Evaluate NFT from multiple perspectives, such as safety, age, creator, and scarcity.
Title of the original text: ” An article about 7 ways to understand NFT valuation “
Written by William M. Peaster, Lead Writer, Bankless NFT Publication Metaversal
There is no doubt that NFT ushered in a moment of explosion. Beeple sold his work for US$69 million at Christie’s auction, an Alien CryptoPunk collection was successfully sold for US$7.2 million, and Fewocious broke the SuperRare sales record.
All this happened last week, and it was really crazy.
You may ask: “How did these NFTs get sky-high valuations?”
This is a very good question. Unlike DeFi tokens, NFT (currently) has no cash flow on the chain, and no price-to-earnings ratio or cash flow model can be applied to them.
But some methods can be used for reference, and in this article, the author William M. Peaster will tell us seven factors that add value to NFT.
How to value NFT?
More and more people are starting to learn and collect NFTs, but is there a way for you to accurately evaluate these unique digital assets so that you can build and manage your own NFT collections like a professional?
This article will help you answer this exact question, and we will outline a series of different methods to help you evaluate the value of NFT.
let us start.
Goal: Learn how to measure the value of NFT
Skills: Simple / Intermediate
Study time: 10 minutes-1 hour
Evaluating the value of NFT has two dimensions, subjective and objective.
Some people may think that the CryptoPunk they obtained for free in 2017 is priceless. However, collectors in the NFT market such as OpenSea and Rarible often trade these basic Punk collections and then price these NFT collections. .
The lower limit of such volatility can objectively tell us that a certain set of NFTs is currently worth at least so much.
For example, at the time of writing, the lower price limit of CryptoPunks is about 19 ETH, so if you list a CryptoPunk at this price, you will most likely be able to sell it soon, because many buyers are tracking the cheapest Collection.
In terms of objective valuation, you must also consider some rare attributes and other factors.
Examples here include the EulerBeats joint curve or Common Avastar initially priced at 0.07 ETH, while an Uncommon (rare) Avastar usually sells for 0.14 ETH, etc.
In addition, the time dimension is also a key factor to be carefully considered.
In other words, how much was this NFT worth in the past? How much is it worth today, and how much will it be worth in the next few years? Over time, how does its value change, whether it changes rapidly or suddenly, will it grow, or will it fall into a quagmire? In-depth study of these issues can help you better evaluate NFT.
Finally, there is an analytical dimension to evaluate NFT, which combines subjectivity, objectivity, and time. What I mean is to be able to consider these dimensions at the same time, and then analyze and estimate the conservative, neutral and aggressive valuation of NFT on a rolling basis.
This provides you with a framework to deal with and understand the meaning of all “what if”, for example, what if the market for the asset heats up, or it cools, or it stays stable?
Suppose you have a CrypoKitties founding cat (one of the first 100 crypto cats), and you want to infer its performance in the next year.
If the NFT bull market can continue for a few more months, your positive analysis result may be that your crypto cat can easily sell dozens of ETH, while your conservative analysis result is that if the NFT bear market breaks out, you can sell What is the reserve price of the founding cat.
Source: cryptokitties.co/kitty/2#
However, this is just a bird’s-eye view of how people understand NFT valuation.
The best way to accurately assess the value of NFTs is to weigh the current market conditions based on the basis of NFTs and objective factors. What are its components? How is it built? What can it do?
Let us introduce some of the most important value-added factors one by one.
7 features will add value to NFT
Security of blockchain
The core point of NFTs is that as long as their underlying blockchain infrastructure remains the same, they are immutable and guaranteed digital assets.
Therefore, Ethereum is to a large extent the most important NFT network, thanks to it being the safest smart contract platform in operation today, and Ethereum will continue to maintain its dominant position in the foreseeable future.
In other words, the blockchain that minted NFTs is linked to the value of the NFT itself, which is why the current NFT minted on Ethereum is more valuable than the NFT minted elsewhere because they are more secure.
Core issues regarding blockchain security:
- Is the main chain secure?
- Is it decentralized?
Is it on the chain
NFTs such as Avastars, Aavegotchis and Art Blocks drops are all cast on the chain. They can exist only by relying on their respective Ethereum smart contracts. This means that they can exist as long as Ethereum exists, which means that NFTs can Exist for a long time.
On the other hand, some NFT projects rely on external off-chain providers such as AWS to provide simplicity and flexibility, which introduces a dimension of trust, so you must believe that the project can persist and keep its servers running.
Otherwise, your NFT may only be valid for a few years.
Therefore, it is obvious whether the value of NFT on the chain is obvious, and the key questions on and off the chain are:
- Where is this NFT hosted?
- Is this NFT completely on-chain (which means it can exist for a long time)?
age
NFTs can also obtain value based on their casting time. For example, NFTs did begin to heat up in 2020/2021, so NFTs before this time period began to take on the status of digital cultural relics. They were the earliest in this digital cultural revolution. s work.
However, the development of NFT is still so early that I think the factor “age” has not yet played a role. In the end, it may be that any NFT or anything established before 2030 may have special meaning, let us wait and see.
At the same time, the earliest NFT projects have received impressive valuations (such as CryptoPunks). These NFTs were born in 2017, and this fact has attracted the attention of many collectors.
So, just like wine, always consider the age of the NFT!
Key questions about age:
- When was this NFT cast?
- Does this NFT have any historical significance?
Creator and community
If a person who has no fans and no history of NFT creation puts an NFT on OpenSea and there is no publicity, will this work be sold? If there is no further effort, of course it cannot be sold.
This is why the NFT forged by a major artist or creator is valuable. The important thing is that involving the community can create demand.
Naturally, the more popular creators and the larger the community, the more valuable NFTs are. This dynamic is basically applicable to any market.
Key questions about creators and the community:
- Does the creator have many followers on social networking sites such as Twitter and Instagram?
- Do they often interact with fans?
- Do you think creators can develop their brands in the future?
Scarcity
In the NFT ecosystem, we will see that there are two versions of the NFT released by creators: unique and large numbers (such as 10, 50, 100, etc.).
Obviously, unique NFTs are very scarce, so they are more valuable than a large number of works. However, this does not mean that a large number of versions of NFTs are worthless, and we often see that some large numbers of NFTs cost thousands of dollars each!
Platforms like SuperRare only support the only version of NFT, so you can guarantee that only one authentic artist is circulating in the market.
Key questions about the scarcity of NFTs:
- How many are minted?
- Will the artist cast more such NFTs?
Release rate
Is the number of NFTs released by a creator in one year 1,000, or only 12?
I mean, figuring out the production speed of a particular NFT is the key to understanding its value.
A project with an unlimited amount of NFTs and a unit price of 0.01 is usually not as attractive as something created by an artist who only produces 25 NFTs. Of course, those outstanding artists who only release a few selected works each year often sell their works higher than those of the same level who release works several times a week.
Of course, there will be some special examples, such as the 5000 collections sold by Beeple. For 13 years, he has created a work every day. These works have sold for about 70 million US dollars. It took him more than 10 years of unremitting efforts to establish This valuation!
Key questions about publishing speed:
- At what rate is this artist creating new works (daily, weekly, monthly, yearly, etc.)?
- How many works did they cast?
Richness (e.g. audio)
We are beginning to see more and more visual NFT works accompanied by audio. This dynamic effect provides users with a richer artistic experience than ordinary NFT. Who doesn’t like to hear music while playing their NFT?
With this in mind, audio can increase the sensory added value of NFT, especially when the audio is done in collaboration with major artists.
Expect to see audio-visual integration become an artistic norm through NFT.
Key questions about audio:
- Does NFT have audio?
- Who made the audio for this song?
Additional item: item-specific rarity
Some NFT projects, such as CryptoPunks and Axie Infinity, have various NFT features. For CryptoPunks, aliens and ape punks are the most valuable, and similarly, Mystic Axies are the rarest (and usually the most valuable) on the Axie Infinity market.
The rarer the NFT’s characteristics, the more likely it is to obtain substantial profits in the NFT market.
Therefore, if you see an NFT sold at a sky-high price and are confused about it, please dig deeper into its potential characteristics. Their rarity may give you a better understanding of the reasons behind its sky-high price.
to sum up
When evaluating NFTs, there may not be right or wrong answers, but if you try to do so, you will definitely consider many dynamic factors.
The best option is to take a holistic approach to understand all aspects of a work before making a decision.
For example, the NFT ecosystem has just rediscovered the MoonCats project, which was released after CryptoPunks, but lost its voice after 2017. Now, hundreds of people have cast MoonCats NFTs and tried to evaluate them on OpenSea.
What is the answer?
We are still exploring, and of course there is no correct answer yet. We will now evaluate them in different ways, for example, is this on-chain? Is this credible? Does the artist have a community? Do they have any unique characteristics?
These are the basic questions you need to ask yourself when buying an NFT. Use everything you know about NFTs, this is the trick.
You must evaluate NFT from multiple angles. If you can do it, then you are at the forefront.
Source link: www.8btc.com
