How do you assess the value of an NFT?

NFT is One of the factors to assess the value of an the Impact of scarcity on NFT value. Unique NFTs are very rare, so they are more valuable than other artifacts

10/8/20223 min read

There is no doubt that NFT has created a big explosion in the digital world. To understand this, let's take a look at recent trades: The Alien CryptoPunk collection successfully sold for $7.2 million, and Fewocious broke the SuperRare sales record. You might ask: How did these NFTs get so valuable? And how do you assess the value of an NFT? Trying to value NFTs is a complex process that requires consideration; one of the reasons for this complexity is the low history of this concept and the lack of familiarity of digital currency market traders. However, some methods can be used as a reference, and in this article, we discuss fully the factors that assess the value of an NFT.

NFT token valuation with the blockchain security factor

The main point of NFTs is that as long as their underlying blockchain infrastructure is the same, they are considered immutable and secure digital assets. Therefore, Ethereum partly is the most important network for building NFTs because it is the most secure smart contract platform ever and will continue to hold that position for the foreseeable future. In other words, the blockchain that creates the NFT is linked in parallel to the value of the NFT. For this reason, NFTs created on the Ethereum network are more secure than NFTs created on other networks.

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Assess the value of an NFT based on whether or not the NFT token is placed on the chain (CHAIN)

NFT execution networks such as Avastars, Aavegotchis, and Art Blocks are placed on the chain. They can only exist by relying on Ethereum smart contracts. This means they can continue to operate as long as Ethereum exists; this means that NFTs can exist on the Ethereum platform for a long time. On the other hand, some NFT projects rely on off-chain providers like AWS to provide simplicity and flexibility, which introduces dimensions of trust. Therefore, you have to believe that the project can continue and keep its servers running. Otherwise, your NFT may only be valid for a few years. So, is it obvious whether the value of NFT is on-chain or not?

Assess the value of an NFT based on NFT token age

NFTs can also gain value based on the time of their formation. For example, NFTs started to appear in 2020/2021, so NFTs took the status of digital cultural artifacts before this period. They were introduced as the first pioneers in this regard. However, the duration of the formation of NFTs is not long, and it seems that the "age" factor has not yet played a role in its value. In the end, any NFT token or anything established before 2030 might have some meaning, we'll have to wait and see where the NFT market goes to be sure. At the same time, the first 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.

The influence of the creator and society on the value of NFTs

Imagine someone who has no fan or background in creating NFTs, and wants to upload an NFT to OpenSea and has done no advertising for it. Is this work for sale? It cannot be sold if there is no potential effort. This is why an NFT made by an artist or creator gains value when that person is a celebrity or a popular figure. The important thing is that community participation can create demand. The more popular the creators and the wider the community, the more valuable NFTs are. This dynamic applies to any market. Key questions about builders and community: -Does the manufacturer have a large following on social media sites and networks such as Twitter and Instagram? -Do they interact with fans often? -Do you think manufacturers can develop their brands in the future?

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Impact of scarcity on NFT value

NFT is One of the factors to assess the value of an the Impact of scarcity on NFT value. Unique NFTs are very rare, so they are more valuable than other artifacts. However, this does not mean that NFTs with high numbers are worthless. Some NFT platforms such as SuperRare only support single-copy digital artwork. NBA's Top Shot puts its NFTs into several categories: Common, Rare, Legendary, and Ultimate. Those listed in the higher row are more valuable than their counterparts in the common row. In fact, in this process, originality is associated with rarity. For example, if the Louvre considers only one NFT for the Mona Lisa, then the Louvre's NFT will be worth more than those created by others in large numbers.