What are NFTs? And Which One Should I Buy? — For Dummies
Disclaimer: This is not investment advice. Just #FreeGame
As I’ve gone further down the blockchain rabbit hole, I’ve become enthralled with the endless applications of NFTs. While cryptocurrencies still confuse many, I believe NFTs are the key to mainstream blockchain adoption. Instead of trying to grasp the underlying technology, a broader population can see value in digital ownership. In a Twitter survey, 78% of active NFT buyers first got involved in NFTs through NBA Top Shot. Through licensing deals with the NBA and WNBA, their platform allows basketball fans and enthusiasts to own moments from their favorite players and teams. Users don’t need to understand blockchain to participate. Because of projects like NBA Top Shot, NFTs are here to stay.
First, What is an NFT?
An NFT, or a Non-Fungible Token, is a digital object that a user can actually own. Before NFTs, you could have a digital object like a Twitter Handle, an NBA 2k MyPlayer, or a Fortnite skin, but you couldn’t actually own it. In the old model of the web, you’re at the whim of your service provider (e.g. Twitter, NBA2K, or Fortnite). If that service goes away or decides to change its rules, you lose your digital object!
Now with NFTs, your ownership is tokenized on the blockchain and you can do whatever you want with it. Where this space is going, and where I think the true magic lies, is when these service providers become interoperable. Imagine a future where you can bring your CryptoPunk or Fortnite skin into NBA2K!
Athletes Driving the Hype
Despite the NFL’s recent ban of cryptocurrency and NFT sponsorship deals for clubs, some of the most popular athletes are taking matters into their own hands.
If you’re on Twitter, you’ve probably seen a bunch of tweets like this recently. 3x NBA Champion and Olympic Gold Medalist, Javale McGee, put this message out on his account. A couple of days later, he became a World of Women NFT Holder. While most NFT projects feature male characters, Javale is betting on women. This project highlights the diversity of women through 10,000 unique characters.
While I wouldn’t trust most of what you see on NFT Twitter, there is value to capture if you can block out the noise and focus on emerging projects.
My strategy so far has been to use Twitter as a tool to discover key influencers in the space. Once you’ve found a project that seems interesting, you can check out the project’s whitepaper to get a better sense of the team’s vision.
A whitepaper is a document released by a crypto project that gives investors technical information about its concept, and a roadmap for how it plans to grow and succeed
From there, I’ll join the project’s Discord to further engage with the community and get a sense of the culture. Is it toxic? Is it inclusive? If you’re thinking long-term like me, this matters.
After narrowing down your favorite options, it comes down to entry price. If you have millions to blow, you can go all out with a CryptoPunk or Bored Ape Yacht Club (BAYC) character. For the rest of us, you can use the OpenSea data to review floor prices and price movement to see what makes the most sense for your collection. Instead of spending all of your cryptocurrency on one purchase, I recommend buying little by little, building up your collection over time.
The floor price in an NFT collection is the lowest price of any single NFT within that collection
Apart from the initial research, here are 4 things I look for in a project before buying:
- Utility — There are a bunch NFTs that are just collectibles, but I think the best projects are the ones that have long-term value (e.g. Axie Infinity and Rumble Kong League characters have value in a game, VeeFriends gives you increased access to Gary Vaynerchuk, etc.)
- Great artwork — is it visually appealing? Does the artist have a strong reputation?
- A strong target market — there needs to be an audience and community that is passionate about the team’s vision
- Strong team — Is it clear who is behind the project? If so, do they have a strong background in blockchain, tech, or gaming?
Once you’ve decided on which projects to support, the last step is connecting your wallet (e.g. Coinbase Wallet or MetaMask) to the exchange. Then shop till you drop!
My VC Journey is far from over, and I’ll continue to share my learnings. If you’re interested in staying updated, follow me here on medium and on Twitter @darrensvision