In the wake of the success of CryptoPunks and other Bored Apes, many non-fungible token (NFT) projects have been launched in recent months. And as in any booming market, it is sometimes difficult to distinguish the promising collections from those doomed to failure… To help you sort out the issues, and avoid investing in scams, we have compiled for you all the criteria to identify a good NFTs project.
A strong team that delivers on its promises
A good NFT collection is first and foremost one that lasts over time
The most important criterion for this is the team behind the project. Is it composed of competent people? Is it 100% involved in the development of the project? Do they listen to their community? Even if the artistic aspect of a project pushes you to invest, it is better to ask yourself the right questions before committing a large sum of money. This is the best way to avoid scammers.
Is the team public?
To properly assess the skills of a team, its members must first be known. This is why projects developed by public teams are more likely to attract investors. Anyone can research individual team members to judge the strength of their profiles.
This also limits the risk of a “rug pull”, when the team suddenly decides to jump ship and take the money collected from investors with it. But this is not a decisive criterion, because many successful projects, also known as “blue chips”, have been launched by anonymous people. This is the case of the founders of Bored Ape Yacht Club, even if their identities have been revealed recently.
Does the artist already have a certain notoriety?
Artists who already have a certain amount of recognition before entering NFTs are more likely to attract investors. This makes sense, as their work is recognised and they can count on the support of an existing community. If the artist is also fully committed to the project, this is a very good sign.
But here again, this criterion is not infallible: many artists have made a name for themselves thanks to their non-fungible token collections. Colin Egan (Cool Cats), Danny Cole (Creature World) and Scott Martin (Doodles) are just a few of them, all of whom are very involved in their respective projects
Are the developers competent and committed in the long term?
Developers are responsible for coding the smart contract on which the NFTs collection is based. Indeed, the slightest flaw in the code could prove catastrophic for the project, which would see its value plummet.
Again, knowing the identity of the developers allows you to check their skills, their background, and to ensure that you are not dealing with scammers who are interested in making a quick buck.
Having developers who are committed to the project over the long term is also important, as they are the ones who make the project useful. This is true at launch, but also throughout the life of NFTs, which can grow in usefulness as the imagination of their creators grows.
Does the team interact with its community
In all good NFT projects, team members are committed to communicating well with their community. This is a real mark of trust. In addition to traditional social networks, most projects have chosen the Discord platform to interact with their supporters.
They use it on a daily basis to keep them informed of the different developments of the project, to make them win rewards, to ask their opinion on the future of the collection…
If you want to check how much attention a project pays to its community, you can go and ask the team directly on their Discord room. You’ll soon find out.
Is the project roadmap realistic?
While the first NFT projects didn’t really have any specific plans, the collections that have been launched in the last few months almost all share with their communities their short, medium and long term goals. This can range from integrating their non-fungible tokens into various metaverses, to preparing TV series or video games using their NFTs.
But be careful if you find yourself faced with all these nice promises, as some roadmaps are as tempting as they are impossible to implement. So make sure the team has the skills and partnerships in place to achieve their goals
NFTs are as useful as they are beautiful
In the art world, a work of art is usually distinguished by its aesthetics and the concept that surrounds it. For non-fungible tokens, it is more or less the same, but we can add to these criteria their utility. A notion that is becoming more and more important in this emerging market: what will I use this NFT for?
It is still very early to draw up an exhaustive list of the different uses of NFTs, but we can already highlight the trends that are emerging at the moment:
Generate passive income for holders
To reward hodlers who are resigned to keeping their NFTs for the long term, many projects offer yield tokens.
Sometimes this requires placing the NFT in a liquidity pool, but often holders do not have to do anything to receive their passive income. Note that in recent months, services like Nexo have been offering cryptocurrency borrowing services backed by NFTs.
Offer new non-fungible tokens to hodlers
Another very common practice in the non-fungible token world is to organize airdrops of new NFTs to all those who already hold non-fungible tokens in the collection.
Sometimes hodlers are not directly awarded an NFT, but they are given privileged access to invest in a new collection launched by the same team. A gift that can allow them to invest in a blue chip project before anyone else and at a lower cost.
Provide merchandise for holders
Slowly, the most important collections of NFTs are being transformed into real brands. Some teams are therefore going to the end of the logic and offering their community members merchandise bearing the effigy of their NFTs. An initiative that appeals to collectors, and which also has the merit of helping to make the project known to the general public.
If you’re going to a cryptocurrency event in the near future, keep your eyes peeled. You’re bound to see hoodies or caps emblazoned with non-fungible Bored Ape Yacht Club, Cool Cats or CryptoPunks tokens.
Multiplying collaborations
To bring two communities together, many projects decide to collaborate to create new NFTs or invite members of an already strong community onto the whitelist of a new project. This allows new collections to benefit from a spotlight, and historical collectors to invest in a promising new project as soon as possible.
Another very interesting use is in collaborations with major brands or media, which can instantly legitimise a collection. In this respect, Bored Ape Yacht Club is once again at the forefront, with its partnerships with Adidas and Rolling Stone magazine. When will the first NFTs appear in a TV series or in the cinema?
Integrating NFTs into video games or metaverses
While most successful NFT collections offer unique characters that can be used as profile pictures (the so-called “PFPs”), others specialize in avatars and objects for use in video games or metaverses. If the project takes off, and sees its number of followers explode, NFTs have every chance of increasing in value.
As with cryptocurrencies, non-fungible collections of tokens that give their holders interesting uses are more likely to gain traction in the long term than projects that rely solely on aesthetics.
High demand and decentralisation of owners
Before investing in an NFT project, one should always carefully study the data surrounding it. This will help you judge the value of the collection, ensure that NFTs are not concentrated in the hands of a few owners, or verify that the demand is there. Here are the most important data to take into account
The maximum number of non-fungible tokens
The lower the number of non-fungible tokens available, the more rare they are. This data is therefore important for assessing whether a project is under- or over-priced. Indeed, if demand explodes, and only a few NFTs are available on the market, the price is likely to rise.
The number of holders
The greater the number of owners of NFTs in a given collection, the more decentralised it is. This greatly reduces the chances of whales selling en masse, and therefore of prices falling suddenly.
The floor price
This is the entry price for buying an NFT in a given collection. The higher the floor price, the more valuable the project is to collectors
The volume of trade
The floor price has little value without a sustained volume of trade. It’s easy to set an extravagant selling price, but someone has to be willing to pay it. The volume of sales validates the floor price, showing that there is a demand for these prices.
A loyal and engaged community
While the best NFT projects depend on a skilled and committed team over time, they would be nothing without a strong community to support them. Here are some key criteria for judging the quality of a community
A large and active community
When an NFT project has a large social network following, and its Discord room is a real discussion forum with thousands of active members, it means that the project has a large community behind it.
This is the case for all the best collections in the ecosystem, unless of course the project is very recent and you are one of the first supporters. Beware of scams, though, as bots abound on social networks and Discord, inflating the number of real supporters.
If you end up in a Discord room with 50,000 members, but never see more than a hundred or so people logged in, don’t bother.
A constantly growing community
A healthy community grows organically, through word of mouth and social networks. There are useful tools to assess the development of a community around a collection of non-fungible tokens, such as the NFT Scoring tool.
Supporters united behind the project
A real community sticks together, even in the most complicated moments of a project. If it holds together despite technical problems or FUD that may come from outside, it’s a good sign
A community that adds value to the project
Some communities are very active. They multiply GIFs or memes on social networks and get a lot of amused feedback. This is a sign of its good health. Some members are even more engaged and develop their own projects around a collection of NFTs, which helps to increase its value.
The presence of industry heavyweights
An NFTs project supported by well-known collectors is always more likely to succeed, provided that these supporters are unpaid of course. So if you see major influencers getting involved in a project, and promoting it to their tens of thousands of followers on social networks, it is probably a serious project.
But don’t forget to do your own research to make sure, because these collectors have such large wallets that they don’t hesitate to take foolish risks.
The property rights attached to non-fungible tokens
Another important point in judging the quality of a collection of NFTs is the property rights assigned to the holders.
Indeed, a non-fungible token will not have the same value nor the same utility for its owner if he can use it for commercial purposes. Let’s take the example of CryptoKitties: in their terms of use, it is specified that the holders of these NFTs can make commercial use of them, up to a limit of $100,000 gross annual revenue.
As you can see, while many projects give part of the property rights to the NFT holders, others are content to sell digital images without any use. Before investing, we encourage you to check what you are buying.
Read the terms of use, ask questions on the project’s Discord, and ask members of the community, and you should find answers to your questions.
Conclusion
With all of this information, you are ready to become a true NFT collector. However, don’t expect to make a fortune in a few weeks, as this nascent market remains unforgiving and unpredictable. But by following our instructions, you should hopefully avoid collections that have no other purpose than to get money out of you.
