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1. What is NFT?
NFT is an acronym for Non - Fungible Token, which simply means a non-fungible token that acts as a proof of authenticity and ownership in the digital realm. It can be seen that NFT is a unique type of digital asset stored on the blockchain. However, it is important to note that NFTs are assets that are difficult to value in a standard way (even if you are an expert in the market) because of the real value of NFTs and the price volatility of the asset type. this product.
2. Why have NFTs become so popular?
NFT first appeared in 2012 with the name Colored Coin created by Yoni Assia and in 2017 this term really became better known through the game Cryptokitties - a game built on Ethereum that allows users to Play collecting, breeding and trading virtual cats. However, NFTs only really became a wave in 2020 when a digital artist, Beeple, successfully sold an NFT for $69 million. To this day, NFTs have largely become popular thanks to their diverse uses. Not only organizations but also individuals can create their own NFTs, ranging from fields related to collectibles, music, sports, property, etc. Brands and models Traditional businesses have also entered this market and brought a large number of new users into the crypto and blockchain market .
With the high applicability of NFT and such wide coverage from the project, many people are looking for investment opportunities, so you need to learn more about valuation,...
3. Top 5 criteria for evaluating NFT projects
Criteria 1: NFT products
No matter evaluating any business model for investment, the product factor is always the core factor and should be considered first. If you invest in an NFT project, you need to know how to evaluate the NFT product based on the aspects below:
- Classification of NFT groups: To answer the question of which group your NFT belongs to, you need to know how many NFT series there are currently and the properties of each type of NFT. For popular NFT types, there will be the following forms: Collectibles, Artwork, Event tickets, Music, Media, Gaming, Virtual items, Real-world assets, Identity, Memes and Domain names. For new users, evaluating and classifying NFTs is quite simple and often on OpenSea there will be a tag about that type of NFT for users to easily identify.
- The story behind NFT: NFT is a unique model created by three components: the creator, the NFT product and the community. To choose a quality NFT set, you need to pay attention to the meaning behind that NFT set because it is an important element in valuing the value of NFTs and connecting with their community.
- NFT graphics: NFTs are still a type of digital asset and are represented by images, so whether their graphics are of good quality and beautiful is also an important factor in evaluating that product. .
- Total supply of NFTs, number of owners holding, trading volume: When evaluating the total supply of NFTs, you can know the market valuation to conclude whether the value of the NFTs you are currently holding is under or over value. Assessing the number of owners of an NFT will help you identify the number of people holding that NFT and whether it can create selling pressure on NFTs. Finally, trading volume will help you evaluate whether the current NFT liquidity in the market is good or not and whether it is a safe time to invest in that NFT. You can refer to information aggregators about this data at sites such as NFTGo, Dune, CryptoSlam, gem.xyz, rarity.tools.
- Scarcity: Scarcity is an important factor in the value of NFTs. Rare, highly sought after NFTs often attract more buyers and sell for higher prices. Therefore, when investing in NFTs, you should check the rarity of that NFT, possibly through support tools or third-party platforms to have the most objective view. Currently, you can check the rarity of NFTs on several platforms such as Rarity.tools, Rarity Sniper, Rarity Sniffer, CryptoSlam,…
Criteria 2: Development team and backer
The development team is the person behind the release of the NFT set on the market, be it an artist, celebrity, technology expert or an organization. The development team plays an important role in developing product ideas, perfecting the product and enhancing the value of the product. If an NFT project has a suitable development team combined with creative ideas, that NFT will be pushed to greater heights and develop more sustainably.
During the process of researching the development team of the NFT project, you need to pay attention to answering 2 questions, which are:
- Which Labs does the NFT project have behind it?
- Does the construction team come from core Labs members?
Backers are the supporters and behind the project, they can hold large amounts of NFTs or participate in media and community development. When analyzing and evaluating a project's backer, you should evaluate whether they are influential people in the market or an organization with great potential.
Criteria 3: Community
The community will include project supporters and influencers participating in the project's own community. For the NFT project, the community operates mainly on two platforms: Discord and Twitter, so you can check the number and activities of the community here. Normally, NFT projects with the number of communities on platforms reaching 50,000 people will be evaluated well (not including the case of pushing virtual memes) and if they reach over 100,000 people, then the project is worth your attention.
Not only that, to evaluate the community of an NFT project, you need to answer additional questions: Is the project's core team active in the community? Are community members excited about the project's progress? How many users contribute to the development of the project? In short, this is an important factor to know how attractive the project is to the market and helps you easily value NFTs.
Criteria 4: Development roadmap
Development roadmaps are important milestones to promote project growth and show you the vision and future direction of the project. A project worth investing in is a project that has a clear development roadmap and the project's activities must be carried out in accordance with that roadmap. You can search for the development roadmap and follow it on the website or official media channels from the project such as Medium, Twitter, Discord,...
Evaluating the development roadmap will also partly help you understand when to invest in the project and the project's growth potential in the future.
Criteria 5: NFT's utility
Utility, also known as NFT's applicability, here we will learn based on two aspects: applicability in the real world and the digital world. The more applicable an NFT is, the more valuable it is, and this will accumulate over time depending on the NFT's popularity and user appeal.
For the real world, NFTs can be used as documents of ownership of assets (land, documents, etc.) or used to exchange for real-life items. Some NFTs can be used as tickets to music shows or fashion events, while others can be used as access to applications or entertainment systems. Not only that, many big brands from the traditional market have entered and applied NFT, causing its utility and popularity to increase.
In the model of crypto projects, some projects have applied NFT as collateral for loans or other financial forms such as Lending - Borrow, Derivatives, Staking, etc. Gradually the model became known. came up with the name NFTFi and received approval from several investors and the community.
The utility of NFT is also shown through a number of other aspects that you can evaluate such as can NFT Holder receive freemint or whitelist rights for NFT sets released later? Will the project issue tokens and reward NFT holders? Is there a DAO established for NFT holders to participate in governance voting? For each different type of NFT, the application is more diverse. Not all models are the same and can fully meet the above criteria. Therefore, when analyzing an NFT project you need to have flexibility as well as a comprehensive perspective on other related areas.
4. Conclusion
Above are reference parameters to help you have a comprehensive and complete view when evaluating a basic NFT project. However, from my perspective, the valuation of an NFT is still relative and there is no way to predict the future value of an NFT based solely on numbers and quantification. Therefore, before investing in any NFT, you need to carefully research and consider carefully the external and internal factors affecting that NFT.
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