Understand the scoring matrix
There are no set rules for how to assess an NFT valuation. The calculations you use to value private companies or traditional investment cars such as stocks simply do not apply to NFTs. The fee offered by the last buyer usually gives some indication of the value. However, it is difficult for NFTs to guess how much the next buyer can pay, depending on their estimates.

Most buyers lack the skills to logically determine the value of NFTs and base their prices on guesswork. It is also difficult for sellers to say what they might end up getting in exchange for the tokens they own. Over time, the value of NFTs is determined by the idea that both buyers and sellers can have no control whatsoever.

An example can convey the idea even better. NFT works of art may be in demand for a period of time, with potential buyers assuming that they are rare and expecting them to gain value in the near future. Then they may suddenly discover that the digital image is available for free online, and there may be no NFT buyers left.

Related: Non-flattened tokens: How to get started with NFTs

Factors that determine the value of NFTs
NFTs of works of art by well-known artists or tokens associated with material reputation assets may have some value. However, in most cases it is difficult for investors and traders to determine the value of NFTs.

deficit
The demand for an NFT is directly proportional to its perceived rarity, but how do you know how rare an NFT is? Unique works of art by well-known artists can serve as good examples of rare NFTs, as well as tokens characterized by high-profile celebrities. Some rare game items can also be linked to this class. The scarcity factor largely determines the intrinsic value of these non-foods.

Permanent proof of ownership gives the NFT owner a sense of distinction and thus value. The first 5,000 days of Everyday Beeple and Jack Dorsey’s first NFT are two prime examples of NFTs with a rare element.

feasibility
To see how NFT projects are evaluated, the tool is displayed as a key parameter. To deliver value, NFT must be used in a real-world application. For example, NFTs can be used to mark real estate, precious metals and even securities; Represent virtual land or game resources in many other ways. The NFT world is still in its infancy, and as it evolves, new innovative applications will emerge.

Immediately after minting coins, NFT gains value due to its inherent properties. Over time, value accumulates based on the usefulness and strength of the core project community. An excellent example of such tokens is Decentraland NFT, which refers to virtual plots in a project.

Related: How to Create an NFT: A Guide to Creating a Non-Workable Token

tangibility
NFTs associated with real-world objects draw a tangible element. Apart from the immutability of blockchains, this creates an immediate tangibility. NFTs can be used effectively to enforce ownership and eliminate fraud. The practical use of NFTs in the projects they participate in affects their value.

NFTs with concrete value are the perfect choice for both short- and long-term trading. Some NFTs, such as tickets, may have an expiration date, while others, such as those representing real estate, may increase in value over time.

interoperability
The main factor in showing the value of NFTs is interoperability, ie the ability to use tokens in different applications. For example, if the same weapon can be used in different games, there is a greater chance of the value of the accumulated token. The way non-fungible tokens work across different blockchains will always make transactions easier.

However, interoperability is difficult to achieve because developers have to create a wide network of applications where tokens can be used. Many attractive use cases help to ensure NFT interoperability. Another strategy that developers can follow is to develop partnerships with other projects for the benefit of the people who own their tokens.

Social proof
The social testimonies associated with the project that underpins the NFT are one of the most important factors in determining the value of the NFT. Checking their social media profiles like Twitter and Instagram can help measure their recognition. If the numbers are low, it indicates that they have not yet managed to establish solid ground for themselves.

Source: CoinTelegraph

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