NFT Projects: Judging Long Term Value

NFT projects continue to dominate the NFT space, with many new releases occuring each week, sometimes multiple on the same day. NFT projects might consist of social media avatars, digital collectibles or even hand drawn pieces of art work. With so many different concepts to evaluate, it is easy to become overwhelmed and quit. To aid our readers, we have developed a simple set of principles that can be used as a guide for whether a project has a shot to survive.

Before we continue, its worth noting that this guide is focused on answering the question: “Will this project be around for the long haul?” We are not seeking to provide a guide to the very profitable art of flipping NFT projects, there are plenty of other resources if wish to go in that direction.

One other point of consideration, we are deliberately not including the overall artistic direction / aesthetic as an item in this list. The reason is because art is highly subjective, and it while it goes without saying, art should absolutely be the number one reason to consider purchasing an item from a NFT project.

High Value Project Attributes

• Does the project do something new, unique, or groundbreaking. How does it push NFT projects forward as a whole? Is the project simply a copy cat of another project, or a mash-up of ideas?
• How does the project provide tangible utility?
  • Future air-dropped NFTs
  • Ability to attend in-person events
  • Special access to private social settings
  • Availability of licensed merchandise
• How does the project integrate with the metaverse?
  • AR / VR models
  • Interactive NFT player
  • Integrations with virtual worlds
• Does the project respect the NFT Project Bill of Rights?

For originality, consider the gravity of the new element that is being introduced. Bored Ape Yacht Club introduced the idea of a private social space (the bathroom), but the space itself is pretty lackluster as an activity. Bonsais provided AR and VR files on day 1, along with the rendered video of the NFT, allowing people to immediately play with the NFT. This was attention grabbing, but faded pretty quickly. VeeFriends provides access to VeeCon, which will remain relevant for several years, an eternity in the NFT space. Bored Apes is forced to continue its innovation via a roadmap, but VeeFriends can comfortably rest on the base utility provided by VeeCon.

For each of the utility items, also consider whether the benefit is granted to original owners, all current owners, or just a random subset of owners, such as those registered for a discord channel. An air-dropped NFT, such as Meebits provided to all CryptoPunk owners, can be a huge driver of value. The promise of giving out a few hundred NFTs based on chance or silly approaches, such as buying pieces priced below floor have little relevance.

Low Value Project Attributes

• Ability to participate in community events
  • Treasure Hunts
  • Puzzles
  • Social Media Promotions
• Ability to enter into giveaways
• Royalties, in the form of some small percentage of an indefinite calculation
• Other low probability of success games of chance

In general, we place almost no long term value in any of these concepts. In fact, because these are generally low technical effort, low cost to implement sorts of arrangements, a NFT project that depends too heavily on any of these for its community building is likely not to be around in the future. We often see these approaches used in NFT projects that come off as ponzi schemes. Royalties was a tough one, as its something we would like to see successfully implemented. The problem, is that the Royalty calculations have to be created before the NFT project creators know whether the project will be successful. This lack of future knowledge causes the calculations to be engineered in such a way as to leave too much wiggle room to yield actual value.

So there you have our metrics for NFT project valuation. We’ve done quite a bit of peer review on it, but there are always angles we have not considered. If you have any comments, please reach out and let us know. Good luck with your research!