How do you Assess the Value of an NFT?
 

How do you Assess the Value of an NFT?


To assess the value of an NFT, consider looking at various factors like ownership, utility, rarity, and social proof. Empirex Capital presents you with important details so that you can determine the value of an NFT.

Understanding the valuation matrix

There is no rule book on how to assess an NFT valuation. The metrics you use for evaluating private companies or conventional investment vehicles such as shares are simply not applicable to NFTs. Usually, the payment rolled out by the last buyer gives some indication of the value. For NFTs, however, it is hard to guess what the next buyer might pay, depending on their estimates.

Most buyers lack the skills to ascertain the value of NFTs logically and base their quotes on guesswork. For sellers too, it is hard to determine what they might end up receiving for the tokens they hold. Over time, the value of NFTs is driven by a perception over which both buyers and sellers may lack any control.

Factors that determine the value of NFTs

Artwork NFTs of renowned artists or tokens associated with tangible assets of repute might have defined values. In most cases, however, investors and traders find it hard to determine what an NFT is worth.

Rarity

Demand for an NFT is directly proportional to its perceived scarcity but how can you tell how rare an NFT is? Unique artworks from renowned illustrators might make good examples of rare NFTs as will the tokens minted by top-grade celebrities.

Utility

For figuring out how to evaluate NFT projects, utility emerges as a key parameter. To carry value, an NFT needs to have a utility in a real application. For instance, NFTs could be used for tokenizing real estate, precious metal, and even securities; to represent virtual land or game assets and in many more ways.

Tangibility

NFTs associated with real-world objects draw an element of tangibility. Clubbed with ownership immutability on blockchains, it creates immediate value intangibility. NFTs can be effectively used to underline ownership rights and eliminate instances of fraudulent activities.

Interoperability

A key factor in the NFT value proposition is interoperability, i.e., the ability to use the tokens in different applications. For instance, if the same weapon can be used in different games, there are more chances of the token accruing value.

Social proof

The social proof associated with the project behind an NFT is one of the decisive factors that determine the NFT’s value. Checking their profiles on social media platforms like Twitter and Instagram can help one gauge their acceptability. If the numbers lie low, it indicates they haven’t yet been able to create a solid ground for themselves.

Created on 17th Mar 2022

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