NFTs: they can hardly have escaped your notice in the last few months. Record after record was broken for the highest sales price, and one multimillion-dollar project after another project was kicked off the ground. According to many, it is far from finished. The figures show that this is not a strange idea, because NFTs are still traded daily for perhaps hundreds of millions of dollars.
More and more celebrities are entering the world of NFTs and this naturally means that more and more ‘normal’ people want to own, sell or trade NFTs. But where do you start? What makes a project good? And what causes a project to increase significantly in value? These are questions that many beginners, but also experienced traders still have. Very logical questions of course, but not easy ones.
Today we try to help you get a better understanding of how NFT projects work. We explain to you what are important things for an NFT project and how you can somewhat predict whether a project will be a success so that you can make successful NFT trades!
Let’s not wait any longer and immediately start answering the question: how do you find a good NFT project?
What is an NFT?
NFT stands for non-fungible token. Fungible means ‘replaceable’. So where a fungible token is a ‘replaceable’ token, a non-fungible token is an ‘irreplaceable’ token. However, that probably still sounds very vague to you.
A non-fungible token (NFT) is a token of which there is really only 1, the token is unique. When you sell an NFT today and buy it back next month, you know that you actually own the exact same token. This is different from, for example, Bitcoin. If you sell 0.1 BTC today and buy 0.1 back next month, the chances are very small that you actually have exactly the same Bitcoin in your hands.
You may already understand it this way, but it becomes even clearer when we look at a contemporary example.
Suppose you buy a wall decoration from New York on Bol.com. You may actually have your own wall decoration, but it is not unique. Hundreds, perhaps thousands, of the same wall decoration have been sold via Bol.com. However, when you buy a painting, such as the Mona Lisa, at an auction, it is unique. There is actually only 1 of them. In this example, the New York wall art is a fungible token and the Mona Lisa is a non-fungible token.
I chose this example because art NFTs are the most popular today. NFTs are one of the most popular parts of crypto right now. Every day NFTs are sold for several tons and sometimes even millions of euros. Although many people find it rather unreal, you can no longer ignore it!
What is important to know is that art NFTs are not the only form of NFTs. Basically, NFT does not necessarily have anything to do with art, it is currently mainly linked to art. What we will probably also see in the future in the form of NFTs are, for example, houses or concert tickets.
You probably already understand quite well what NFTs are. Do you want to know more? We previously wrote an extensive article about what exactly NFTs are!
How do you find a good NFT?
Now that we know exactly what an NFT is, let’s start right away by answering the most important question: how do you find a good NFT? To answer this question properly, we look at the 3 most important aspects of an NFT project: the art, the team, and the community.
First, we look at the art. By the piece of art we really simply mean what the NFT looks like. We would like to say that the most beautiful NFTs always yield the most, but that is certainly not the case. For example, an NFT of a stone once sold pixel art for $1.3 million, and I can tell you that was not a high-quality piece of art. And that while beautiful works of art are sometimes sold for next to nothing. So you could say that there is no arrow to raise, but a structure can still be recognized.
What you often see is that NFT projects that do well, for example, consist of a collection of 10,000 (or 8,000, or 3,000, etc.) different NFTs, each of which has certain attributes. You saw this, for example, with the Crypto Punks, the Bored Ape Yacht Club, the Meebits, and the Doodles.
Let’s look at the Crypto Punks, the most successful NFT project ever, as an example. You have 5 different punks and from most to least rare these are Alien, Ape, Zombie, Female, and Male. Then you have 87 different attributes, such as earrings, lipstick, purple hair, and a medical mask, and here too there is a distinction in rarity. Then there is also a difference in the number of attributes per punk, where also certain quantities are rarer than others. For example, there is only 1 punk who has 7 attributes.
In general, we see that this idea of creating scarcity and rarity through attributes and types works well. This is probably because people like to save these attributes, for example. You could compare it a bit with saving Pokemon cards.
So it can be smart to look for an NFT collection that works with this system. However, it is no longer a guarantee of success, because NFT artists were also aware of this and there are so many NFT collections that work with this system. It is, therefore, less rare, and therefore the chance that an NFT collection that works with these kinds of attributes becomes a great success.
While you would probably say that the appearance of an NFT is very important to the success of the project, it is probably less so than you might think. Otherwise, the aforementioned rock would never be able to sell for $1.3 million. Something much more important is the community, but more on that later.
Next, we look at the team. As with anything in crypto, the team can be an important gauge in predicting the success of any given project.
The first step in investigating the team is to see if the team is anonymous or transparent. It is often a good sign when the team is transparent. Someone with a reputation would never publicly link himself to a pump and dump or rug pull of course because then he would ruin his entire reputation.
Then you can look at the previous experience of the different team members. Were they already part of previous successful crypto projects? Or is it their first experience in the crypto world? While it is of course not a guarantee, it can be a good sign if, for example, a creator of an NFT project has already worked for a previously successful NFT project.
When researching the team it is important to know that this offers the least guarantee of all factors, while nothing offers a guarantee at all. When the makers of Crypto Punks (Larva Labs) release another collection, it certainly doesn’t have to be just as great a success. Home Alone 3, 4, and 5 were also a lot less successful than Home Alone 1 and 2, even though they were made by the same studio.
Probably the single most important factor in the success of an NFT (or crypto at all) project: is the community. Ultimately, it is the buyers, the community, who have to push the price up.
But then, how do you determine whether a community is good or not? It is difficult to put numbers to that. It is not only about the numbers and it is also logical that the numbers are sometimes not so high at the beginning.
For example, you can look at social media followers. For example, the Bored Ape Yacht Club has 972,000 followers on Twitter and 683,000 followers on Instagram. That’s a lot for sure, but you can’t expect a starting NFT project to have so many followers.
What is perhaps more important is the real community like the ones on Telegram or Discord. It depends on the project and which platform they use. Don’t just look at how many people are in the Discord or Telegram community, but also how active they are within this community.
A community of 10,000 people in which 5,000 are very active every day is of course much better than a community of 50,000 people in which only 2,500 are very active every day.
Of course, it is all still quite abstract, but that is because there is no single formula for success. Sometimes you simply cannot predict it at all and it is somewhat just luck.
How do you buy NFTs?
Now that we have an idea of how to identify a good NFT project, we naturally want to know how to buy these types of NFTs.
First, of course, we need to have a platform through which we are going to buy our NFT. Where the answer would have been very simple a few months ago: Opensea, today it is a bit more complicated. Through OpenSea, you can buy NFTs built on the Ethereum or Polygon Blockchain. Today, however, NFTs exist on many more different networks. If you want to buy NFTs on the Solanablockchain, you can do that for example via Solanart, if you want to buy NFTs on the Stacksblockchain, you can do that via StacksArt, and if you want to buy NFTs on the Cardano blockchain, then you can do that via CNFT.
When you have found an NFT on a network and the associated marketplace, the process is actually quite simple.
The first step is to link your wallet. In most cases, you can do this, for example, with your Metamask wallet. Do you already have a Metamask wallet? Doing well! Don’t have a Metamask wallet yet? Read our extensive article about creating a Metamask wallet and have your own digital wallet within minutes. However, some marketplaces do not allow you to use your Metamask. For example, via StacksArt you need a Stacks wallet, but luckily this is often easily explained via the marketplace itself.
When you have linked your wallet, it is important that you deposit the cryptocurrency that you will use as a means of payment in your wallet. Then click on the ‘Buy’ button and then confirm the transaction via your wallet. Your money will then be transferred and in return, the NFT will automatically end up in your wallet.
So the process is very simple! From now on you have to wait and see if the NFT will give you a profit. Let’s hope so!
NFTs are therefore very interesting! But partly because they are so new, most people don’t have much knowledge about them yet. Many people find it difficult to choose a project in which they want to invest. Logical of course, because it is quite a crazy idea that millions of euros are being put down for an image. Especially if you are not involved with crypto on a daily basis, you will find this very strange.
It is of course important to mention that investing in NFTs is at your own risk and that it is certainly no guarantee of success. In fact, there may just be no buyers for your NFT at all and that means you can sell it for free. You will then lose your entire investment.
We hope to have taught you enough today so that you can avoid this and start making some nice profits with NFTs!