How to evaluate the value of NFT? To assess the value of NFT, you can consider a variety of factors, such as ownership, practicality, rarity, and social proof. There is no rule book on how to evaluate NFT valuation. The indicators you use to evaluate traditional investment instruments such as private companies or stocks do not apply to unlisted companies at all. Usually, the payment made by the last buyer shows some value. However, for non functional transactions, according to their estimates, it is difficult to guess how much the next buyer will pay.

Most buyers lack the skills to logically determine the value of NFT, and their quotations are based on guesswork. It is also difficult for sellers to determine what they will eventually get from their tokens. Over time, the value of NFTs is driven by a perception that buyers and sellers may lack any control over it.

An example can better illustrate this point. A piece of NFT art may be in great demand for a period of time. Potential buyers think it is rare and expect to obtain value in the near future. Then, suddenly, they may find that digital images on the Internet are free, and NFT may have no buyers.

Factors that determine the value of NFTs:

Works of art by well-known artists or tokens associated with reputable tangible assets may have a defined value. However, in most cases, investors and traders find it difficult to determine the value of NFT.

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The demand for NFT is proportional to its scarcity, but how do you know how rare NFT is? The unique works of well-known illustrators may be a good example of rare non-traditional art, as well as tokens forged by top celebrities. Some rare game items can also successfully call this category. Rare factors bring a lot of intrinsic value to these non functional transactions.

The unalterable ownership certificate gives the NFT holder a sense of difference and the value that comes with it. Every day is the first 5000 days and Jack Dorsey's first NFT is a typical example of nonfunctional translation with rare elements.

utility

In order to understand how to evaluate NFT projects, utility becomes a key parameter. In order to realize value, NFT needs to be practical in practical applications. For example, NFT can be used for securitization of real estate, precious metals and even securities; To represent virtual land or game assets and more. NFT is still in its infancy. As it matures, new innovative use cases will certainly emerge.

Just after casting, NFT gained value from its inherent characteristics. Over time, the growth of value depends on the utility of basic projects and community strength. Decentralized land NFTs, which refer to plots in virtual land projects, are an excellent example of this characterization.

Accuracy

Non functional objects associated with real objects have a tangible element. In the blockchain, ownership remains unchanged, and it creates tangible direct value. NFTs can be effectively used to emphasize ownership and eliminate fraudulent activities. The actual use of non-technical personnel in the projects they participate in has an impact on their value.

Non financial assets with tangible value are very suitable for short-term and long-term transactions. Some NFT, such as tickets, may have a deadline, while others, such as NFT representing real estate, can generate more value over time.

Interoperability

The key factor of ANFT value proposition is interoperability, that is, the ability to use tokens in different applications. For example, if the same weapon can be used in different games, the token will have more opportunities to increase in value. The way in which non redeemable tokens work on different blockchains will always make transactions easier.

However, interoperability is difficult to achieve because developers must establish a huge network of applications on which tokens can be used. An attractive set of use cases helps inject NFT interoperability. Another strategy developers can follow is to develop partnerships with other projects to benefit those who own tokens.

Social proof

The social proof related to the project behind NFT is one of the decisive factors determining the value of NFT. Viewing their profiles on social media platforms like Twitter and Instagram can help people measure their acceptance. If the number is very low, it indicates that they have not been able to create a solid foundation for themselves.

When meeting any person or project for the first time, there is a natural tendency to get clues from people around the project. Social evidence shows people's overall view of a project, which is conducive to decision-making.

Ownership History

The identity of the issuer and former owner of NFT has an impact on its value. Tokens created by celebrities or corporate entities benefit from high ownership historical value. You can promote the value proposition of NFT by cooperating with people or enterprises with strong brand value.

Resale NFT previously held by influential people is another way to gain traction. The market and seller can help the buyer find the information of the previous owner of NFT by providing a simple tracking interface. Highlighting the addresses of investors who have made a lot of profits from NFT transactions will help buyers gain valuable insight.

Flexible appreciation

Non financial assets with high liquidity also have higher value. The secondary market provides a place to trade ERC or BSC standard NFT in a frictionless manner, which immediately provides opportunities for buyers. Traders prefer to invest their funds in NFT category with high trading volume, because more liquidity helps them to make profits easily. Even if the relevant platform is closed, the highly liquid NFT may retain its value.

Symbolic economics emphasizes increasing participation, and liquidity will promote the value proposition of NFT. A built-in system that depreciates long-term idle non fixed assets and encourages competitive assets will help to establish a stable market. With the growth of NFT market, the system supporting asset liquidity will be in place.

Speculation

Sometimes it is speculated that it is the catalyst behind the price rise. For example, in December 2017, the price of CryptoKitty # 18 fell from 9 ETH to 253 ETH in just three days. Although there is a critical objection to taking speculation as one of the driving forces of valuation, speculation is human nature and cannot be eliminated in fact.

Even in the traditional financial system, instruments such as derivatives are based on speculation. From this perspective, it is not surprising that speculation has become an important part of the NFT ecosystem. The price performance chart of NFT project, changes in assets under the project, and even events beyond your direct control may encourage speculation and promote the price of non-financial assets.

Continuous change of NFT ecosystem

NFT is a new and evolving ecosystem. Various factors affecting NFT value are developing rapidly. To improve accuracy, you need to take them all into account. In addition, value is generally a subjective concept, although you may think that the discussion is about intrinsic value. In this case, it becomes more challenging to solve how you decide the future value of NFT.

Since non patented technologies are an asset class with unlimited possibilities, we can safely assume that their versatility will grow steadily and profitable opportunities will emerge in each subcategory. The number of non functional test cases has been growing rapidly. NFTs can now be used in applications such as vote allocation to ensure voting rights.

When exploring NFT estimators, you only need to note that all shiny things are not diamonds. So be patient and consider all factors when making decisions. When various NFT markets emerge, it is particularly important to do a good job of due diligence and make wise decisions, from an all inclusive platform like OpenSea to a niche market like Real Nifty.