With all of the hype in the space and so many NFT Projects being launched everyday, the probability of success of an NFT project can significantly diminish – and the ones that succeed do so because of the overall (perceived and actual) value they deliver. This short article explains what an NFT is and the factors involved in driving its value up or down in the marketplace.
What is an NFT? A non-fungible token (NFT) is a unique digital asset that acts as a certificate of ownership for virtual or physical assets like photos, videos, Tweets, etc.. Each NFT represents a one-of-a-kind cryptographic item that cannot be interchanged with another and is maintained in a digital ledger called blockchain.
What drives the value of an NFT? The relationship between supply and demand ultimately determine the value of an NFT. If there is high supply and little demand the price of the NFT will be low. Similarly if the demand for the NFT was greater then the available supply, the price will be high. An example of this is the NFT collection Bored Ape Yacht Club which has a current floor price of 88.54 ETH (+$147,000 AUD), and had a recent sale of $1.2 Million. The question then is to determine what the quantity (total supply) of your NFT collection should be, and how you intend to drive demand for the project – determining the supply will in essence determine an NFT’s value in the marketplace, hence getting this right can be crucial to ensuring a project is successful.
Now that we understand what an NFT is and what drives an NFT’s value up or down in the marketplace, let’s understand the key factors that need to be considered when implementing an NFT Project:
- Branding & Messaging – is the vision, mission and overall positioning of the project clear and in-line with the target audience?
- Value & Utility – what’s the value behind having the NFT other then reselling for a potential profit? This can be tangible value (practical use-cases, event-entry, early access, products, services and so on) and/or intangible (social prestige/recognition).
- Community – is there an existing community to drive the project’s growth and hype?
The three factors above NEED to be met in order for an NFT project to be successful. The priority of how they should be met are: Branding/Messaging > Value & Utility > Community; as without branding/messaging. By having a clear understanding of a project’s branding, and having that aligned with the value and/or utility that’s provided by the project, building a community not only becomes easier but the rate at which it builds and grows is much faster – ultimately giving the project the best possible chance of success in long-term.
This method extends to more then just NFT-projects, but to other establishments that’re Web3/Blockchain based such as Metaverses (a follow-up article will expand on this in more detail).
At Unreal Growth we are passionate about emerging technologies (such as Web3/Blockchain) and how we can create leverage for new/existing brands, and one invaluable method is the use of NFTs.