Case Analysis of Successful NFT Collections
Interest in NFT collections is growing at a tremendous rate, dividing the society: while some actively invest in NFTs, others do not understand why they should pay for a picture or a video that they could previously download for free. In March 2021, a work called “Daily: The First 5,000 Days” was sold by Christie’s auction house for $69 million, making a huge splash in the crypto enthusiast sphere. Since then, many celebrities have come to support Snoop Dogg, NBA superstar Stephen Curry, and many others in their endeavor to promote NFTs.
NFTs as a Market Design Tool
Every NFT is a unique, one-of-a-kind digital object. They are stored in blockchain-based public distributed registries, making it possible to prove who owns a particular NFT and trace ownership history at any time. Moreover, tokens can be easily transferred from one person to another — in the same vain a bank can transfer funds between accounts — but are very difficult to counterfeit. Because NFT ownership is easy to verify and share, tokens can be used to create markets for a wide variety of commodities.
Many artists today have abandoned the traditional sale of their paintings in favor of NFTs, which allows them to earn many times more for their talent.
Quite often, you can see product creators arrange personal meetings with the owners of their NFTs: for example, such sessions were held at the recent NFT conference in New York. In other cases, having a specific token in your virtual wallet may be necessary to access an online game, chat room, or themed shop. Creative teams sometimes provide additional tokens to NFT holders to expand the product’s ecosystem. For example, owners of a particular goat NFT were recently able to receive another free goat NFT, providing benefits beyond the original token, and owners of a specific bear NFT received honey.
NFT Ecosystem Phenomenon
Many marketplaces (such as Foundation, OpenSea, and Nifty Gateway) currently sell NFT collections.
At the same time, there recently emerged a model for creating an active ecosystem based on inherent NFT features, which led to the development of new organizations entirely within the NFT space. It starts with a series of NFTs, then the token holders are offered access to a growing range of products, activities, and experiences. Revenue from initial and subsequent NFT sales nourish the brand, supporting ever more ambitious projects that increase the tokens’ value.
For example, Bored Ape Yacht Club is a collection of NFT images of monkeys that prove membership in an online community. The project began with a series of private chat rooms and graffiti walls, then eventually grew to the level of expensive themed products, social events, and even a real yacht party. SupDucks and the Gutter Cat Gang also form communities around a series of NFT images and associated virtual spaces. The first company is related to the boardwalk-themed gaming metaverse, while the second company focuses on offline events.
Determining NFT Value Based on Successful Examples
There are millions of NFT projects out there, so it can be challenging for investors and collectors to determine which ones deserve more attention. We did some research that revealed 6 factors that made it easier to estimate NFT project value:
1. Practical Application
The usefulness of NFTs depends on how they can be applied in both the physical and digital realms. As the two worlds converge, it creates a need for a class of assets able to transfer value between these modern dimensions.
Tokens can be used for various purposes. For example, one can employ them in games to get additional abilities and spells. They can also be used as wardrobe items for your character or as crafting and building materials.
Examples of practical NFT application can be found in Play-to-Earn titles such as Axie Infinity, MOBOX, and many others. Here, tokens play the role of in-game resources, often sporting a unique set of properties that can serve to increase their value. Such NFTs currently have the broadest range of applications, so the value of NFTs in the gaming ecosystem will continue to grow with the emergence of new player communities.
Another factor to consider is real-life NFT benefits. Some NFTs can be exchanged for physical prizes, while others provide event access. For example, the Lewis Capaldi NFT Collection released on Binance NFT allows you to earn special rewards in each Mystery Box Collection, including studio session tickets, intimate performances, and merch.
People also use NFTs as collateral for loans on various exchanges. In this case, NFTs will be unavailable until the borrower repays the debt and accrued interest. Once the debt is repaid, the NFT is returned to the borrower.
NFT staking has also become a popular alternative feature, allowing people to earn in-game currency rewards and receive premium content. Binance NFT has become one of the most popular NFT gaming platforms, when the launch of IGO attracted particular attention to the project. Participants can access leading gaming NFT assets from top-notch gaming projects available exclusively on Binance NFT.
Rarity or uniqueness is the key property of NFTs, with some being created by renowned artists. Others are tokenized assets from the real world. All NFTs are unique, and anyone can verify their authenticity and ownership. The token itself is unalterable, but ownership can shift in case of buying, selling, donating, or exchanging NFTs.
Rare, highly demanded NFTs attract more buyers and sell for bigger prices. Third-party platforms like rarity.tools can help understand how rare a particular NFT is. The service interacts with blockchain explorers and other data sources to estimate token rarity. It also considers factors such as popularity, trading volume, and the current number of owners.
3. Community Size
The larger its community grows, the more people will learn about a particular set of NFTs, which subsequently helps the project attract additional buyers. Take the popular Bored Ape NFT collection as an example: its community is robust and active, so, due to its size, the project can reach an exceptionally wide audience. It is usually enough to visit official websites and social media pages, check the subscriber count, and see how active the followers are (i.e. how often they like, comment, and make new posts) to determine the size of a particular project’s community. Another critical factor is the number of NFTs on secondary markets. The abundance of NFTs combined with low auction prices or buying activity may indicate that supply is outstripping demand.
One should also keep track of the number of unique wallets that participates in NFT trading on the market per day, week, and month. This allows to accurately determine the total market demand.
4. NFT Potential
Potential is determined by an NFT project’s available development opportunities, based on its rarity and following. The upside potential can be estimated by examining the NFT’s supply/demand ratio.
Long-term community attention refers to the collection’s market relevance and its ability to attract users over time. Star Wars is an excellent example of a project that enjoys the community’s long-term focus, as the iconic franchise has been capturing and expanding audiences for over 40 years. Users should evaluate the attractiveness of NFTs as well as their long-term ability to keep under the spotlight, but do not forget about other important factors we discussed earlier.
When considering buying an NFT, the user should find out more information about its author. Among other things, it is worth learning the creator’s bio and NFT background to assess the author’s popularity on the market. Revealing this sort of information is relatively simple: would-be buyers can get acquainted with the author’s work online and determine the size of their following to estimate the project’s potential.
The more famous an author is, the higher the chance that their work will be valued and appreciated on the market.
6. Personal Taste
There are objective criteria that should be considered before buying an NFT, but do not neglect subjective priorities and individual preferences. The user may like an NFT for various reasons: because of the image and aesthetics, due to a personal connection with the artwork, the relevance of a particular NFT project, or a pre-existing relationship with its author.
There is always the possibility that a collector will bid more for an NFT that they see as underappreciated. People can buy NFTs that hold a special meaning to them, especially if they plan to keep the token for a long time. When purchasing an NFT they like, collectors are more focused on its personal value rather than the actual price. NFTs risk depreciating over time just as any other type of asset but, in such cases, the token will still remain valuable to its holder.