
An easy way to determine an NFTs utility is to ask yourself one simple question. What does it do beyond representing a unique digital asset? If the answer is nothing, that doesn’t mean that the collection is a complete write-off. Some of you will be looking to collect some cool digital art and have the NFT to prove your ownership. Much in the same way that enthusiasts collect valuable physical art pieces.
There are plenty of projects on the market with various utilities, but a few sectors, in particular, have been quick to integrate NFTs. The applications of non-fungible tokens are ideal for both play-to-earn and metaverse gaming. Popular titles such as Axie Infinity and Sorare are excellent examples of how tokens are the perfect solution for determining in-game ownership.
Aside from gaming, the fashion industry has also embraced NFTs. Recent examples range from high-street brands such as GAP to high fashion labels like Gucci, with the latter taking its own steps into the metaverse. Philanthropic utilities are also on the rise. Swiss-based GainForest is a non-profit organization using blockchain to combat deforestation. Holders receive a token representing an area of rainforest, which they can potentially use to track the status of that area and governance.
A community can make or break a project. This is why so much time and resources go towards building, developing, and maintaining communities. Successful projects will often spend months, even years, ensuring their communities are primed for mint. A good community is a solid foundation as it not only breeds confidence in new members but provides an ecosystem that can determine the future of your project in terms of utility.
Several NFT projects have grown far beyond their initial mints, growing into global communities that impact various industries. Prominent among these is the Bored Ape Yacht Club. This popular collection has evolved into a worldwide brand. BAYC members include grammy-winning musicians, elite athletes, and hugely successful entrepreneurs, and the artwork has an almost iconic status among NFT enthusiasts.
Another critical aspect to focus on while researching a project is the team behind the NFT. A credible group, preferably with experience launching a successful project, gives a potential buyer a boost in confidence. Knowing that the team is all in eases any suspicions of a rug pull or fear that the project might collapse.
Several popular NFT projects, including Otherside and Moonbirds, found success thanks partly to the people behind them. The latter, in particular, found rapid, almost overnight success, thanks to the unique artwork and the fact that Proof, the group behind the project, is well-established and has an excellent reputation. A purposeful, dedicated team increases the likelihood of success, so you must do your research.
Finally, we have the art. Despite all the possibilities for NFTs, art remains one of the primary factors most buyers consider. As of writing, the two most expensive NFTs ever sold ($91.8 million and $69.3 million, respectively) were created by renowned digital artists Pak and Beeple. A well-known and respected artist can bring credibility to a project and hugely influence the floor price on the secondary market.
The quality of a collection’s design can indicate the project’s intentions. A team that spends a lot of resources and effort on design is likely in it for the long term. Well, that’s what you’d hope for as a buyer anyway. After all, there are no guarantees. There are collections out there with the most basic 8bit design that are well worth looking into, but these are exceptions rather than the rule.
Several NFT collections have become iconic in their own right. Projects like BAYC and Cryptopunks have gained an almost cult following. Their popularity has made PFPs, (profile pictures) featuring their art much sought after among the NFT community.
It’s up to you
Of course, there are plenty of factors that you should take into consideration before buying an NFT. Projects will do everything in their power to attract you to their collection. Friends may recommend projects that are “sure to moon,” and you might even get a good feeling from a project. However, you should never make that final decision until you’re informed of all the facts, what does this NFT do, who is behind the project, what type of community it has, and has thought and care gone into the design? It is unlikely you will find a project that ticks all the boxes; if you do, please let us know, but by simply asking these questions, you increase your chances of finding a gem in a currently over-saturated market.
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This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or any third-party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.