Non-fungible tokens, or NFTs, have taken the art and collectibles world by storm in recent years. An NFT is a digital asset representing ownership of a unique item, such as a piece of art, a collectible, or even a tweet. Because NFTs are stored on a blockchain, they are easily verifiable and can’t be replicated, making them a secure and desirable way to own and trade digital assets.
The NFT market has exploded in popularity, with high-profile sales such as Beeple’s “Everydays: The First 5000 Days” NFT selling for a record-breaking $69 million. But what makes an NFT rare and valuable? In this post, we’ll explore the factors that contribute to the rarity of an NFT and provide some examples of particularly rare and valuable NFTs.
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Many factors can make an NFT a highly sought-after and rare digital asset, from limited edition releases to associations with famous artists and celebrities. So, if you’re interested in collecting NFTs or want to learn more about the market, read on to find out what makes an NFT rare and valuable.
What is NFT Rarity?
An NFT is considered rare if there is only a limited number available or if it is highly unique or desirable in some other way.
An NFT’s rarity can be determined by certain characteristics or traits of the NFT. Color, design, and costume are examples of physical traits and arbitrary factors like the artist’s or project’s reputation. An NFT’s rarity contributes to its value since scarcity leads to higher demand and prices.
Factors that Contribute to the Rarity of an NFT
Several factors contribute to the rarity of an NFT. These include:
1. Limited edition/quantity
One way to create rarity is to limit the number of NFTs available. For example, an artist might release a limited edition of 50 NFTs of a particular piece of art. These NFTs will be rare because there are only 50 available, and as they are purchased, the number available decreases, increasing the rarity and potentially the value of the remaining NFTs.
2. Utility or practical benefits
One factor that contributes to NFT rarity and value is utility. An NFT’s utility can be summed up as its usefulness or practical value. When an NFT serves a specific purpose or has a practical application, it is more likely to be considered rare and valuable.
The utility of an NFT may, for instance, make it valuable and rare if it offers access to an exclusive event or special perks. The same can be said about NFTs that represent unique experiences, such as virtual reality experiences or one-of-a-kind art pieces, which are considered valuable because they offer a unique and immersive experience.
Generally, NFTs with high utility is more valuable and sought after since they provide practical benefits for the owner.
3. Liquidity or trading volume
NFTs with high liquidity have a higher value. This liquidity explains why tokens made on ETH are more valuable. Anyone holding ETH can easily exchange ERC-compatible NFTs on secondary markets.
In addition, if your specific NFT, or NFT collection, doesn’t have any buy & sell demand, you may have liquidity problems. It is impossible to sell an asset if no one wants to buy it. Liquidity lowers the risk of holding NFTs you no longer need, so investors prefer to invest in high-volume NFTs.
4. Artistic or historical value
Some NFTs have value because of the artistic or historical significance of the item they represent. For example, an NFT of a famous painting by a well-known artist might be considered rare and valuable due to the artistic merit of the original piece. Similarly, an NFT of a rare historical document could be considered valuable due to its rarity and historical significance.
5. Association with a famous artist or celebrity
NFTs created by well-known artists or celebrities can be considered rare due to their association with a famous person. For example, an NFT created by musician Grimes sold for $6 million due in part to the artist’s fame and popularity.
6. Uniqueness or originality
NFTs that are one-of-a-kind or extremely unique can also be considered rare. For example, an artist might create an entirely original NFT that has never been seen before, making it a truly unique and rare item.
7. Difficulty in obtaining
Some NFTs may be considered rare due to their difficulty acquiring them. For example, an NFT might only be available through a specific platform or marketplace or be auctioned off at a high starting price, making it less accessible to the average collector.
Examples of Rare NFTs
There are many examples of rare and valuable NFTs, but here are a few notable examples:
Beeple’s “Everydays: The First 5000 Days” NFT: This NFT, created by digital artist Beeple, sold for a record-breaking $69 million at Christie’s in March 2021. The NFT is a collage of every digital artwork Beeple created over a period of 5000 days and is considered a unique and valuable piece due to the artist’s reputation and the sheer volume of work contained in the NFT.
CryptoKitties: These one-of-a-kind digital cats gained widespread popularity when they were first introduced in 2017. Because each CryptoKitty is unique and can’t be replicated, they have been known to sell for hundreds of thousands of dollars.
NBA Top Shot collectibles: These digital collectibles have gained significant popularity recently due to their association with the NBA and their perceived value among fans. NBA Top Shot collectibles are digital highlights from NBA games that are issued in limited quantities and can be traded and sold on the marketplace. Some of these collectibles have sold for tens of thousands of dollars due to their rarity and perceived value among fans.
The Role of Scarcity in the Value of NFTs
It’s important to understand that the rarity and value of an NFT are often tied to the economics of supply and demand. When there is a limited supply of a particular NFT and high demand for it, the value of the NFT can increase. This is similar to how traditional collectibles, such as stamps or coins, can increase in value due to scarcity.
There is also the potential for speculation and investment in NFTs. Just as with traditional investments, there is a risk that the value of an NFT could decrease over time. Collectors and investors need to do their due diligence and research the rarity and potential value of an NFT before making a purchase.
Best Tools for Checking NFT Rarity
If you’re interested in collecting NFTs, it’s important to accurately assess the rarity and value of the rare NFTs you’re considering. There are a few rarity tools that can help you do this.
Rarity.tools is one of the most popular tools in the space. On this site, you can check an NFT’s rarity score and other useful information such as price, volume, and liquidity. Rankings of NFTs are based on the rarity of their characteristics, and you can filter them by average price, total sales volume, and owner count.
2. Rarity Sniffer
Using Rarity Sniffer, you can keep track of the latest rankings for NFT projects. A free version of the tool shows a simple display of recent sniffed projects and NFT collections. Premium subscribers receive advanced analysis and access to newly sniffed NFTs before they are made public.
Icy.tools is an easy-to-use platform that tracks NFTs. It is especially helpful for beginners since the site offers a transparent, easy-to-use interface ideal for quick market research. Besides trending sales and projects, users can also filter results by volume and sales.
In conclusion, the rarity of an NFT can be influenced by a variety of factors, including limited edition/quantity, artistic or historical value, association with a famous artist or celebrity, uniqueness or originality, and difficulty in obtaining.
Understanding these factors can help collectors and investors make informed decisions when purchasing NFTs. Additionally, the role of scarcity in the value of NFTs highlights the importance of understanding supply and demand dynamics in the NFT market.
As the NFT market continues to grow and evolve, it will be interesting to see which NFTs become the rarest and most valuable in the future.
Frequently Asked Questions (FAQs)
What factors contribute to the rarity of an NFT?
Several factors can contribute to the rarity of an NFT, including limited edition/quantity, artistic or historical value, association with a famous artist or celebrity, uniqueness or originality, and difficulty in obtaining.
Can NFTs increase in value over time?
Like any investment, there is a risk that the value of an NFT could decrease over time. However, if there is high demand for a particular NFT and a limited supply, the value of the NFT could increase.
How do I know if an NFT is rare or valuable?
There are a few ways to determine the rarity and value of an NFT. You can research the artist or creator, check the rarity score on NFT rarity checker tools, and consider the demand for similar NFTs. It’s also important to do your due diligence and carefully evaluate the potential value of an NFT before making a purchase.
How do I buy and sell NFTs?
There are several platforms and marketplaces where you can buy and sell NFTs. Some popular options include OpenSea, Rarible, and SuperRare. It’s important to research and choose a reputable platform to ensure the security and authenticity of your NFT transactions.
Can anyone create and sell NFTs?
Yes, anyone can create and sell NFTs as long as they have the technical knowledge and access to the necessary tools. However, it’s important to consider the potential value and demand for your NFT before attempting to sell it.
Are all NFTs valuable?
Not all NFTs are valuable. The value of an NFT can depend on various factors, including the rarity and uniqueness of the NFT, the reputation and popularity of the artist or creator, and the demand for similar NFTs. It’s important to carefully evaluate the potential value of an NFT before making a purchase.
Is it a good idea to invest in NFTs?
As with any investment, there are risks and rewards involved in investing in NFTs. It’s important to research the rarity and potential value of an NFT before making a purchase. It’s also a good idea to diversify your investment portfolio and not rely solely on NFTs.