Most NFT projects are ‘collections’ – a set of NFTs which are all based on the same concept.
Collections can vary on their amount of items, artwork, utility and overall idea of what they represent and how they are valuable. All of these factors are determined based on the aim of the projects.
The following sections explain some of the most common characteristics that make up a collection.
Each NFT collection will have to decide how many items will be created and made available to the public to buy. The creators are free to choose the amount of NFTs their collection will have, but there are some common practices to be noted.
CryptoPunks is probably the most known and valuable NFT collection created to this day. Thanks to their success, the 10.000 number became a golden standard for collection sizes. Many projects now release between 8.000 to 10.000 NFTs, as it seems to be a proven business model.
However, others decide to release fewer assets to create more scarcity (such as with fine art NFTs) or to choose a number that has a particular significance to define the quantity (see The Pepsi Mic Drop).
What makes some NFTs more valuable or expensive than others is their rarity. From all the thousands of NFTs in a collection, only a few hundred or dozens might have certain characteristics in their artwork, making them more unique and hence more difficult to get. Most marketplaces help users identify these rarity traits. Here’s an example from the CryptoPunks collection:
There are even tools to help ‘NFT investors’ identify the rarest items of a collection, so they can acquire them on the market and potentially sell them for a profit margin:
The ‘roadmap’, as people in NFT communities call it, is the plan presented by the founders in which they outline what the different phases of the project are and how they aim to provide value to holders and members of the community.
A traditional roadmap usually includes:
- A timeline of important events (date of opening the server, minting date, event, etc.)
- An outline of the business model
- Allocation of the potential profits from the sale of the NFTs.
- Collaborations, merch drops, games, etc.
- Future uses of the NFT in real life.
- Future uses of the NFT in the metaverse.
The point of the roadmap is to make clear to the holders that there is a plan set in place to provide benefit to the holders, and to make sure that the NFT they are planning to buy will increase in value with time.
Besides the hype and popularity around the project, there are three main factors that will end up affecting the value of an NFT:
This is arguably the most important factor of the three. People will be drawn to the project first for what they see, what the art resembles, what it means, or the uniqueness that makes it stand out from the other NFT collections.
The actual creator of the NFTs can end up having a great influence on the overall value of the project.
On other occasions, the artist will be someone very talented and already known within the design or art community, which helps not only at legitimizing the project, but also at showing the holders that they will acquire a piece created by someone with a good reputation. This is of interest to the holders, since it could be an indicator of the future value of the piece they are acquiring.
For NFT buyers, famous designers or artists with a huge following represent an opportunity to invest in these assets just like you would do in the traditional art scene.
Although most artists become part of the collective or team behind the NFT projects, already established players in the industry have also released collections on their own: Tom Sachs and Damien Hirst are great examples of this.
NFTs can represent any kind of digital asset, so the possibilities are endless. However, avatars and digital art dominate the space at the moment.
Many holders decide to use their NFT as their profile picture on social media once they acquire it, hence why characters are a really popular choice when launching a collection. They are created taking into account that the buyers will use them to represent themselves in the digital world.
Creators are free to experiment with their character design, but there are some popular trends (often combined), dominating the market:
- Derivatives - Alternative versions of already successful NFTs.
- E.g. The Humanoids, 3D versions of CryptoPunks.
- Animals - Apes being the most popular.
- Memes, internet or crypto-related concepts turned into characters.
- E.g. Dogepound (a reference to Dogecoin)
Other types of digital art NFTs, which are not character-based, include:
- Contemporary / digital art
- Photography NFTs
- E.g. MEMORY EMOTION
Besides the concept, the creative usually has other two important characteristics:
- Static or Dynamic (GIF)
- 2D or 3D
There is no combination of these factors that will make the NFT more valuable, although 3D art tends to be appreciated more. Most people are aware of the amount of work and knowledge needed in order to sculpt and create 3D renders, and the end result tends to look more high-end than 2D art.
An NFT project won’t succeed if there is not a group of people behind it who believe in the roadmap and support the idea.
A community is essential to increase the visibility and reputation of the project, since happy members will be more willing to talk about, value and invest themselves more in the project.
A good community will also create a sense of belonging and identity among the members:
- CryptoPunk holders call themselves Punks.
- Bored Ape Yacht Club holders call themselves Apes.
- Doodles holders call themselves Doods.
Many compare acquiring an NFT similar to buying the stock of a company, simply because you believe the value of that organization will increase with time – it’s an investment.
Although there are many ‘flippers’ and people who are in this world to make a quick profit, more and more projects are looking for ways to re-invest in their community and reward long-term holders who keep on supporting the idea behind the collection.
For more on how these communities are managed and the systems they employ, see the section on NFT Communities.
The benefits that an NFT can give you as a holder is the third factor directly affecting its market value. Besides the appreciation based on the artwork itself and the artists who made it, utility is a big topic among NFT communities.
Utility of an NFT can be generally divided into two categories:
In-real-life (IRL) benefits
Some NFT projects decide to invest more heavily in real-life or tangible benefits, which can create a bridge between the abstract concept of a digital asset and its usefulness in real life. Examples of IRL benefits include:
- Access to exclusive events (e.g. meetups, meet-and-greets, parties)
- Access to exclusive networking spaces
- Access to merchandise and other marketing products
Digital / virtual benefits
While IRL benefits are an interesting opportunity, utility in the digital world is more commonly seen among the offers towards NFT holders. Some examples include:
- Being able to bring the NFT into one of metaverses being developed at the moment (e.g. Sandbox, Decentraland)
- Using NFTs as a key to access an exclusive, members-only metaverse. This is seen more commonly with game-based NFT communities.
- See NeoTokyo, for a great example of an NFT game that blew up recently.
- See Loot: For Adventurers, for an interesting case of a text-only NFT adventure game.
- Earning ‘staking’ rewards, which can be given in some sort of virtual currency.
- Some NFT communities that are big enough have released their own coins, which can be earned by holders and provide them with financial rewards.
- Lending your NFT to virtual exhibitions for display, and getting paid for it.
The possibilities are almost endless since this is a space that is currently under development and different concepts come to life every day.
Game-based projects are the ones reaping the most benefits in terms of utility, since they can use their NFTs as a key element of their virtual game, such as an entry-pass, upgrades and dynamic content that holders and players of the game can make use of.
The marketing strategies used to promote these projects rely a lot on hype and exclusivity.
Influencer marketing and partnerships with celebrities / famous brands is common practice. Social media plays a huge role, with Twitter and Instagram being the two main channels for marketing promotion.
Many big NFT investors are very active on Twitter, and people in the community will follow them in order to catch their recommendations or predictions on future projects they deem as a good investment.
Youtube is useful for releasing content such as trailers, and there are many NFT/crypto content creators who might catch an eye on a project and mention it on their videos as a potential investment opportunity.
Competition is fierce and the marketing budgets tend to be high, with many projects destinating a big chunk of potential revenue from the NFT sales to keep on promoting the project and engaging in new marketing initiatives.
Besides social media, other more traditional marketing methods such as the use of billboards has also been seen in the NFT space.
Rankings and calendars
Many buyers who are interested in investing and flipping NFT for profits will make use of listing sites and NFT calendars where they can keep track of all upcoming collections.
Listing a project in one of these sites is not for free, so that’s an additional marketing cost to be considered.
Choice of network
The choice of network is important for many reasons.
For the holder, NFTs from one blockchain cannot be transferred to a different one. For example, if you buy an NFT in Solana you won’t be able to trade it in non-Solana marketplaces or use it on applications that don’t support this blockchain.
The network should be chosen taking into consideration factors such as:
- Development requirements for setting the smart contracts
- Available marketplaces and popularity
- Long-term vision and roadmap of the blockchain
At the moment, Ethereum is still the clear leader, but competition is growing and other networks like Solana and Cardano are starting to catch up mostly due to the problem with high transaction costs on Ethereum.
NFT buyers with a limited budget are at the moment more tempted to join new blockchains, while Ethereum is seen as an option better suited for those trading higher volumes.
NFT Community terminology
Acronyms and terms commonly used by people in the NFT and crypto space. Useful to make sense of online conversations on Discord, Twitter, Instagram, etc.
This is a list of useful definitions for the most common terms encountered in the blockchain, crypto and NFTs space.
NFT communities have certain ways of communicating and building their membership count.
Popular and famous NFT collections
This is a list of NFT collections that have achieved mainstream success and are now considered solid investments. In the NFT space, some of these are referred to as ‘blue chips’.
February 3, 2021
The blockchain can be defined as a decentralised, distributed and (most of the time) public ledger.
February 25, 2021
Non-fungible tokens (NFTs)
A non-fungible token or NFT is a unique and non-interchangeable unit of data stored on a digital ledger (blockchain).