What are NFT’s really? And what are they worth?

Ok. They’re everywhere, everyone’s talking about them, everyone wants them or think they want them, but you have no clue what they are. Should you walk away from that fancy cocktail party just because some smarty pants starts talking about blockchain, crypto, and NFT’s?

Maybe yes, maybe not…

Non Fungible Tokens aka NFT’s

To explain NFT’s I am going to first explain what a fungible token is. Weird right?

A fungible token is something that holds the same value to two different people. A great example of this is a fiat currency like the Euro or the US Dollar. No matter where you and I are, we will not argue about whether 1 Euro is in fact worth 2 Euros — ok fine if it is a commemorative coin you may perceive that specific coin as having more value than another 1 Euro coin, but if you used that coin at the bar it would still be worth 1 Euro (unless the bar owner wanted to collect it and gave you 5 Euros for it). Same applies with crypto currencies, ie. 1 Bitcoin = 1 Bitcoin and 1 Sol = 1 Sol.

Now this brings us to the other side of the spectrum with Non Fungible Tokens. If a fungible token holds the same value to everyone, NFT’s on the other hand will hold different value to two different people. It’s all about individual perception, objectives and market activity.

Valuation of NFT’s: individual perception, objectives and market activity

Individual perception and objectives

One can make several analogies to describe this point. A simpler one is that to ascertain the value of an NFT it is almost like ascertaining the value of a painting. There is on the one hand the background of the painter, the techniques it uses, and then… well what you think it’s worth — let’s leave the speculation out of this for a moment.

With NFT’s it is very much a similar process. You need to DYOR (Do Your Own Research) on the project, who is the team behind it, have they been doxxed (vetted by a third party and known, not just an alias behind a fancy pfp or profile picture), understanding what the utility (the benefits for holders) of the project is, what is the roadmap and overall, is the project something that resonates with you?

Once you got that figured out, you need to understand what are your objectives in the world of NFT’s. Hodling (holding the NFT for long term)? Are you looking for a quick flip (buy it, expect it to go higher by 2x and sell it)? Are you looking to mint projects (like IPO’s buying at launch of the project on the stock market) or focus on the secondary market (like the stock exchange but for NFT’s)?

Depending on what you plan to do with your NFT’s (apart from making a cool pfp for that Teams call) you need to look at the market activity of a project.

Market activity — mint vs secondary

Finally, price is also determined by market activity. If you are looking to mint a project, you have to look at launch hype, how many Twitter followers the project has gained since the public launch of the project, how many people it has on it’s Discord channel (Discord is an app where people chat, share stuff, play, stream, etc) and the hype basically that this launch has generated.

If the project has 10,000 NFT’s and it has 500 followers on Twitter and 1000 people on Discord, it’s likely going to be a slow mint and won’t generate a lot of activity on the secondary market meaning the price is likely to drop post mint when it moves to secondary.

However, if the project has 3,000 NFT’s, has 100K followers on Twitter and 50K users on Discord, it’s likely going to mint in 60 seconds and will have a lot of activity on secondary immediately post mint, meaning there’s a chance the price will go up (even if momentarily).

If you’re planning to buy on the secondary, the Twitter and Discord following is pretty important, but then you need to look at the trading data in the marketplace where you plan to buy your NFT. As of now, while there are other marketplaces, OpenSea is the leader in ETH (Ethereum the crypto currency) based NFT’s and MagicEden is the leader in SOL (Solana crypto currency) based NFT’s.

[Quick addition as of 6th Apr 2022] OpenSea has now integrated SOL NFT’s into its marketplace, but if you hold ETH and SOL NFT’s you will need to use your respective ETH or SOL wallets. OpenSea getting into Solana NFT’s has generated a lot of hype in the Solana space.

One thing you should always do is to look at the roadmap and see what was supposed to be delivered from the roadmap and utility “now” and speak to others on the Discord channel and understand if this has been delivered or not, if the team is still present or if it is a rug (the team that launched the project has disappeared).

Then if you’re still happy to proceed, dig into the project on the marketplace and look at the activity (sales) and see the frequency and trend of the activity. If you see that there’s been a sale every 2 minutes for the past day and price has been increasing it means the project is active. If you look at the activity and there was a sale a couple of hours ago and then one yesterday… well, there’s little chance the project will moon (increase in price) at least for now.

Hype and FOMO (Fear Of missing Out)

I know I touched on this above but it is something I want to ensure is clear if you are walking into this space. The movie Wolf of Wall Street highlights this point.

There will always be people out there hyping projects, making you think this is the project that will make you rich, that you need to ape in (invest heavily) and that there is no team like this one and that the utility is out of this world. This is generally where for people coming into this with zero experience (like we all did when we started), FOMO kicks in and bad decisions are made that on the one hand can be costly financially and, on the other, make people give up and bad mouth the NFT space.

Whenever this happens to you, remember one thing. A missed mint is an opportunity to invest in another project. There are literally 100’s if not 1000’s of NFT projects being launched every day. Take your time, DYOR, talk to other people, have fun! Yes there is money to be made, but when starting learn and enjoy the experience, you are all welcome. :)

So next time someone starts talking about NFT’s at a cocktail party… you know what to do.

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In ❤️ w/ tech & what it can do for people. Star Wars extremist. NFT enthusiast. Retweets not endorsements. Hodling some good, some bad, some rugs.

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KuratorNFT

In ❤️ w/ tech & what it can do for people. Star Wars extremist. NFT enthusiast. Retweets not endorsements. Hodling some good, some bad, some rugs.