What makes an NFT valuable?
What are Non-Fungible Tokens (NFT)?
NFT stands for “non-fungible token”. A “fungible” asset refers to something that can be exchanged for another unit of the same asset. A good example of a convertible asset is the US dollar. If I exchange my $1 bill for your $1 bill, nothing changes. Both bills represent exactly the same value. There is fungibility.
Conversely, a not-fungible asset refers to something of a distinct value. No two are exactly alike. A good example of a non-fungible asset is a house or a car. A non-fungible token is where things get really interesting. Blockchain technologies allow us to implement many radically new ideas that were not possible before. A non-fungible token allows us to create a digital certificate that represents a unique resource. We can attach these symbols to just about anything, including digital files—such as a picture, a video, an audio recording, or even this article. This allows us to create certificates of authenticity for digital content that can be owned, bought, sold and traded. Because these tokens are stored on an open and distributed blockchain (like Ethereum), their embedded metadata and transaction history are fully verifiable by anyone in the world with an Internet connection. That means we can all know which digital wallets own which tokens at any given time.
The implications of this are truly endless, and we’ve only just begun to scratch the surface of the possibilities.
What types of NFTs are on the market?
It is important to note that ‘NFT’ is a very general term. Many different types of NFTs exist on the market and the variety should increase over time as more applications for the technology are discovered. There are currently ten main categories of NFTs:
eg – Beeple, Chromie Squiggles, Where My Vans Go
eg – CryptoPunks, Bored Ape Yacht Club, VeeFriends
eg – Proof Collective, Quantum Key, VaynerSports Pass
eg – VeeCon, Rocket Factory Mothership
eg – Otherside, Sandbox, Decentraland
eg – ENS domains, unstoppable domains
eg – Axie Infinity, Sorare, Illuvium
eg – RTFKT, Adidas Originals, 10KTF
eg – Royal, Snoop Dogg, Spottie WiFi
eg – Calladita, Keepers of the Inn
What makes an NFT valuable?
NFTs have two main sources of value: collectability and utility. These characteristics are both subjective and often not easy to define. Understandably, two people may assign very different judgments to the significance of a work of art or the merits of attending a conference like VeeCon. This is why it can be useful to have a framework for understanding why specific NFTs have value.
An NFT can have aggregate value for a number of reasons. First, an NFT may be desirable due to its historical nature if it was created prior to the current industry adoption cycle. Second, people may want to collect a specific project because it represents a certain level of technological innovation. Third, an NFT can be collectible if it was launched by a significant brand or culturally relevant creator.
A little history lesson. “Cryptoart” was perhaps the first real use case of NFTs. Most projects launched between 2014-2019 were art-forward collectibles such as Rare Pepes, Curio Cards and CryptoPunks. These collections are early artifacts of the blockchain, and are still in high demand. Market participants assign significant value to them because of their OG status. Moving further down the timeline, there’s certainly a select group of art projects that are thriving in today’s market, like Fidenza by Tyler Hobbs and Where My Vans Go by Drifter Shoots. While many NFTs have value solely due to their collectability, most digital goods launched in today’s environment derive their value from their use.
The NFT tool comes in many different forms. The two most common examples are token-gated access to content and IRL (in real life) events. A number of projects, such as Kevin Rose’s Proof Collective, create content exclusively for holders. In other words, you can only access and consume specific content if you own a Proof Collective membership card. In addition, most often during the largest Web3 conferences, NFT projects will organize parties and large events that are only open to holders. In terms of IRL utility, some brands will allow NFT owners to claim limited edition items that typically have significant resale value.
To address the other common types of utilities, let’s use the Bored Ape Yacht Club (BAYC) as an example. BAYC has a history of rewarding holders in a number of ways. Most notably, they have conducted several successful airdrops. Airdrops are events where the team behind a project sends additional NFTs, or fungible tokens, to wallet addresses that own a specific asset. ApeCoin was the largest BAYC airdrop in this market cycle. Each Bored Ape owner can claim 10,094 $APE tokens per monkey, which is equivalent to $38,000 today. These tokens can be used to participate in the ApeCoin DAO, also known as a Decentralized Autonomous Organization. Owning any amount of $APE tokens gives holders the ability to propose ideas and vote on various initiatives related to the project. Direct participation in governance is an increasingly popular source of benefit among NFT projects.
How to look up the values of NFT projects?
Now that we’ve established the different types of NFTs and the reasons behind why people might attribute value to them, how do you actually look up market prices? The most common way is to apply on OpenSea.
One option is to look up a specific collection using the main search field. Collection pages show important statistics such as the current floor price and all-time volume. Alternatively, hover over the statistics tab in the navigation bar. This will give you a button to check out the ranking page where OpenSea lists projects according to a wider range of statistics. You can also filter through to different time frames, including 24 hours, 7 days, 30 days, and all time.
Cryptoslam, NFT Price Floor and Nansen are other useful resources for researching NFT values. These platforms aggregate prices from multiple marketplaces and are fairly easy to navigate around.
