NFTs or Non Fungible Tokens are digital tokens in the blockchain network. NFTs have been seeing a considerable rise in their popularity for the past few years now.
The hype around the NFTs is making many people transform their art forms into digital tokens.
And similarly, it is making the buyers rush to get these art collectables. But the prices of these NFTs vary a great deal and are selling for millions.
So, if you are one of the people wanting to spend a good hefty amount on an NFT, here are the factors in selecting the NFT you should buy.
What Is An NFT?
NFT stands for Non Fungible Tokens. Non-fungible implies that it is unique and irreplaceable. For example, Bitcoin (BTC) is a fungible token.
You can trade one BTC for another and still have the same thing. That is not the case for NFTs. So if you trade an NFT for another, you’ll have a completely different thing.
What Is An NFT Used For?
The rising popularity of the NFTs is making people brainstorm and find out new uses for NFTs. However, so far finds, its uses are in the following sectors:
- Art & Music: NFTs have been extensively used in the visual arts sector as still images or videos selling for millions.
- Collectables: NFTs have proved to be fit for being used as the digital versions of other collectables such as trading cards.
- Gaming & virtual reality: NFTs are attachable to video game items like special characters, weapons, outfits, etc.
What Gives An NFT Value?
Mostly, the value of NFT is dependent on the market. So, a person buys one as an investment hoping that someone else will pay more than them to buy it from them.
However, there are other ways in which an NFT carries value. It is believed that the NFTs have the potential to change the relationship between the creator of the content and its consumer.
Given that NFTs are built on smart contracts, it always ensures that the conditions of the contracts are met. This has led to many creators experimenting and making their propositions.
For instance, the creator can create a provision where they ensure that they get a share when their NFTs change ownership. Similarly, for a buyer getting an NFT to support a creator, they can make a provision for themselves to get a share in the future earnings.
Also Read: How are NFTs Tracked and Verified?
How To Know Which NFT To Buy?
Finding the right kind of NFT for yourself is similar to buying something in real life.
You need to research it and know all the aspects in order to make the right decision. Following are a few things that you should check before investing in an NFT:
1. Research Well To Decide On The NFT
Check for the next best NFT in the market. To be on the safer side, ensure that you’re investing in an NFT that has potential and popularity.
If you’ve chosen an NFT to invest in, make sure that you research it thoroughly. When buying an NFT, it is three things that you must know about in as much detail as possible:
- The creator – If you want to buy a good NFT, it is important to know the person who is behind the creation of that particular NFT that you are interested in buying. It is important to know that person’s social status and background since it plays a big role in determining the quality of that NFT. The creator should have a good social status with a positive public history. These people feel more responsible and have more leverage in creating and selling these non-fungible tokens. You may have more luck in buying NFTs from a celebrity figure rather than from an unknown person who is not popular.
- The project or brand– It is important to research the brand’s reputation in public. Some of the brand names do not have a reputation but launch NFTs to develop their IP.
To know about the brand, you can study the roadmap of the NFT. It is a creator’s guide that gives you an idea about the whole project. From this, you can know about the direction where the project is headed. This can be found on the brand or creator’s website.
- The community– An active community with close ties is important to look for in deciding whether you want to buy an NFT or not. This creates more hype and can be helpful in future. If the community is strong, the members help in supporting each other and back up the brand.
Some of the signs that indicate a strong NFT community include:
- The NFT community should have a good and active social media following. This shows that there are people who like that particular brand and support it.
- The creators associated with the community are helpful and friendly to each other as well as to the new members of the community. This is an indication of a strong and fair community.
- Their presence should be on diverse platforms, such as Facebook, Instagram, Twitter, Youtube, Websites, Clubhouse, Pinterest, etc. This shows an indulging and engaging type of activity in the community.
2. Unique Properties Of The NFT
NFTs come into the market as collections like the PEACEFUL GROUPIES. Each collection incorporates an individual artwork for a specific avatar, and all of them come with different properties. Now, the value of an NFT goes hand in hand with the properties.
Sometimes more properties mean high value, while other times, basic and simple properties mean high values.
So if you wish to buy an NFT which has a promising future in terms of its value, then see how rare and unique properties the NFT has.
Find an NFT that has the rarest properties of them all in the collection. Moreover, checking for properties will also help you in confirming the legitimacy of these NFTs as there are certain scam accounts too.
3. Smart Contract Terms
If you want to buy a good non-fungible token, it is important to know about all of its aspects beforehand. One of these includes smart contract terms.
It is important to know about the smart contract terms and the terms within a particular NFT project you are interested in buying. These contracts may offer mentorship, investment opportunities, access and many other related things.
The terms required would include things like the length of access of the project or the expiration dates, the limitations and the redemption quantities, and other types of data which will add more value to the NFT.
It is important to look at all these terms before making the decision to buy the right NFT.
4. Seller Verification
You must ensure that you buy your NFT from a legitimate and verified seller. On platforms like OpenSea, the verified accounts have a blue tick as in Twitter and Instagram verified accounts.
However, a blue tick is not the most feasible method since many legitimate sellers are still unverified on the platforms.
So if you’re planning to buy an NFT from an unverified account, you should confirm the legitimacy of the seller by going through the properties of the NFTs they’re selling.
Also, you can check the statistics of the sales on their page to ensure that the seller is well-established.
5. NFT Liquidity & Market Volume
NFTs do not have any liquidity like the cryptocurrencies, which can easily be transformed into regular currency. So, it is a problem for the people entering the NFT world for profits. Many experts, therefore, suggest that the NFT should be broken into smaller parts to improve its liquidity rates.
Another thing to keep in mind is the market volume of the NFT industry, which is currently somewhere around $35 billion. However, whether its value rises or falls depends on which NFTs are being transacted regularly.
Given that the NFT industry has reached this height in only a short period, it is also likely that it can be short-lived. So, this should be kept in mind if you’re thinking of buying an NFT as a long-term investment and not as an art piece to sell in a few weeks. Always ensure that you do not invest money that you can’t afford to lose.
The Price-Performance Of The Other NFTs Of The Seller
Go through your seller’s profile to check the performance of your chosen NFT and decide that it is a good investment. Just go and check their previous sales and find out the rates at which the desired NFTs were being sold a few weeks or months ago and make a graph accordingly.
And this will help you see how the NFT value varies with time. You can check for this information on certain dedicated websites as well.
NFT is an area filled up to the brim with tremendous possibilities and profits.
You can make huge profits by trading NFTs, but at the same time, this area is still in the development phase and, therefore, demands you to be careful of the NFTs in which you invest.
This is why, if you’re just starting, then investing in a popular NFT that shows potential and interests you. Research thoroughly about the creator, brand, the NFT community, and its performance over time.
It is wise to check for the unique properties of the NFT to ensure that its value is high and verify the seller to steer clear of the cybercriminals.
Conducting research will help you from making folly investments that could cost you dearly.