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How to find NFT projects with growth potential?

NFT is the same as DeFi in 2019. The projects are still unknown, but after the bull market in the summer of 2021, NFT has changed from a niche market to a gold track that cannot be ignored. So far, the number of NFT projects has basically reached more than 1,500 a . With the rapid development of the DeFi and NFT markets, blockchain investment is blooming everywhere, NFT has become a new trend, and major investment institutions continue to enter the blockchain world.

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Financing progress trend (2021) Data source: Footprint Analytics

Due to the growth of the NFT market, many projects have risen one after another, and they have attracted the attention of countless people due to their huge wealth effect, and hope that assets can be preserved and increased in value. However, in the current market environment with numerous projects, we need to be cautious about the industry. Anticipation, rational evaluation of a project with real growth potential is very important.

Basic concepts of NFT and two areas of concern

NFT stands for Non-Fungible Token. It is a unique and unique blockchain project with blockchain management rights. It’s like if you give me 50 dollars and I also give you 50 dollars. The two 50 dollars are the same, and the 50 dollars in our hands are the same; if you sign the signature of a celebrity on this 50 dollars, this Not only is US$50 different from the US$50 in my hand, it is also worth US$500,000 because of this signature. In this way, the value of NFT is reflected in its scarcity, and it is believed that it has increasing value, which will bring you a huge wealth effect.

Another feature of NFT is that it has uncertainty , which may increase tenfold or a hundredfold in a short period of time, or it may collapse in the next stage. So when you enter this market, you have to make an assessment.

With its unique attributes, NFT has brought a certain degree of change to many fields such as meta universe, digital art, collectibles, games, DeFi, public utilities and sports. Judging from Footprint Analytics data, in recent months, collectibles and games are the two largest areas of NFT collections and sales, which have attracted the attention of the public. What are their growth potential and success secrets?

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Data source of transaction volume of the top 5 platforms in the past 30 days: Footprint Analytics

Collection

CryptoPunks as a symbol of online identity

The rise of NFT projects like CryptoPunks has pushed the NFT field to the mainstream, and everyone considers it to be one of the earliest examples of “non-fungible tokens” on Ethereum . According to the data of Footprint, the trading volume of Cryptopunks on November 10, 2021 was 8.15 million US dollars, which is 8 times higher than the trading volume of NBA Top Shot. The total trading volume, as a basic indicator of NFT, is to show users The number of sales between and the total value of the exchange, CryptoPunks compared to the transaction volume of other collectibles, highlights the strong position of the old NFT.

The value of a Punk depends on its type, number of attributes, combination of attributes and subjectivity. Using it as a profile avatar has become a symbol of online status, each avatar is unique, so more and more people will spend hundreds of thousands of dollars to buy (as shown in the picture, it is currently the largest selling avatar in the market ), most collectors want to get an avatar, because this is a digital expression of their identity and personality.

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Source: larvalabs

CryptoPunks Square Ethernet network as the first NFT project is Larva Labs created by the encryption punk collection set NFT 10000 uniquely generated pixelated avatar together. CryptoPunks were available for free when they were first released, and they were all received soon. Now if you want to own it, you need to spend money to buy it. In the past 12 months, the number of sales has reached 11,744.

According to the official website of larvalabs, the current Crypto Punk with the highest sales is “#3100”, which was auctioned at USD 7.58 million on March 11, 2021. The current “CryptoPunk 3100” listed price is 35,000 ETH, or approximately USD 167 million. , An increase of 2100%, is currently the world’s highest unit price NFT work.

Therefore, some of the basic factors for the rapid increase in the value of CryptoPunks can be simply summarized as “the first NFT project in history”, “scarcity” and “status symbol”.

game

Axie infinity’s unique economic model provides liquidity based on scarcity

Recently, Axie infinity is still the leader of the popular collection list. It is a game published by Sky Mavis , a blockchain publisher in Vietnam , and has received investment from multiple well-known investors in May of this year. By adopting the play-to-earn model, it provides users with a future where work and entertainment are combined, not only can play but also make money. This economic model gives it a strong growth potential.

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Source: axieinfinity

Its economic model is as follows:

-Gameplay of the game itself

  • Strategic and difficult games
  • Have raised or nurtured pets
  • There is a battle
  • Possess scarcity

-Play-to-Earn profitability

  • Distribute tokens and get rewards for participating time
  • Get rewards for battles
  • The rewarded tokens can be realized
  • Compared with traditional games, users have to spend money to play and buy equipment

-Liquidity of cyclic participation

  • At least 3 pets can start the game, creating demand and scarcity
  • Provide liquidity based on scarcity

Axie Infinity is a game that solves the problems of ordinary users and fees. It is different from traditional games and attracts more users to enter the NFT market. This caused the price of Axie Infinity’s issued token AXS to rise from $0.59 at the beginning of the year to the current $141. , An increase of 238 times compared with the beginning of the year. And its trading volume has been considerable in the past 4 months, indicating that more new players have entered the market.

According to Footprint data, as of November 7, 2021, Axie Infinity’s market value index hit a record high of 10.2 billion U.S. dollars, with an annual increase in market value of 310% . Judging from the overall trend, the market value is constantly rising, and its market value reflects the market value of a project in the industry. The current market value of Axie Infinity ranks 23rd in the entire network and ranks first in game projects.

1637665991492451AXS token and transaction trend data source: Footprint Analytics

1637665991497083AXS token market value trend data source: Footprint Analytics

How to mine high-quality projects in the NFT field?

The current NFT coverage of collectibles, games, art, etc. are just a few of the components of the market. Therefore, the entire field cannot be judged in general, and specific issues should be analyzed in detail. The following important indicators allow you to quickly find high-quality NFT projects in this huge market.

-Information about the project team. If the founder has blockchain industry experience and game industry experience, it means that this is a team with great potential.

For example, the Axie Infinity team has created a digital pet game kingdom. Today, this game is the most popular game in Ethereum; in addition, the founder of CryptoPunks is known as a “creative technology expert” who “makes things for Android, iPhone and the Internet.” The team has a deep understanding of punk encryption technology, thus realizing one of the first irreplaceable NFTs.

-Partners and investors. If a well-known venture capital participates in the investment, it will also add a lot of visibility and credibility to the project.

Axie Infinity, like games, has received investment from many well-known investors in the technology industry. On October 5, it raised $150 million in financing at a valuation of $3 billion. A16z led the investment, adding credibility to the project and game works. Spend.

-Transaction frequency. High frequency projects are basically top-level projects.

For example, Axie Infinity and CryptoPunks, but the newly emerging NTF projects are not ruled out, indicating that the number of participants has increased, and the transaction volume will continue to increase, increasing user confidence.

– fluidity. It is a key indicator of the health of any market.

By observing liquidity, we can analyze whether the composition of market assets is stagnant or liquid. For example, if you invest in a certain type of NFT, it is now popular in the market. However, if the market’s liquidity is low, it also means that there are not enough buyers to pay the price; when this happens, you may have to sell at a lower price, or wait for more people to join the market, and then sell . If you choose to sell at this time, records show that someone sold it at a lower price, which may affect the value of your NFT in the market.

-Value Analysis. When building or owning an NFT, consider its intrinsic value.

In addition to scarcity, there are the following other values:

Exchange value: the purchasing power of the NFT, that is, the value of the transaction between the NFT and currency or other items;

Use value: The attribute that a commodity can meet people’s needs. We think it includes entertainment value, collection value, social value, production value, etc.;

Entertainment value: The NFT has entertainment attributes and can be used in leisure, games and other scenarios;

Collection value: The NFT has attributes such as value preservation, appreciation, and commemoration;

Social value: NFT products with a large number of users and a large number of fans, such products help holders to show their personality in social interaction, seek a sense of identity, integrate into the community faster, increase trust, improve social efficiency, etc.;

Production value: This NFT can be used to earn excess profits.

           When owning the CryptoPunks NFT collection, the value of Punk depends on the user’s ultimate status symbol in the cryptocurrency community; and the Axie Infinity game allows users to earn more revenue while playing.

-Risks also coexist. Users should better balance the benefits and risks.

For example, the risk of brand awareness, creator identity, underlying blockchain, and product ownership of intellectual property rights should not just be speculative.

Summarize

The rapid development of the NFT market is also a new trend that investment institutions are paying attention to. Whether NFT is used as a status symbol or an opportunity to bring you a huge wealth effect, we must rationally evaluate its value. Whether you want to issue, buy, invest, or collect by yourself, you must consider whether the value will increase and whether the project is legal. These must have a clear value judgment standard and a thinking about the future business model.

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