The NFT rush is just beginning and it brings lots of questions to all the people involved. Perhaps the most controversial is how are NFT prices determined? The main obstacles to answering this question are that NFTs may comprise different types of objects such as collectibles, digital art, interactive video game elements, or simply regular objects. Some of them already have their own rules in the physical world but the virtual world needs its own rules. Nowadays, it is only possible to find some basic aspects that everyone should consider before setting the price of NFT and here we will talk about them.
Read also: Can You Sell an NFT on Multiple Platforms?
Ups and Downs of NFT Prices
NFT prices can go up and down. Such variation is very dynamic and may happen in just a few seconds. Some sites like nftpricefloor.com monitor the prices of many NFTs and publish the variation every 5 minutes. Another case is the collection EtherRock that comprises 100 pet rock JPEGs. It has a Twitter bot account that is constantly updating its prices.
Who Can Determine Value of NFT?
Initially, it is the creator who is in charge of determining the value of NFT. Once it is published, it may vary to go up or down according to the bids.
What Is the NFT Floor Price?
In the jargon of NFT, the floor price is the lower value of any given piece that somebody has to pay to be able to acquire it or become a member of the project at any given time.
How Does Floor Price Work?
At first, it is the price that the seller or creator sets for the NFT. But it varies with time according to the market. Although it is the official minimum price, bidders can offer lower amounts and it will depend on the seller to accept it or not. It is hard for a seller to accept a lower bid but it is possible to do it.
What Does the Floor Price Include?
The floor price includes the gas fees, minting expenses, and the value of the item itself. All these amounts may vary due to different circumstances. Firstly, the amount of gas fees and minting expenses depend on the schedule to tokenize the asset. Some platforms like OpenSea use a lazy minting mode that allows the creator to upload the item on the platform and wait for the best time to mint it. When it comes to the value, it will depend on how to determine NFT value. In this sense, creators and sellers along with the market expectations rule the value.
Read also: Future Use Cases for NFT
How Is NFT Value Determined?
Although the NFT market and its assets are still new, creators and investors have already started to set some rules. Due to the fact that it is a different type of asset that doesn’t totally fit with any other asset in the physical world, we can find a combination of rules. Some of them are similar to art. Others borrow some ideas from collectors and so on. Overall, these are the major rules you should consider to enter the NFT exposure or investment.
It is possible to evaluate rarity from different points of view. First of all, the originality of design. It may come in colors or position of a piece in any given collection. Secondly, because it is a total disruption from what we commonly see.
Scarcity is an element that is present in almost any type of investment. You can see how it affects the value of precious metals, art, and collectibles. So, it is not strange that it affects the NFT market. In this sense, scarcity may refer to the impossibility of producing a similar piece due to different aspects. Some examples are the original pictures taken of famous sports basketball players like Michael Jordan. Another example is the first tweet posted by the former CEO of Twitter that reached almost 3 million dollars.
Provenance refers to the history of property of any given NFT from the first registration in the blockchain. It provides information about previous owners and authenticity of the item. The provenance may become more and more important depending on who owned the piece in the past. On the other hand is the author of the piece. It can be a recognized artist that offers pieces on a NFT platform and that increases the value of the object.
4. Cultural Significance
Culture comprises many aspects and it affects the price of many pieces specially when they reflect the physical world. Currently, the former First Lady of the United States, Melania Trump, launched her own NFT platform and offered a portrait of her eyes in a painting named “Melania´s Vision”. It is intended to be a piece of art but directly related to her functions as First Lady. In addition, it includes a recorded voice from Donald Trump. For many people it will be an invaluable piece that contains a significant part of our culture. However, it does not guarantee a high price as it was offered for about $180.
How Do I Keep My NFT Safe?
After buying NFT, it is logical that you wonder how to keep it safe. After all, you still don´t know for how long you will keep it with you. Also, you might want to negotiate it and want to make sure you can transfer it properly in the near future. Keeping an NFT mostly means protected from malicious or accidental scams.There are two major ways to keep them safe as follows:
This is the most secure way to protect your newly acquired NFTs. Once you include it into this type of offline wallet, you don’t need to provide passwords to anyone except directly to the blockchain. Nowadays, the Ledger wallet offers options and designs for different purposes. The difference is mostly based on the number of apps you can install on your device. Their designs are minimalist and easy to carry when you need to. They can manage more than 5,500 coins and tokens and are compatible with more than 50 wallets. Besides, the Nano X version works on Android and iOS for Ledger Live.
Software wallets are widely available for everyone on the Internet. Some of the biggest names include Metamask, TrustWallet and Coinbase but there are many more. It is precisely their security and access mode that differentiate them and that is what you need to evaluate before choosing one. There you have to provide your login and data to access the blockchain and at some point the information is visible. Also, every NFT platform has a list of compatible software wallets. It is one of the most common options to start because people can access them with just some clicks. However, they are not the safest way because hackers can attack and steal your funds anytime.
Read also: Where Can I Store my NFT Collectibles?
Can Someone Steal My NFT?
Unfortunately, yes. It is a real risk you assume when you invest in the NFT market. That is why it is so important to keep your password and recovery phrase in a safe place and avoid sharing it with anyone. And opting for a hardware wallet is always a more safety-oriented decision. The good news is that you can always share your public key or hash code in order to complete your transactions to receive or send funds on NFT platforms. The public key does not grant access to your account. But letting someone accidentally access your account by sharing info is not the only way to steal NFT pieces. Instead, there are other ways to do it and you need to be aware and take precautions. Some of them are the following:
- Stealing passwords and recovery phrases from your software wallet. Software wallets can be attacked and hackers can take all the information they want. This is precisely the main reason why hardware wallets became so popular.
- Stealing your art work or pieces from your social networks or publishing platforms. NFT platforms can not control whether or not someone is the author of a piece. Hence, if you are a creator you must be aware and careful with that.
- Bidding with fake coins or coins with lower amounts. If you are a creator or seller and offer your piece, someone can take advantage of your ignorance in that aspect. You might end up accepting an offer for lower prices that do not reflect what you intend to obtain. This is why it is so important to keep yourself updated with the NFT trends.
It is still too soon to define how are NFT prices determined. Sometimes it is the market. But investors and creators are being very successful to work on it meanwhile. It is still too soon to determine the long-term benefits of holding and negotiating a piece of NFT. Projections and the future of this type of crypto assets play a major role. But it doesn’t stop this lucrative market and you shouldn´t stop your investments either.