February 3, 2023

What Makes an NFT Valuable?

Many people ask what makes an NFT valuable. Let's take a look at how we define value, and what you can do to create a valuable NFT of your own.

Many people ask what makes an NFT valuable. That’s a somewhat tricky question because we often conflate value with price. When it comes to an NFT, value can come from a number of different places. Some of these are related to price, and others are not.

Let us explain.

NFT Value Vs. Price

Non-fungible tokens, or NFTs, are bought and sold in an unregulated market. This means that the sales price for an NFT can be whatever the buyer is willing to pay for the digital asset.

Because NFTs started as a means of primarily selling digital art, they have garnered fair comparisons to the traditional art market. And just like in the art market, NFT prices are not necessarily governed by the quality of the asset itself.

What we mean is that it’s not uncommon for rather simple-looking NFT projects to sell for thousands of dollars, whereas more complex and aesthetically pleasing NFTs sit in NFT marketplaces unsold.

Just like assets in the real world, such as art, trading cards, or even real estate, NFT markets see prices vary for many different reasons:

The popularity of the artist or brand
The exclusivity of ownership
The buzz about the project
The NFT’s roadmap (the incentives provided to buyers over time)

While popularity can be harder to control, the latter three points can all be managed to some extent, and as a result, so can the NFT’s value.

Exclusivity

Part of what makes NFT art valuable in some cases is that it is rare. Often, NFTs are sold as 1 of 1 assets. No one else will ever have the opportunity to buy that same NFT again unless the purchaser decides to sell it. That creates value, particularly if the NFT project generated a good deal of attention. It’s possible that the owner of the NFT will be offered the chance to sell the asset for a profit.

Other times, an NFT might be sold as part of a limited collection. NBA Top Shot, for example, often sells digital trading cards in exclusive lots of 500. If you miss your chance to buy your favorite player, you would need to track down another owner and buy on the open market.

Owning several exclusive NFT projects can make an NFT collection valuable, as the collector gains notoriety and recognition.

The Buzz about a project

Any NFT project can generate a buzz. When coupled with notoriety, influencers, or brand loyalty, the value (and price) of an NFT can skyrocket. Imagine being known as the owner of a high-profile piece of real estate. NFT collections can work the same way.

The ownership history of an NFT over time can also impact overall value. As Hackernoon explains, “Value depends on the identity of the initial issuer, or the previous owners of the NFT. Those with high ownership history value are often created by famous artists, globally recognized celebrities, or brands.”

NFT Roadmaps to value

Many of the most valuable NFTs include far more than a piece of digital art (or another digital asset). As we explain in our Guide to NFT Roadmaps:

The roadmap is a fundamental aspect of an NFT project — it’s your chance to provide clarity and transparency around your venture, the kind of community you want to build, and what people can expect for their investment. While not every project uses roadmaps the same way — and some even forgo them — they’ve become standard practice for a reason.

Some of the most successful NFT roadmaps involve some type of ongoing engagement between the buyer and the creator of the NFT. Hackernoon calls this “utility,” saying that NFTs have begun offering this as a standard feature. They say, “Be that enhancing video games by adding scarcity/provability to in-game loot or power-ups, through to creating a wrapper for many other token types within one NFT, the utility of an NFT (or its expected future utility) plays a part in its value.”

We find that some of the most valuable NFTs combine all of these elements: exclusivity, notoriety, and a compelling roadmap. Brands are able to harness these elements into exclusive NFT-driven experiences for their buyers, and then they turn those buyers into a loyal and engaged community of support.