Key Takeaways

• NFT investments require thorough research: evaluating the artist, community, utility, and trading history helps distinguish valuable assets from risky ones.
• Flipping NFTs relies on market dynamics and understanding floor prices, liquidity, and demand ensures better decision-making.
• Not all NFTs have long-term value, as some collections are purely speculative, while others provide real-world benefits like governance or access to services.

In our recent article about researching TON projects and their tokens, we explored a short checklist to evaluate any token by looking at public metrics.

In this article, we will continue our DYOR take by explaining how to check the validity of a collection and pick a good NFT with comments from our partners. Dive in!

What’s NFT and Why They Have Value?

NFT means non-fungible token, meaning each NFT is unique. On a technical level, each NFT has unique identifiers: its ID number and the contract’s address or the creator’s address. These identifiers are stored on-chain and with them, it is easy to track NFT’s history, verify its origin, or spot a counterfeit.

Diving deeper, NFTs often have digital content tied to them like images or gifs, have no content but utility, or have everything: cool image, voting power within their project, airdrops for holders, and so on.

NFTs are usually created in collections. All NFTs within one collection have the same contract address with unique IDs for each token. When someone speaks about Bored Apes, they mean the whole Bored Ape collection, and when they discuss Bored Ape #8817, they talk about the Bored Ape with ID 8817 in particular.

As you see, Bored Ape #8817 costs 17.5 ETH or $56,000 at the time of writing. It has such value because of several factors:

• They are rare — only 10,000 tokens in the collection.
• They are a self-sufficient brand — most Web3 enthusiasts and even Web2 guys saw or heard something about expensive crypto monkeys.
• They are famous — Mark Cuban, Madonna, Eminem, and other celebrities bought them (or at least pretended to buy them themselves), these NFTs were showcased in the Louvre, and sold at Sothbey’s auction to bored millionaires.

Hype and fame are the main pillars that hold NFT’s value, just like with any branded clothing or unique cars.

What Makes NFTs a Complicated Investment?

Trading fungible tokens ($TON, for example) is like trading fiat currencies. Two dollar bills of the same nominal will cost the same no matter what.

Trading NFTs is more like trading cars. Two cars of the same model and made in the same year might cost differently because one is painted in common black and the other in rare blue color, plus it has 19' rims. Two NFTs from the same collection might trade at different prices.

Also, you can’t buy just a car’s side mirror and expect it to rise in price — you have to buy the whole car. The same with NFTs: you can’t buy a fraction of a non-fungible token. We hope you got the difference if you are looking at NFTs for the first time.

Before buying an NFT, you have to decide why you want to buy one.

If it is about enjoying the art, using it as a profile picture (PFP), or for another utility case, then just go for what you like.

If it’s about investment, we suggest you follow a quick DYOR checklist to buy something that won’t lose its value:

• The artist and the community.
• The floor price, volumes, and trends.
• The utility behind the token and the project.

As you won’t buy a Miata to transport logs, you don’t want to buy an NFT that doesn’t suit your purpose.

NFTs Are About the Artist’s First

A mediocre painting by a famous person will cost more than a masterpiece by an unknown author. So, the first thing to do is to find out who is behind the project, whether it is a lone artist, a team, or an organization.

“Find what the artist did before this particular collection. If he or she made a successful NFT project before, they know what they are doing, thus this collection has a chance to become a banger”, — Asterrvn — Crypto-Digital Artist.

For example, artists usually sell their NFTs to make a living or to fund their next projects — that’s a valid case, as you can expect them to care about their reputation and community. On the other hand, some celebrities jump into the NFT train because their manager told them so or because someone paid them to use their image. In most cases, they don’t care about NFTs, and their prices decay after the initial hype. For example, Snoop Dogg’s NFTs latest got less than $700 in total trading volume despite his fame.

The best pick would be a famous Web2 artist who went into Web3 to make additional income or to expand the audience. Those usually have an active community, ready to buy his or her tokens and support them further.

_“Be aware of copycats. Sometimes bad artists steal art and try to resell it on other chains”, — Igor Fox (_CEO TON Spiders Ecosystem)

The second best pick is an art-involved project like a Web3 game or non-financial decentralized app that will care both about the style and utility of their tokens. They might look generic, but it’s the utility that defines their value. Check the project’s community in Telegram, Discord, or Twitter to see how active it is. In our first article of the DYOR series, we explained how to check a community to avoid being fooled by fake activity and shilling.

The third best is NFTs with a predefined utility and clear value, like Telegram usernames or Notcoin vouchers in the form of non-fungible tokens. Tokenized assets are NFTs too, and their value and market are far more predictable.

The Floor Price is Everything for Flipping

Flipping means quickly buying and selling NFTs for profit.

Following the car trading narrative, one can buy a Porsche 911 for €30,000, while there are a lot of offers for €500,000 and higher. The same is true about NFTs: even within a single collection, some users sell their tokens at a discount.

The price for the cheapest NFT in a particular collection is called a floor price. Unlike the cars, the cheap one isn’t rusty or faulty, just cheap. Maybe their owners need money ASAP. The floor price is usually displayed right away on any NFT marketplace.

But don’t fall for the low price before checking the hype and trading volumes. If the tokens are traded at least a few times a week, and the cheapest NFT you are looking at is listed at a reasonable discount compared to the second-cheapest one, you might take a shot at it.

_“If the volumes are low and there are like 1–5 NFTs sales per month, you will just freeze your money by buying the NFT. You won’t be able to find a buyer to sell it”, — Igor Fox (_CEO TON Spiders Ecosystem)

To evaluate the hype, go to the collection’s community. To evaluate the traders’ interest, look for the “Stats” or “History” tab on the collection’s page on the marketplace.

The Utility is What Defines NFT’s Long-Term Value

If you are looking at NFTs for long-term profits, research the project’s roadmap and promised NFTs’ utility.

“While checking utility, consider how profitable or useful those utilities are for these NFT holders. Unique and helpful utility means unique valuation and great prospects”, —

E.g. there are TON Usernames and Anonymous Numbers with clear utility — you can expect them to rise in price along with more Telegram users joining TON. There is a collection from Pokraslampas, promising to distribute 555 prizes over 3 seasons — those might rise in value too. Just pretty images without a creator dedicated to developing them into something bigger will likely fall in price in the long run.

Check the Trends to See the Opportunities

Most NFT marketplaces track the collections’ trading stats. It tells the amount of tokens sold in one day, the average price, and the total volume. Just like with regular fungible tokens, you’d like to see those metrics grow. If they start decaying, maybe it is too late to jump on the train.

Let’s try Researching a Random NFT Collection

We went to GetGems and picked a random collection — Rich Cats. It is one of the oldest TON NFT collections that even got investments from TON Foundation President Steve Yun.

The artist is anonymous, but the collection has an active Telegram community with 3,700 members and ~100 reactions under each post. They promised to gift some prizes and recently wrote about the partnership with DAOLama NFT lending service. The community and the team are active, and the partnership promises utility and liquidity for those NFTs — everything looks good so far.

Next, let’s explore the prices. The floor price is 85 $TON for the cheapest, and then the price keeps rising. 190 cats are listed for sale with 2300 just being held — the supply is rather small, which is good. Now checking on the chart we have a few NFTs sold in the last few days for more than 100 $TON each.

While the collection is good, it is more suitable for experienced NFT collectors than for newcomers. The floor price of 85 $TON (~$570 at the moment of writing) is too high for making the first steps in the NFT world, so we’ll check a more affordable collection.

Let’s Research One More Random NFT Project

This time let’s pick something more affordable. We chose one from the GetGems main page with the cheapest floor price — NOT Wise Eggs.

The artist is anonymous too, the Telegram group has 5,200 users with ~100 reactions under each post. No utility or roadmap is present, but the collection has a website with a mysterious timer ticking — 52 days left to something, probably for the eggs hatching.

The floor price is just 2 $TON for an egg. With 10,000 NFTs minted, only 436 are listed for sale — compared to the Rich Cats, the supply is even smaller.

The chart looks good too. Hundreds of eggs are sold every day at an average price of 4.5 $TON. Those NFTs started trading just a week ago, so the team still has room to build hype around it.

Considering an affordable floor price of just 2 $TON and an average trade price of 4.5 $TON, this is a good choice for a first attempt to flip NFTs.

Let’s Take a Look at a Bad NFT Collection

Behold — Enotius. The artist is anonymous, but that’s not the case: instead of art, the artist tries to sell mediocre AI-generated images.

Now let’s check the stats. The floor price is 12 $TON, but there was only one sale for 0.1 $TON. Also, there are no social media links and no signs of community.

As you can see, we can’t even conclude research as there’s nothing to research. This is an example of NFTs no one should buy.

In Conclusion

The NFT DYOR should start by looking at the floor price. If you are new to this space, it’s better to start with cheaper NFTs and sums you can afford to lose.

NFTs are about demand, so the first thing to check is how active the community is and how the authors plan to develop the collection’s utility and build hype.

The last thing is to study the NFT’s sales charts and history. If the amount of NFTs sold and their average price are growing, everything is good.

Remember: we did the DYOR on NFTs for educational purposes only to illustrate the checklist. We picked random collections, we aren’t affiliated with their creators, and we do not advise you to buy the mentioned tokens.

Do your own research! Do not invest the money you cannot afford to lose.