Part 2: What is an NFT good for?
If you’re new to Crypto and NFT, or just tired of explaining it, here’s a mini-series that explains it quickly and easily. Feel free to share. This is not financial advice, do your own research.
In part one, I explained how the blockchain allows you to prove ownership of a digital item called an NFT.
But, ownership only means that you own that NFT, it does not confer any inherent value.
The value of that NFT comes from whatever rarity or utility people think it has.
Rarity can come from being limited in quantity, or more commonly, by having rarer traits than others in the same collection.
For example, a Bored Ape with certain rare traits tends to be more valuable that those with more common traits.
This is “manufactured” rarity.
For the most part, every NFT in the same collection will all have the same utility. But some people want to say they own a rare one, just like with baseball cards.
Utility is added by the project’s developers/owners.
For my project, Bike Club, the utility will be access to cycling brands, athletes, coaches, events, etc., plus the opportunity to win prizes and get free stuff.
The NFT doesn’t provide that utility, we do.
The NFT only serves to prove you’re a member and thus give you access to that utility.
If the utility or perceived value of an NFT is high enough, people might pay more for it.
Most collections have no utility.
Most collections were simply an attempt to cash in on the early hype around NFTs created by Bored Apes and Crypto Punks having massive valuations.
We will almost certainly never see those types of valuations again.
The hype is mostly over for that type of OG collection, because there can only be a few OGs.
Everything else is either a copycat, or it’s coming up with something new and unique.
You can’t sell a project because it has “amazing art” or a “great community” anymore…no one cares.
A project has to have true utility for anyone to care now.
And, increasingly, a project has to have a fully doxxed team so people know who they’re buying from.
This is because there have been too many “rug pulls” and cash grabs, where a founder promises something big, mints the collection, then ghosts the project and leaves everyone with a worthless NFT that has no utility and no real community.
If you’re looking at buying into an NFT project, look for:
- a team that’s not anonymous
- utility that is valuable to you
If there’s hype around it, great, that’s a bonus.
More important is a team that you trust to do what they say they’re going to do. A lot of NFT projects have founders with a great idea, but no (as in ZERO) experience running a business.
What is the long term plan?
A lot of projects talk about creating a DAO, or land in the metaverse, or their own token, or a game. Or all of those things.
But why?
If there’s no point to it, then they’re just throwing buzzwords at it because they think that’s what people want because they see all the other projects doing it.
