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

What determines the value of an NFT token: rarity, utility, tangibility
NFT tokens have virtually endless possibilities for use in real-world applications, despite the fact that they are now most often thought of as digital collectibles.

Some tokens sell for millions of dollars, but what does that value depend on? In brief, the intrinsic value of NFTs is made up of factors such as rarity, tangibility, and utility. Of course, what kind of asset the NFT belongs to and what type of ownership it implies - long-term or short-term - also play an important role.

Purchasing and using NFT tokens


Collectors and traders can find a wide range of irreplaceable tokens on the Binance NFT platform. There are both works of ordinary people and premium auctions, as well as Mystery Boxes from significant brands and well-known digital artists from all over the world.

The crypto market is constantly evolving. If initially only Bitcoin was presented there, now there are thousands of altcoins, stabelcoins, tokens of decentralized projects. Stable every few years a new type of assets makes a furor on the market, there are a lot of variants of its use and instant growth of its value.

Non-exchangeable tokens (NFTs) have spread to almost all areas of the decentralized industry, becoming one of the "bridges" between the virtual and physical worlds. These unique tokens validate the owner's right to certain assets on the Internet or in real life.

NFTs have become extremely popular on the crypto market as a universal tool that can be attached to a work of art, a pair of sneakers, or an object in a computer game.
What determines the value of an NFT token: rarity, utility, tangibility

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

What factors make up the value of an irreplaceable token?


It's quite difficult to put a specific price on NFT, mainly because of the newness of this asset class. When it comes to physical works of art, such as the Joconda, basketball cards, or other collectibles, they have a certain value, and investors find it difficult to decide if they even need the object and how much it might be worth.

However, as NFTs have spread into other areas, they have reached high valuation levels in less than a year.

There are three key factors that influence valuation: rarity, usefulness, and tangibility.

Rarity


The more rare and hard to find a particular token, the more likely it is to be priced high. Good examples of rare NFTs are tokens issued by famous digital art creators, popular celebrities, or brands. NFTs that give some property in a computer game are also often highly valued.

Such tokens attract people because of their intrinsic value, because the owner of an NFT is like owning a certain item and can verify it with a cryptographic asset on a blockchain. This makes rare tokens somewhat of a premium and gives a sense of distinction from other users.

Famous examples of the rarity effect in the crypto industry: the first "cryptocurrencies", Everydays - The First 5000 Days by Beeple, etc.

Usefulness


The price of NFT is positively influenced by the possibility of its actual use in the physical or digital world. Irreplaceable tokens can be more than just collectibles.

It is very common to see game objects clothed in this form - virtual land plots, avatars, weapons, and skills for games. At the same time, the more popular the project where the item will be used, the more valuable the tokens. For example, as the decentralized game community grows, users are willing to pay higher and higher prices for unique cards.

Examples of NFTs in question include soccer game tickets, land plots in Decentraland, collectible cards for card games (e.g., Heralt of Rivia for the Witcher Universe Gwent Card Game).

Tangibility


Although less common, there are NFTs tied to real-world objects that can be "touched." In this case, the cryptographic token is a proof of ownership. The object can be absolutely anything, and the object does not have to be rare. It can simply bring pleasure or life benefits. The price in this case depends on the level of satisfaction.

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

From a trading perspective, "tangible" NFTs are best suited for short-term trading in the crypto marketplace. In many cases, an asset has a certain shelf life - this is the case with tickets in particular. However, there are also objects that can build value over the long term. For example, limited edition clothing or books.

What do I need to know in order to work with NFT?


There are four main aspects to keep in mind before you make your first transaction with irreplaceable assets:

- What exactly are you interested in. The number of token categories is endless, but most of them relate to games, music, or digital art. Within those categories, tokens vary too, they can be premium or simpler, say, created by little-known users. The choice depends on what type of collection you are aiming to build.
    
- Liquidity and market volume. Most of the NFT tokens on the market are collectibles, which are often bought and then held in hopes of future growth in value. However, it can be difficult to resell the asset later if it is not too popular. This is the disadvantage of NFT when compared to, for example, 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's important to know in advance what the base blockchain fee level is now. With this in mind, you should think carefully about the additional costs that an NFT transaction may entail.
    
- Benefits. Many traders think of NFTs as just another market to make money. But these tokens are more than just another trading tool. Platforms such as Decentraland and Axie Infinity have introduced a type of utility into the virtual world that was previously unavailable. For example, on these platforms you can trade and exchange valuable items.

At the moment, NFTs have just started to gain momentum, and it is truly an exciting opportunity to participate in an exciting and promising new movement. For those who want to try their hand or even build a collection, there is much to look forward to in the future, especially as the space expands to include more and more active participants.

Binance and other major companies are constantly releasing new products, tools, and marketplaces where it's easy to interact with NFT - create, sell, buy, store. In short, immerse yourself in an innovative economic structure.

Conclusion


There is no denying that first and foremost, personal perception affects how much a person is willing to give for a particular NFT. However, the intrinsic value that affects market value is still subject to a number of rules. As far as irreplaceable tokens are concerned, the rules are defined by three key metrics. These indicators depend on who issues the NFT and affect short-term and long-term trading value.

Such tokens are a versatile asset class and can encapsulate virtually limitless possibilities. They are far from just collectibles or tokenized analogues of any items. In fact, NFT can be used for anything in real life: it can be used to sell airline tickets digitally to secure the right to the object in order to avoid plagiarism.

Binance NFT is the platform where the use of non-exchangeable tokens is the most convenient and the functionality of interaction with them is the most extensive. Anyone can mint and sell their own token or buy a ready-made one - the platform offers many unique NFTs from famous artists and brands, for every taste.

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