HomeGUIDEWhat is NFT: How investors can examine the value of an NFT

What is NFT: How investors can examine the value of an NFT


Follow us



Knowing what is NFT is not enough, you must realize its value to mold your decision about buying the tokens or doing otherwise. Even though the determination of the value of an NFT as a digital trend is not rocket science, there is undoubtedly no exact rule or formulae on how its value becomes assessed. However, several factors aid the determination of the value of all non-fungible token artworks. Accordingly, this article seeks to critically analyze those individual factors and how they ultimately determine the valuation of NFTs.

NFTs as virtual tokens

The Non-fungible tokens (NFT) remain digital, purchased via blockchain technology. This, thus allow creators to relay their respective works into the digital market. Over time, crypto investors grossly see the token as a platform to foster the digital economy. This is, however, because it possesses several benefits for decentralized finance platforms cemented on crypto. The NFT market makes it possible for anything whatsoever to be sold without hindrance. In addition, NFT technology remains non-fungible as implied. Each of the tokens possesses a unique code which makes the trading of the tokens impossible.

How Digital tokens work

NFTs like bitcoins usually possess ownership information or details, which helps to enhance easy identification and exchange between holders. In addition, virtual tokens always change the crypto paradigm by making each token extraordinary and irreplaceable. With this in place, it becomes grossly impossible for one non-fungible token to be equivalent to another. Accordingly, the NFTs appear as digital representations of assets and have been equated to virtual passports. This, however, becomes obtainable because each token possesses a unique, non-transferable identity to differentiate it from other tokens. NFT tokens enjoy market productivity to their ability to convert physical assets into digital ones. This becomes feasible through streamlining the processes and removing intermediaries.

Furthermore, the tokens become minted via tangible and intangible digital objects, like music, videos, GIFs, arts, video games, etc. Even though it is primarily attached to work on the Ethereum blockchain, the virtual tokens get support from other blockchains. This thus makes it possible for creators to monetize their goods on the platform. However, one major advantage of the NFT marketplace is that none of its contents can be censored. Its server remains intact all the time as no central person is controlling the market. Although applications using non-fungible tokens may shut down, all data or records still remain intact on the blockchain.

As non-fungible tokens continue to enjoy massive patronage in the virtual community, the passionate need to always examine their values increases. However, as earlier noted, three factors come into play in the determination of the values of these tokens. These factors include rarity, utility, and tangibility.

Factors determining the value of NFTs

Utility as one of the factors necessary in the determination of virtual tokens comes from the NFT applications. Recall that NFTs as virtual tokens possess the potential to function in games and this thus places it beyond mere collectibles. The functionality of tokens in virtual games, like spells, enables them to possess immediate value, which lingers over time, depending on the specific project. This, however, put utility as a huge parameter or determiner of values.

Rarity as another parameter obtainable in the determination of digital tokens manifests through scarcity or rareness associated with a specific NFT. The creation of non-existing artworks by a popular creator in the industry, for instance, serves as a good example of rarity. In addition, the rarity of virtual tokens also entails the effect enveloped in such NFT. A video game for instance illustrates this effect. Such NFTs possess intrinsic value and by that virtue attract many investors towards them. In this approach, the owner of the virtual tokens withholds the blockchain proof of ownership. This helps to give the creator the ground to determine the premium value of the NFT.

Another parameter available to investors in determining the valuation of digital tokens (NFTs) is tangibility. Prevalent indices indicate that NFTs attached to real-world items possess an ingredient of tangibility. The value derived here becomes by ownership rigidity. Here, the manner in which NFTs become used in underlining ownership rights and dislodge fraudulent operations become evaluated. Using NFTs in these practical ways, however, possess a bearing on their value. More so, some NFTs expire or possess an expiry date, but that of real estate enjoys more value.

Most Popular