There is no doubt that NFT ushered in a moment of explosion. Beeple sold his work for US$69 million at Christie’s auction, an Alien CryptoPunk collection was successfully sold for US$7.2 million, and Fewocious broke the SuperRare sales record.

All this happened last week, and it was really crazy.

You may ask: "How did these NFTs get sky-high valuations?"

This is a good question. Unlike DeFi tokens, NFTs (currently) have no cash flow on the chain, and no price-to-earnings ratio or cash flow model can be applied to them.

But some methods can be used for reference, and in this article, the author William M. Peaster will tell us several factors that add value to NFT.

Some features will add value to NFT

1. The security of the blockchain

The core point of NFTs is that as long as their underlying blockchain infrastructure remains the same, they are immutable and guaranteed digital assets.

Therefore, Ethereum is to a large extent the most important NFT network, thanks to it being the safest smart contract platform in operation today, and Ethereum will continue to maintain its dominant position in the foreseeable future.

In other words, the blockchain for minting NFTs is linked to the value of the NFT itself, which is why the current NFT minted on Ethereum is more valuable than the NFT minted elsewhere because they are more secure.

Core issues regarding blockchain security:

• Is the main chain safe?
• Is it decentralized?

2. Is it on the chain

NFTs like Avastars, Aavegotchis and Art Blocks drops are all cast on the chain. They can exist only by relying on their respective Ethereum smart contracts. This means that they can exist as long as Ethereum exists, which means that NFTs can Exist for a long time.

On the other hand, some NFT projects rely on external off-chain providers such as AWS to provide simplicity and flexibility, which introduces a dimension of trust, so you must believe that the project can persist and keep its servers running.

Otherwise, your NFT may only be valid for a few years.

Therefore, it is obvious whether the value of NFT on the chain is obvious, and the key questions on and off the chain are:

3.Age

NFTs can also obtain value based on their casting time. For example, NFTs did begin to heat up in 2020/2021, so NFTs before this time period began to take on the status of digital cultural relics. They are the earliest in this digital cultural revolution. s work.

However, the development of NFT is still so early that I think the "age" factor has not yet played a role. In the end, it may be that any NFT or anything established before 2030 may have special meaning, let us wait and see.

At the same time, the earliest NFT projects have received impressive valuations (such as CryptoPunks). These NFTs were born in 2017, and this fact has attracted the attention of many collectors.

So, just like wine, always consider the age of the NFT!

Key questions about age:

• When was this NFT cast?
• Does this NFT have any historical significance?

4.Creators and communities

If a person who has no fans and no history of NFT creation puts an NFT on OpenSea and there is no publicity, will this work be sold? If there is no further effort, of course it cannot be sold.

This is why the NFT forged by a major artist or creator is valuable. Importantly, involving the community can create demand.

Naturally, the more popular creators and the larger the community, the more valuable NFTs are. This dynamic is basically applicable to any market.

Key questions about creators and the community:

• Does the creator have many fans on social networking sites such as Twitter and Instagram?
• Do they often interact with fans?
• Do you think creators can develop their brands in the future?

5.Scarcity

In the NFT ecosystem, we will see that there are two versions of the NFT released by creators: unique and large numbers (such as 10, 50, 100, etc.).

Obviously, only NFTs are very scarce, so they are more valuable than a large number of works. However, this does not mean that a large number of versions of NFTs are worthless, and we often see some large numbers of NFTs with a unit price of thousands of dollars!

Platforms like SuperRare only support the only version of NFT, so you can guarantee that only one authentic artist is circulating in the market.

Key questions about the scarcity of NFTs:

• How many quantities were minted?
• Will the artist cast more such NFTs?

6.Release speed

Is the number of NFTs released by a creator in one year 1,000, or only 12?

I mean, figuring out the production speed of a particular NFT is the key to understanding its value.

A project with an unlimited amount of NFTs and a unit price of 0.01 is usually not as attractive as something created by an artist who only makes 25 NFTs. Of course, those outstanding artists who release only a few selected works each year often sell their works higher than those of the same level who release works several times a week.

Of course, there will be some special examples, such as the 5000 collections sold by Beeple. For 13 years, he has created a work every day. These works sold for about 70 million US dollars. It took him more than 10 years of unremitting efforts to establish This valuation!