The NFT market has since cooled off a good deal from its peak in 2021. A host of other once-hyped projects have disappeared into the ether, leaving stung investors with digital tokens that are literally worth virtually nothing. ThrowingToken.com deep dives into why 97% of NFTs are failing. Most importantly, it emphasizes the essential characteristics that have characterized the projects that not only survived this uneasably dark landscape—but thrived. Grasping these elements is key for collectors, artists, and investors alike to successfully dive into the world of NFTs and spot the most promising assets. Li Wei is a blockchain content strategist, with strong roots in China’s tech landscape. Here she offers her expert insights on this fast-growing market.

The Great NFT Collapse: What Went Wrong?

The high failure rate in the NFT space can be attributed to a confluence of factors, many of which stemmed from the market's rapid growth and speculative nature. Knowing these traps is the first step to sidestepping them.

Lack of Real-World Utility

Too many NFT projects spilled into the market without any clear use case other than making something a digital collectible. Unlike many other successful NFTs, these presented no meaningful use cases or tangible benefits to their holders. Without utility, these NFTs were worthless. Once the hype went away, their prices fell through the floor.

Environmental Impact

The environmental effects of NFTs, especially those on the Ethereum blockchain, played a major role in their demise. Minting and trading NFTs requires a great deal of energy, raising environmental concerns about their carbon footprint. Therefore, damaging PR-induced headlines have surfaced, and socially responsible investors are steering clear.

Speculative Bubble and Market Saturation

The NFT market saw a textbook speculative bubble. Pumped up by speculation and FOMO (fear of missing out), prices quickly became inflated beyond reasonable limits. This bubble would inevitably burst, driving many investors to ruin with staggering losses. The sheer pace with which thousands of NFT collections were generated quickly saturated the market. Further, hundreds of incredibly worthy projects are competing against one another for limited funding. In doing so, they leave each individual NFT to flounder and fight to find their value.

Scams and Unfulfilled Promises

Sadly, the NFT landscape has been rife with scams and projects that didn’t pan out as advertised. High profile failures, like FTX and Alameda, did not help restore investor trust and only deepened the market’s downturn. Such schemes have sullied the reputation of the whole NFT ecosystem, leaving investors distrustful of newcomer projects.

What Makes an NFT Project Succeed?

Though most NFT projects have flopped, a handful have proven resilience, holding and even increasing their value. These successful projects share several key characteristics.

Strong Fundamentals

The community that forms around an NFT project is just as important as the tech that’s involved. Dedicated, engaged community advocacy can deliver sustained support and build demand over time. The creator’s reputation and recognition An NFT’s value is heavily affected by the prominence of the creator. Collaborating with a familiar, established, and recognizable artist or brand can infuse a project with more credibility and reach a larger audience.

  • Unique and Defined Concept: A clear and well-defined concept, along with a specific target audience, is essential.
  • Roadmap and Documentation: A comprehensive roadmap and supporting documentation demonstrate the project developers' commitment and seriousness. This provides potential investors with a clear understanding of the project's goals and future plans.
  • Active Online Presence: A dedicated website and active social media channels are crucial for building a strong community around the NFTs. Consistent communication and engagement with the community help foster loyalty and drive demand.

Community and Creator Reputation

A large and engaged community is crucial. Look for projects to have at least 1,000 active collectors in the first three months. Ideally, every intended collector should own at least several NFTs.

Beyond the creative realm, the technical and executional elements of an NFT project play an influential role in impacting its success.

Technical Aspects

Here are some factors to consider:

  • Chain Security: The security of the underlying blockchain is paramount. Ethereum, with its robust security features, is a popular choice for NFT projects.
  • On-Chain Metadata: NFTs with metadata stored directly on the blockchain (on-chain) are generally considered more valuable than those with off-chain metadata. On-chain metadata ensures that the NFT's information is permanently stored and cannot be altered or lost.
  • Rarity and Uniqueness: Limited edition or unique NFTs, such as one-of-a-kind art pieces or rare collectibles, are often more valuable than mass-produced NFTs. Scarcity drives demand and can lead to higher prices.

Navigating the NFT Market: A Guide to Identifying Value

Although speculation can fuel short-term price spikes, consider what makes an NFT valuable in the long term. In this environment, it is more important than ever to seek out projects with solid fundamentals, enthusiastic communities, and transformative use cases. Ask questions, do your homework, and be skeptical. This process will increase your chances of finding NFTs that last long-term. ThrowingToken.com gives you deep industry knowledge and expertise, so you can master the fast-growing NFT market and invest wisely.

  1. Evaluate the project's fundamentals: Does the project have a clear purpose, a strong team, and a well-defined roadmap?
  2. Assess the community: Is the community active, engaged, and supportive?
  3. Examine the technical aspects: Is the NFT on a secure blockchain? Is the metadata stored on-chain?
  4. Consider the creator's reputation: Is the creator well-known and respected in their field?
  5. Look for rarity and uniqueness: Is the NFT a limited edition or a one-of-a-kind item?

While speculation can drive short-term price increases, it's important to focus on the long-term value of an NFT. Look for projects with strong fundamentals, engaged communities, and innovative use cases. By doing your research and exercising caution, you can increase your chances of finding NFTs that will stand the test of time. ThrowingToken.com provides expert insights to help you navigate the NFT market and make informed investment decisions.