How to Evaluate NFTs with Mesha

As new applications and use-cases appear in a wide-ranging set of industries, NFTs (Non-Fungible Tokens) have begun to gain even more momentum.

Key Takeaways:

NFTs are unique, one-of-a-kind digital assets that get stored on blockchains. Two NFTs can never be identical, which makes proof-of-ownership easy to establish.
These assets become the perfect medium for associating real-world items with a digital environment while maintaining uniqueness across both worlds.

Why are NFTs so popular?

In addition to guaranteeing ownership rights and serving as digital collectibles, NFTs have gained popularity due to their varied use cases. And anyone on the blockchain can issue them.
Since these tokens are so accessible, more and more people are becoming creators. Mainstream brands and platforms have also started entering the NFT space, attracting new audiences to the overall crypto space.
And NFTs have now found new applications in the gaming industry, as far as use-case is concerned.
The play-to-earn or P2E model, for example, allows users to earn tokens while playing and also create, exchange and buy a variety of unique assets.
Another well-known use case for NFTs is the loot model. Here users enjoy rewards issued to them in-game. These usually are boxes containing certain valuable items, power-ups and more.
Another major category for NFTs as a new kind of digital art is avatars for social networks.
The growing popularity and use-cases of NFTs are solidifying their value as they continue to expand in terms of utility and functionality, inducing further demand.

How to evaluate the value of NFTs?

An NFT’s value can get influenced by a lot of factors. Here we have listed six key indicators that can help you evaluate the longevity and value of an NFT project for your collection or crypto portfolio.
It will also help you spot in-demand NFTs and upcoming NFT trends.

1. Utility

An NFT’s utility comes from its application in both the physical and digital worlds. As both worlds are growing closer to each other with every passing day, an asset class is required to translate the asset value from the real to the digital world.
Along with being one of a kind, they can perform several other actions. For example, NFTs can get used as power-ups and spells in games or articles of clothing for characters, resources for building and more.
Utility lies at the heart of a digital asset as, without it, there would be no use-case and no demand.
An NFT with a solid utility gives it upfront value, which may accrue over time, depending on the popularity of the project and the traction it gains.

The best example of utility can be Play-to-Earn NFTs like Axie Infinity, MOBOX and others.

Since these gaming NFTs hold the most utility right now, their value will continue to grow within the gaming ecosystem with the increase in new communities of players.
Another factor that contributes to an NFT’s value is its strength. Every NFT is not part of a collection, but for the ones that are, the appeal of the future content influences the value of the previously issued NFTs.
The real-world utility of NFTs is another factor that needs to get considered. For example, some NFTs can be used to exchange for real-world prizes or benefits like access to events.
For instance, some NFT collections allow users to receive special rewards with each Mystery Box collection. These rewards can be anything from a ticket to a studio season, a secret live show or some physical merchandise.
You can also use NFTs as collateral for loans as they become inaccessible until you repay the loan and the agreed-upon interest. So, you can get the NFT back after paying the debt.
Staking of NFTs is also gaining popularity lately as an added-value feature. It allows users to get rewarded with in-game coins if they stake the native NFT of a project, which can later get used to redeem premium content.

2. Rarity

One of the core qualities of an NFT is uniqueness. Anyone can verify their authenticity, but they cannot alter it as all NFTs are one-of-a-kind. Generally, the NFTs which are in demand have a higher value.
The fact that in-demand NFTs often attract more buyers and sell for higher prices is due to the law of supply and demand and the law of scarcity.
For example, third-party tools like rarity.tools help users get a more objective view of the uniqueness of an NFT.
These tools use several factors to estimate the rarity of an NFT like popularity, trading volume, number of owners, etc.

3. Community size

Community size is a decisive factor, too, as it helps to decipher how many potential users and buyers an NFT has in the open market.
A large community attracts more audiences, which can help the project reach more potential buyers.

For example, a popular NFT project like Bored Ape Yacht Club has a large active community. That helps in introducing the project to a much wider audience.

You can check a project’s community size by visiting its official social network pages and checking its subscriber count. The number of NFTs available on secondary marketplaces is also a crucial factor.
An abundance of NFTs with low bidding or buyer activity usually suggests that the supply outstrips demand.
How does mesha help:
Under the Collection category, we provide a list of all the top NFT collections that have a large community size and a good subscriber count.
It helps to reduce your research effort and brings together all the popular NFTs that you can invest in together with your friends.

4. NFT potential

Potential refers to the ability of an NFT to grow based on its rarity and community size. The growth potential can usually get estimated by factoring in its relative supply and demand.
The NFTs with long-term community support might become more valuable as they are more likely to maintain or gain traction over time.
The timespan of a community to remain relevant in the market and retain user involvement depends on long-term community attention.
A good example can be the Star Wars series. It has successfully engaged and grown its viewer base for over 40 years.
When it comes to the ability to generate long term community attention, you should evaluate the attractiveness of an NFT along with other factors.
How does mesha help:
Our ‘Top NFTs’ list helps you immediately access all the top-selling NFTs of the past week. It also includes details like floor price, owner and more.

5. Provenance

Before even considering buying an NFT, you should begin by learning about its creator. That includes researching their origin, backstory, prominence on the market, and more.
Some research options include checking their creative pages and community followings to evaluate their potential for personal growth.
If the creator is prominent, there is a higher chance that their work will be considered valuable on the market.
How does mesha help:
Our NFTs explore section also includes a segment for upcoming talks with artists. It has all the information, including host and co-host details.
You can even set reminders to attend the same. The idea is to help you learn about different artists and get to know the creators well before buying their NFTs.

6. Personal taste

Subjectivity and individual preference play a critical role too when deciding to purchase an NFT.
There are numerous reasons like outward appearance and aesthetics, personal connection, the relevance of an NFT’s application or a relationship to the issuing project that can influence a decision and make users choose one NFT over the other.
There is also always a chance that a collector may ask for a higher-than-market price for an NFT due to the value they personally ascribe to the asset.

Takeaway

All the indicators we have mentioned above are tips rather than determining factors set in stone. An NFT’s future value cannot ever get quantitatively predicted with utmost precision.
It always depends on market forces. So it is best to do some research and analysis before purchasing NFTs.

Share this article