What to Look For When Buying an NFT?
When you’re new to the cryptosphere, it can be hard to know what to buy when looking for NFTs. Take a look closer and learn.
Looking to start your very own NFT collection, but don’t know where to start?
NFTs come in all sorts of shapes and forms. Some collections like the Bored Ape Yacht Club, are part of a very exclusive collection that have limited numbers in distribution. While other collections have secondary purposes, such as raising awareness of certain issues, or provide funding for charities, and more.
That said, when you’re new to the NFT space it can be daunting to figure out a place to start. With so many collections available out there. That’s why we’ve put together this guide to share some insights into what matters when considering which NFT to buy.
Non-fungible token, or NFT for short, is a type of digital asset that represents a unique tangible, or intangible goods. Similar to cryptocurrencies, NFT exists on a decentralised network of computers called blockchain.
Each NFT contains information that allows it to be easily verifiable and can be traced back to the original creator. Another way to think of NFTs are like digital signatures that can serve as a way to prove authenticity and ownership of a digital asset.
Learn more: What are NFTs?
How to choose which NFT to buy?
Investing in the NFT space can be tricky for a newcomer. There are many different NFTs out there, and it can be hard to know which one to invest in. Even if they all look trustworthy, you can’t guarantee they aren’t a scam. That’s why we recommend doing research before deciding where to invest your money.
Three things you might consider when buying NFT are:
Team behind the project
A solid understanding of the NFT project’s team will help protect investors from fraud. With so many influencers promoting NFTs, it can be easy for investors to be swept up in hype and buy NFT without doing proper research.
The smart way to filter all of NFT projects is by knowing the team and their reason for building the project. Check their LinkedIn profiles, whitepaper, roadmap. This will drive you to a decision whether or not you should buy these NFTs.
Most of the legit NFT projects have a community platform. Whether it is on Twitter, Facebook, Instagram, or Discord. You should join the community platforms so they can keep you updated on news and future developments related to the project.
Another good reason for joining the community platforms is that you can get answers from other people who are involved with NFTs in general or your specific project in particular.
Define your capability
If you’re going to invest in NFTs, make sure you can handle the risk. The markets are volatile, and prices can go up and down quickly.
Don’t invest money that you really need—if the price goes down, it could put your family at risk if you have one. If you don’t have extra funds to buy an NFT, wait until you do.
Take a closer look: How to buy NFT?
What makes a good NFT?
The question of whether an NFT is objectively “good” ultimately depends on how you as the collector or investor associates value to the NFT itself.
However, there are certain inherent values of NFTs that can add value to the project themselves.
Rarity and exclusivity
NFTs vary in their rarity and exclusivity. This drives the price of NFTs up for some, creating a high demand for a limited supply. Pair that with the list of individuals who also own that particular collection of NFTs, and you have a recipe for an NFT that trades in the six-figure range.
Creator and ownership history
Another dimension that provides value to an NFT is the identity of its creator or previous ownership history.
This can be considered as a sentimental factor, and yet it’s a powerful reason for anyone to own an NFT – or any asset for that matter.
Think about it, an item or asset that was previously owned by a notable figure, celebrity, or celebrated artist will have their reputation and history attached to it – therefore adding to its value.
Utility and access
Some NFTs are valuable because they provide useful features to their owners. For example, some artists are using NFTs as a way to sell their albums or concert tickets—in this case, the NFT’s utility is that it gives exclusive access to its owners.
For creatives (like artists), NFTs are also a way to monetise their digital artwork, whether that be illustrations, photos, 3D models, and much more. NFTs also allow creatives to get commissions from just beyond the initial transaction—something a conventional gallery could never provide.
When an asset is liquid, it means that buyers and sellers have equal access to the asset. This same idea applies to non-fungible tokens (NFTs). If an NFT is liquid, it will facilitate its inherent value – especially if it’s a token that can be minted on-chain.
Read more: What Drives the Value of an NFT?
How to spot a fake NFT?
NFTs are digital assets that represent ownership in a physical object. The blockchain technology tracks the ownership of these assets and prevents forgery. However, it does not guarantee that you are not buying fake NFTs.
Here are some tips to help you identify fake NFTs:
Check the price
The first thing you should do is check the price. If it’s too cheap, then it might be fake. It’s hard to tell if it’s real because people can make fake NFTs and sell them for cheaper than the real ones.
So, if you want to make sure that your NFT is real, then you need to buy from an authorised marketplace or their official website.
Analysis the Artwork
Is it clear? Is there any pixelation in the picture? These are things that could indicate that your NFT is fake. You should also check if there are any details missing from the artwork or if something looks “off” about it. If everything looks good then congratulations! You have yourself a genuine NFT!
Check their social media channels
Another good way to spot a fake is by looking at its community activity and recent transactions (if any). If there aren’t any transactions happening on this NFT recently, then that could be another sign that something fishy is going on!
As mentioned above, there are three things that you have to look for when buying NFT. First, learn to choose the right NFT. Then, understanding the values that drive NFT. Last, spot the fake NFT project.
These tips can help you do more than just spot a good NFT, they can help you understand what makes each project unique, and how you can better assess the market for investment. Happy hunting!
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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
Last updated November 3, 2022