In the early days of NFTs, novelty ruled the day. If you created an interesting piece of art or were among the early pioneers to produce a generative set, it was fairly easy to get attention from enthusiasts.
With NFTs now in the early adopter phase of the technology adoption curve, budding artists, celebrity names, big brands and entrepreneurs have flocked to the space to claim their non-fungible stake. While a handful of blue chip collections have emerged, the majority of creators are still trying to figure out how to bring interesting utility to their collections so that the masses will want to participate and purchase.
NFT consumers are now becoming savvy and demanding more from their NFTs. While there isnt a formula for success in a collection, these 15 principles for identifying NFTs may give you a better chance at a winning investment.
No matter what the project is, its always a good idea to purchase NFTs that you enjoy visually. Ask yourself if you would still be happy you purchased the NFT even if the marketplace value was zero. If a piece makes you smile, its most often going to be a win regardless.
Which chain is the NFT collection being minted on? If it is on Ethereum, be prepared to pay additional fees for Gas. Its quite possible that an $20 NFT can cost you $100 in Gas fees. However, if it is on WAX, you can purchase a similarly-priced NFT with no fees.
Whichever chain the NFT resides on, youll need to be aware of how your NFTs are stored and want to understand the marketplaces for secondary sales. Ethereum derivatives such as Avalanche, Binance Smart Chain and Polygon can use the same ERC-20 address. WAX, EOS, Tezos, Solana, Internet Computer, Cardano and other chains require a unique wallet.
While we are still early in NFT creation, several formats for delivery have emerged as the most popular. Generative collections featuring x number of NFTs with multiple variations and attributes based on a a standard character or theme, art delivered as 1-of-1s or identical in quantities, packs containing one or more random NFTs from the collection, and membership-access cards that deliver ongoing value as deemed by the creators.
Is the NFT unique or is it a derivative of an existing collection? Bored Ape Yacht Club is the premier collection that comes to mind when considering apes. But not only have they spawned their own derivatives in the form of Mutant Apes, there is also seemingly no end in sight for other ape-inspired collections seeking to capitalize on the fortune and fame of the original.
Is there a reason for people to bond as a community around the NFT collection? Sometimes a common mission or cause is enough to bring people together. An enthusiastic community can make or break a collection.
If an NFT collection isnt presented to the public well, it may never leave the starting gate. Markets determine the value of an NFT, so the larger the demand the more likely your NFT will have long-lasting value.
Consumers want to know the long-term goals for an NFT collection. Check the roadmap to see what promises are being made by the creators for future value or utility. While a piece of art may be purchased just for enjoyment without any expectations for future utility, many collections now seek to lay out plans for the next year or three.
The more serious collections have no problem saying they are in it for the long haul and provide a decade-long roadmap. Gary Vaynerchuk has set the bar with Veefriends by promising to bring value to the collection for the rest of his life. He has declared a 40-year roadmap.
Some NFT collections have left consumers holding the bag when the creators have absconded with the proceeds and abandoned the project. This is why its essential to know who the creators are. It doesnt always mean the creators need to be doxxed, but understanding who the team is composed of and what they have accomplished before can go a long way towards instilling trust in potential customers. Its a good sign when the founders are actively involved in the discord or telegram community, but this alone doesnt mean they can be trusted.
When it comes to brick and mortar businesses, the mantra is location, location, location. With NFTs we can modify that to Utility, utility, utility. NFTs are like a key that can unlock a magical box. Whats in the box? Well, thats up to the creator to decide. Some NFTs earn a token passively and others allow staking to earn tokens and/or additional NFTs. Some NFTs can be used in games or virtual worlds. Others can be redeemed for physical goods, such as apparel or framable art. And some other NFTs can act as a membership card or subscription promising additional airdrops or whitelists for future drops. Weve barely begun to scratch the surface on utility and the most savvy creators will find new ways to bring valuable utility to their collections.
10. Celebrity/Influencer Involvement
Having a big name celebrity attached to a collection doesnt guarantee success. But being aware of popular or famous third-party celebrities or influencers that are either founders or are involved in a collection can assure more awareness and potential credibility to NFTs.
NFTs are fun, and having a website or app experience with a clever and interesting user experience may indicate how passionate the creators are about the collection. Innovative ways of using UI/UX that are hands-on has the ability to resonate with collectors.
Whether its finding ways for projects to work together or simply providing whitelists to collections with similarly-interested audiences, the concept of a rising tide lifting all boats rings true in NFT circles. Collaborations can bring communities together and increase exposure for all projects involved.
13. Charitable Initiatives
Its always good to give a portion of a collections proceeds to a worthy cause. What causes or charities does a collection promise to support, and how much are they giving?
14. The X-Factor
An NFT collection can have all or none of the first thirteen items checked on this list. But, it doesnt matter if the collection have the x-Factor. Ask yourself what visible or unseen factors could add value to an NFT in such a way that it resonates with the masses in spite of falling short on other attributes. Its the great unknown and its guaranteed that an unlikely NFT will become high in demand, leaving those who passed on it scratching their heads and asking why?
One is example is Goblintown, who has managed to generate an incredible amount of hype and volume during the bear market. While many people dont resonate with the art or the roadmap, they decided to invest because there was something unique about the project theyve never seen before.
15. Cost and Return on Investment
Its a good idea to know how much it costs to purchase or mint an NFT. Are you purchasing with expectations that the NFT will increase in value over time? If the creators do a good job on the previous items listed, the financial aspect may indeed take off in the short or long term. But just like any other investment vehicle, its a good idea to never spend more than you can afford to lose.