24.06.2024

What determines the value of an NFT token: rarity, usefulness, tangibility

NFT tokens have almost endless possibilities of use in real-world applications, despite the fact that they are most often perceived as digital collectibles now.

Some tokens sell for millions of dollars, but what does that cost depend on? In short, the intrinsic value of an NFT is made up of factors such as scarcity, tangibility, and usefulness. Of course, which asset the NFT belongs to and what type of ownership it implies – long-term or short-term, also plays an important role.

Collectors and traders can find a wide variety of non-replaceable tokens on the Binance NFT platform. It presents both the work of ordinary people and premium auctions, as well as Mystery Boxes from significant brands and famous digital artists from around the world.

Purchase and use of NFT tokens

The crypto market is constantly evolving. If initially only Bitcoin was presented on it, now it is thousands of altcoins, stablecoins, tokens of decentralized projects. Every few years, a new type of asset makes a splash on the market, there are many options for its use and an instant increase in value.

Non-fungible tokens (NFT) have spread to almost all areas of the decentralized industry, becoming one of the «bridges» between the virtual and physical worlds. These unique tokens confirm the owner’s right to certain assets on the Internet or in real life.

NFTs have become extremely popular in the crypto market as a versatile tool that can be attached to a piece of art, a pair of sneakers, or an item in a computer game.

What factors make up the value of a non-replaceable token

It is quite difficult to price the NFT at a specific price, mainly due to the newness of this asset class. When it comes to physical works of art, such as the La Gioconda, basketball cards or other collectible objects, they have a certain value, and investors find it difficult to decide whether they need this object at all and how much it might cost.

However, as NFTs spread in other directions, they reached a high level of appreciation in less than a year.

There are three key factors that affect the assessment of value: rarity, usefulness, tangibility.

Rarity

The rarer and more difficult to obtain a particular token, the higher the likelihood that its price will be high. Good examples of  rare NFTs are tokens issued by renowned digital art creators, popular celebrities, or brands.  Also, NFTs are often highly rated, giving some property in a computer game.

Such tokens attract people because of their intrinsic value, because the owner of an NFT does not care that he owns a certain item and can confirm this with a cryptographic asset on the blockchain. This makes the rare tokens somewhat premium and gives a sense of being different from other users.

Notable examples of the rarity effect in the cryptoindustry: the first «crypto kitties», Everydays – The First 5000 Days by Beeple, etc.

Utility

The price of NFT is positively influenced by the possibility of its real application in the physical or digital world. Non-replaceable tokens can be more than just collectibles.

Very often there are game objects clothed in this form – virtual land plots, avatars, weapons and skills for games. Moreover, the more popular the project where the item will be used, the more valuable the tokens. For example, as the decentralized gaming community grows, users are willing to pay an ever higher price for unique cards.

Examples of NFTs in question: soccer tickets, land in Decentraland, collectible cards for card games (like Geralt of Rivia for the Witcher Universe Gwent Card Game).

Tangibility

Although less common, there are NFTs that are tied to real-world objects that can be “touched”. In this case, the cryptographic token is proof of the immutability of ownership. Absolutely anything can act as an object, while the item does not have to be rare at all. It can simply bring pleasure or life’s blessings. The price in this case depends on the level of satisfaction.

Examples: Now there is an auction of paintings from the State Hermitage, where anyone can buy a copy of the painting. Each of the submitted works of art will have two digital copies. The first one will be placed in the Hermitage, and the second one will be put up for sale on the Binance NFT marketplace.

From a trading standpoint, tangible NFTs are best suited for short-term trading in the crypto market. In many cases, an asset has a definite expiration date – in particular, this applies to tickets. However, there are also objects that can add value in the long run. For example, limited editions of clothes or books.

What do you need to know to work with NFT?

There are four main things to keep in mind before making your first transaction with non-fungible assets:

  • What exactly are you interested in. The number of categories of tokens is limitless, but most of them are related to games, music or digital art. Within these categories, tokens also differ, they can be premium or simpler, say, created by little-known users. The choice depends on what type of collection you are trying to create.
  • Liquidity and market volume. Most of the NFTs on the market are collectibles that are often bought and then held in the hope of future growth in value. However, it can be difficult to resell an asset later if it is not very popular. This is the disadvantage of NFT, when compared, for example, with the always liquid Bitcoin.
  • Transaction fees. A common situation – you found what you were looking for, went to the payment page and suddenly saw that a huge commission was added to the total amount. Since NFT prices vary widely, it is important to know in advance what level of gas fees are currently on the underlying blockchain. With this in mind, you should carefully consider the additional costs that an NFT transaction may entail.
  • Benefit. Many traders see NFTs as just another market to make money. However, these tokens are more than just another trading tool. Platforms like Decentraland and Axie Infinity have introduced a type of utility into the virtual world that was previously unavailable. For example, valuable items can be traded and exchanged on these platforms.

At the moment, NFTs have just begun to gain momentum, and this is a truly exciting opportunity to participate in a new interesting and promising movement. For those looking to try their hand or even create a collection, there is much to look forward to in the future, especially as the space expands to include more active contributors.

Binance and other large companies are constantly releasing new products, tools and marketplaces where it is convenient to interact with NFT – create, sell, buy, store. In short, immerse yourself in an innovative economic structure.

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