9 Things to Consider Before Buying Your First NFT
NFTs

9 Things to Consider Before Buying Your First NFT

Created 4mo ago, last updated 4mo ago

Planning to buy your first NFT? Not sure which one you should go for? Here is a list of nine things to consider before buying your first NFT!

9 Things to Consider Before Buying Your First NFT

Table of Contents

With the NFT craze seeping out of the walls of Web3 and taking over Web2 platforms, especially considering the heavy endorsement of certain collections by popular names, such as Snoop Dogg, Jimmy Fallon and Eminem, a whole new customer base is now interested in taking a bite out of the NFT pie. In August 2021, the NFT market saw a staggering 280,000 brand new buyers and sellers in the space, almost doubling the NFT trade activity as compared to the previous year.

With a multi-million dollar business model, non-fungible tokens have the potential of being extremely profitable for those that invest in them. To give you an idea of just how expensive they can get, a piece called "Pepenopolous", from the Rare Pepe series just got sold for $3.65 million in Sotheby's Metaverse auction, making it the most expensive NFT in the auction. In the same gallery, the Bored Ape Yacht Club #8817 from Yuga Labs' Bored Ape Yacht Club collection went for $3.4 million. And these don't even make the top 10 list of the most expensive NFTs ever sold. Pak's The Merge fetched a ridiculous $91.8 million, making it the most expensive NFT sold to date.

Based on these bizarre statistics, forecasts assume that the hype does not seem to be waning any time soon. This means that the market is going to get more and more valuable in the upcoming years. If you are one of the hundreds of thousands of people who have developed a newfound interest in NFTs, here are a few things you need to consider before putting your money into one of the tokens.

1. Seller Credibility - The Marketplace

The marketplace functions as the digital headquarter for an NFT project. A well-established platform can prove to be a massive factor in asserting the legitimacy of a company.

What to Look for on the Marketplace?

Once you get access to the website itself, here are a few things you need to confirm;

The "Why"

The 'why' shows you the reasoning that a seller states behind its NFT projects. Why did they create the collection? Why is a certain project worthy of being bought over other projects? Why did they choose that specific platform for the collection? This gives you an insight into the motives of the seller.

The "How"

The 'how' shows you the process of buying the NFT. A detailed, transparent process without the use of vague and cryptic language further establishes the reliability of the seller.

The "What"

The 'what' shows the buyer exactly what they will be investing in. Here, you are supposed to look for all possible details of the NFT you're being sold. What is the identity of the artist? What is the collection about? What is the market potential of the collection? Similar questions if answered properly by the platform can assure the NFT's credibility.

2. Utility - The Value Proposition

Unless the project is an art-based one where the utility narrows down to the art world alone, look for what the NFT serves. Is the value limited to the digital space or does it remain valuable even in the real world? Utility simply means the value of a project. For instance, an exclusive photograph of a celebrity as an NFT has both digital and real-life value whereas a meme template NFT has digital value only.

3. Overall Aesthetic - The Art of the Package

After the value, the art and aesthetics need to be evaluated. Is the art meme material? Is it serious? The Bored Ape Yacht Club, for example, showcases the pictures of apes appearing bored. The aesthetic that Yuga Labs tried to establish is 'cool' and 'trendy', as opposed to sincere artwork. Whereas Pak goes for a darker aesthetic. Verifying the aesthetic is especially important because an outdated aesthetic means that mainstream NFT enthusiasts will seldom be interested in the project.

4. Future Prospects: The Vision

You need to establish a good understanding early on, of what future prospects and hopes the seller has for this particular collection. Do they expect to sell it to collectors who will further trade it? Or do they want to sell it to buyers to hold?

How will the utility (value proposition) be delivered over time? What are the long-term goals, and if there are any, are they reasonable? Note that if the future vision seems too good to be true, it probably is.

5. Accessibility - Rarity Distribution

The NFT distribution needs to be checked for its rarity. The distribution might be super rare, rare, or ordinary. The most probable percentages for the distribution are as follows;

Super Rare

The super rare NFTs are often the most valuable. Their distribution is, therefore, lower than 3%.

Rare

The rarity distribution for rare can go above 5%. 5-10% is the most reasonable for the rare ones.

Ordinary
Ordinary NFTs are very common. Their distribution is therefore above 85%. 88-94% is the most probable distribution.

6. Customer and Shareholder - The Community

How engaged is the company with those participating in the project? Is the community committed? How does the team keep in contact with those that can add value to the NFT? If the community is dead, it isn't the one for you. Goal-oriented, lively communities contribute a lot to the success of an NFT.

7. Market Strategy - Supply and Demand

The value of an NFT is increased by maximizing the demand through great marketing and advertising. Will the company be able to meet supply and demand if its market surges? You especially need to look for the marketing strategy tied to the numbers of NFTs in the collection. The reasoning behind the current number and the potential number of NFTs in the future should be crystal clear in the company's strategy.

8. The Official Launch

Is the official launch going to be a big event? Is the company going to drop the entire collection all at once, or is the launch going to be a calculated one? What is the time span of the launch if it isn't a one-time drop? The drop proves to be a massive contributor in creating an engaged customer base for the NFT, therefore, you need to get all details about it before you invest.

9. Team and Growth - the Execution

Now that the roadmap is out of the way, does the website have a reliable team to act on those prospects? Does the seller allow you, as a customer, to have an insight into the progress of the team throughout your journey? If the seller is not transparent regarding the gears of the process, you might want to reconsider buying from them. Moreover, if the original founders still participate in the project, it is a massive plus point because it gives you the reassurance that they will try their best to execute their vision.

If all of the above boxes are ticked off by a company, they are reliable and you can invest in their NFTs free of worry.

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