NFT final investment guide: 6 dimensions to judge whether NFT projects can become blue chips

There are countless investment traps waiting for us behind the prosperity of the NFT field. The six dimensions proposed in this article will be the basic points of investigation to investigate whether an NFT project is worth long-term investment.

According to the real-time data of the NFTSCAN browser, as of January 14, 2022, a total of 39.43 million NFT assets have been minted on Ethereum, 29,570 NFT asset contracts have been deployed, and there are as many as 64.73 million NFT asset-related transaction records on the chain. The number of wallet addresses involved is 37.97 million. Moreover, the number of NFT assets minted on Ethereum is increasing at an average rate of 100,000 per day. Undoubtedly, the NFT field we are focusing on is a very innovative and creative emerging market.

NFT final investment guide: 6 dimensions to judge whether NFT projects can become blue chips

In the past 2021, the NFT field has opened a furious road. Every day we open our eyes and see new faces. From Cryptopunks to BAYC (Bored Ape Yacht Club), from JPG avatars to Loot programmable assets, from Land to Metaverse, the NFT field has never stopped innovation. Whether it is short-lived or out of reach, the NFT field, which is constantly being joined by new blood, can always bring you surprises. After the ups and downs of the market, there are only a handful of NFT projects that can precipitate and develop. The following picture includes the leaders in the NFT field.

NFT final investment guide: 6 dimensions to judge whether NFT projects can become blue chips

According to the current data, the 29,570 smart contracts deployed on Ethereum correspond to more than 30 high-quality NFT asset projects that you can name in the current market, so the success rate of NFT projects is only 0.1%. Thinking about it carefully, this number is terrible. Only one blue-chip NFT project worthy of investment can be born out of 1,000 NFT asset projects. For ordinary investors, this number means that there are countless investment traps waiting for us behind the prosperity of the NFT field. Therefore, based on this, I will share some experiences that I think are valuable from the perspective of first-line practitioners and NFT investors in the NFT field, for your reference only.

How to judge whether an NFT project has the potential to develop into a top blue chip, I think it can be analyzed from the following aspects:

Statement of Interest: I really like and own the Doodles program, which is the industry benchmark in my opinion.Therefore, in the following content, I will take Doodles as an example from time to time to facilitate understanding and description.

Protocol Standards for NFT Assets

At present, the common NFT asset protocol standards are mainly ERC-721 and ERC-1155 protocols. NFT assets with strong investment attributes are generally ERC-721 protocol standards, while ERC-1155 protocol is more inclined to NFT business scenarios with strong functional attributes.

When it comes to the NFT asset protocol standard, it is mainly analyzed from the NFT asset contract code level to examine whether it is written in accordance with the ERC-721 protocol standard. Here is a negative material: Cryptopunks, due to the early deployment of its asset contract code, the developers at that time did not follow the protocol standards for development, and the result can be described as four dislikes. Cryptopunks are neither ERC-20 Token-like assets nor standard ERC-721 NFT-like assets, and they also have their own trading functions built in. This leads to the following NFT infrastructures including Opensea and NFTSCAN, all of which need to be actively compatible with it, which creates a lot of trouble for developers.

Therefore, the result of the inspection of the protocol standard of NFT assets here is to ensure that the asset contract of the NFT project basically follows the ERC-721 protocol standard, so as to lay a good foundation for the subsequent development.

How to store NFT asset metadata

If an NFT is just a bill or a certificate, it doesn’t matter whether the metadata is accessible; but most of the NFT assets we are in contact with now have investment value, and we pay more attention to their financial attributes, so the security of the metadata will change at this time. It is very important, it is one of the core elements that make up the NFT to become an investment asset.

According to the data analysis of NFTSCAN, there are four main ways of storing NFT asset metadata:

Stored in blocks of the blockchain network. Usually Base64 format: data:image/svg+xml;base64,PHN2ZyB3aWR0aD0iMjkwIiBoZ…

NFT final investment guide: 6 dimensions to judge whether NFT projects can become blue chips

For example: CryptoPunks and Uniswap V3 LP NFTs are stored in blocks, which is the storage method with the highest level of security.

Stored in the node server based on the IPFS protocol. The format is: QmYBYWMwGcyn1GoettFnn4yzpzRUwtaYrt3XscsxcyN6hD

NFT final investment guide: 6 dimensions to judge whether NFT projects can become blue chips

For example, Doodles, BAYC and other head projects use IPFS protocol storage, and the security level is relatively high.

Stored on centralized servers, various cloud servers . The common format is:

This is the most common storage method and the least secure storage method.

In addition, there are a small number of projects that use the Arweave network for storage.

Through the above classification, we can see that the storage method of NFT asset metadata is uneven and not standardized. At the same time, these large-scale non-standardized NFT data have also brought a lot of trouble to developers in the industry. They need to invest a lot of manpower and computing power to analyze the data and establish standardization. Recently, Numbers, together with the three-party team of Protocol Labs and NFTSCAN, plans to unify the IPFS storage of NFT asset metadata and standardize the access path. In the future, developers who use the NFTSCAN Open API can enjoy this benefit.

The degree of openness of the copyright of NFT asset creators

The degree of copyright openness is very important for an NFT project community, because it represents the subsequent development direction and development scale of the NFT community. If the copyright is fully retained, it will be difficult for the community to expand based on the NFT asset, whether it is at the secondary creation level or at the commercialization level.

There are about three types of common copyright notices:

Copyright is fully open. That is, the copyright follows the NFT holder. Whoever holds the NFT asset owns the copyright of the NFT material and can be commercialized. A typical case is: BAYC NFT.

The creator team fully retains the copyright. NFT holders cannot enjoy any copyright of any element carried by the NFT asset, a typical case is: CryptoPunks.

The creator team has limited open copyright. Allow NFT holders to make commercial attempts on a small scale. A typical case is: Doodles, allowing commercial attempts below $100,000.

Of course, we choose an NFT project with a completely open copyright, which is more in line with the essence of the blockchain and more popular with the community!

Scalability of the NFT Asset’s Own Elements

I put Doodles and Jaylen Bear PhantaBear together, and everyone will understand what it means.

NFT final investment guide: 6 dimensions to judge whether NFT projects can become blue chips

NFT final investment guide: 6 dimensions to judge whether NFT projects can become blue chips

It is clear that the basic elements of Doodles NFT are very extensible, and are very distinctive and attractive. But in contrast to PhantaBear, the scalability is relatively poor, and it cannot even be extended. Some people here may say, I was slapped in the face, and Jaylen was very successful. Then I can only say that the success of Jay Bear does not lie in the design of the NFT itself, the core lies in Jay, regardless of whether it is a bear or any other animal.

Operational capabilities of the NFT project team

We all know that the Token of homogeneous assets is more dependent on liquidity; when it comes to NFT, because NFT is a non-homogeneous asset, it is very dependent on Web2 traffic. Yes, you read that right, internet traffic. Because only with enough traffic and brand exposure, it is possible to convert more purchasing power in. In point 4, it was mentioned that Jaylen Bear was used as a negative teaching material. Here, Jaylen Bear is a successful case. Because Jay Bear captured Jay’s influence and traffic, so we see the so-called success.

The operational capability of the NFT project team represents its ability to capture traffic. In such a complex NFT market, how to stand out among 1,000 NFT projects depends on the team’s operational capabilities, in addition to the quality of the NFT itself.

We all know that blockchain networks and protocols are essentially composed of cold algorithms, and these things are very objective. Traffic and capital can never make a logically wrong protocol successful, but they can bring bears like Jaylen to the sky. Because the latter is not objective, its existence is created from the subjective.

Financial properties of NFT assets

The financial attributes mentioned here are directly related to the benefits of holding the NFT assets of this project.

Generally, there are 2 kinds of rights and interests: the right to use and the right to benefit (dividend right)

The right to use refers to the right to use certain scenarios or PASS that can be obtained by holding NFT assets. The right of income refers to how much investment income or dividends I can get by holding NFT assets.

Take Doodles as an example here, which has DoodleBank for value capture and income distribution.

The copyright income obtained by the Doodles project in the market and the income actively submitted by the derivative project will enter DoodleBank. Of course, there are actually many sources of income, which are not described here.

Therefore, the last key step in investigating an NFT project is to analyze the financial properties of its NFT assets to see if it can capture value and whether it is sustainable. In addition, the strength of financial attributes is very direct to the valuation of NFT itself. The stronger the financial attribute, the more popular the NFT asset is in the market, and the stronger the anti-risk ability.

Most NFT assets are assets in a bull market and air in a bear market; in other words, assets when there is traffic, and air when there is no traffic. So how can we change this situation? Then vigorously develop its financial attributes. When NFT assets have strong financial attributes, it will still be an asset in a bear market, and it will not lack traffic.

To sum up, the above 6 points are the basic inspection points to investigate whether an NFT project is worth long-term investment.

In addition, since NFT assets are long-tail assets and have particularly poor liquidity, they must be treated with greater patience and perseverance. When traffic comes, you must know how to retreat bravely, and efficient realization can reflect the essence of investment.

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