How to Research NFT Projects
Dear Bankless Nation,
Crypto prices are down this week, so the time is ripe to busy yourself with something other than staring at the charts, right!
Luckily in our ecosystem, there’s nothing like putting your head down and getting back to work to tune the noise out.
One way you can consider doing that right now is by researching new NFT projects. But what’s the best way to go about that?
In this write-up, I answer that question by outlining a handful of steps you can follow to get up to speed on NFT projects in rapid fashion. Check them out below, and let me know if there’s anything you’d add to the list!
How to Research NFTs
“Do your own research.” Also known as DYOR.
It’s a phrase and acronym that gets thrown around in decentralized finance, or DeFi, a lot. Essentially the saying means that in this wild west-like frontier that is the cryptoeconomy, ultimately it’s up to you to study projects and learn their ins and outs before you put non-trivial amounts of your money into them.
That said, I recently came across a tweet by trader Alex Krüger, which comprised a list he had created on how to DYOR when it came to DeFi tokens. It read:
Now, I track the DeFi space as well as the NFT ecosystem, so I can say these steps really are a great for diving into DeFi projects. But where my interest got doubly piqued is that I think you can also helpfully adapt Krüger’s advice to researching NFT projects, too. I’m going to loosely refashion these steps to show you what I mean.
Here, I’ll add that these research steps are obviously more fruitful and necessary for newer NFT projects. But they provide a model through which to get more familiar with any project.
So here’s how to DYOR on NFTs …
1) Check the project’s Twitter and website — “CryptoTwitter,” or CT, is where all the magic happens, right, so any project worth its salt will have something of a Twitter presence worth following, even new projects. These accounts are great for links to authoritative updates and resources, too. Additionally, you’ll want to check out projects’ main websites. In most cases these front-ends are how you’ll interact with NFT dapps, so you need them on your radar.
2) Analyze team — Some NFT project teams will be composed of publicly known members, others will be released by anonymous teams, and others yet will be mixed with known and unknown contributors. There are no right or wrong answers here, but you’ll want to familiarize yourself with the main builders. Are they reputable? What have they done previously? That kind of stuff.
3) Determine how on-chain the NFTs are — Does the project host its NFTs totally on-chain? Does it split the storage durably between Ethereum, IPFS, and Arweave? Or instead does the project host its metadata entirely off-chain, which introduces serious trust assumptions for holders? Learning where projects fall on the on-chain spectrum is a key part of NFT research.
4) Check the project’s Discord and Telegram chats — Oftentimes NFT projects will maintain a Discord or a Telegram or both. When it comes to getting the pulse on a project’s current community, sentiments, and activity, joining these community chats can prove invaluable. They’re also great places to scope for trades if you’re so inclined.
5) Track what other NFT holders are saying — What other people say at any given time isn’t the end all be all, of course. Remember that and don’t put too much emphasis on the whims of others. But you’ll also want to be tracking the conversations of NFT project holders to get a fuller picture of where the community stands. Maybe this means searching through hashtags on Twitter, or digging through Reddit.
6) Analyze on-chain activity — Use tools like OpenSea’s Rankings page and NonFungible’s Market History hub to track the trading activity of NFT projects. If you want to know how these efforts have fared lately or historically, these resources are a great place to start.
Moreover, if the NFT project you’re analyzing has its own native token, you can follow these steps to better understand the fundamentals of this NFT-centric asset:
- Find the token in CoinGecko — CoinGecko is an awesome crypto market data dashboard that makes it easy to find all kinds of fundamental metrics about tokens. It also covers many tokens early and often, so your asset should be tracked by the site.
- Study the market cap, fully diluted value, and trade volume — Market cap is the total dollar market value of a project’s outstanding tokens. Fully diluted value is what a token project’s market cap would be if all of its planned tokens were issued now. And trading volume refers to the amount of money that’s trading through these assets on any given day, week, month, etc. These are core metrics you have to track if you want to understand any crypto asset.
- Study tokenomics and any pre-sales — What is the NFT token supposed to do within the project’s ecosystem? Can it be staked for treasury rewards, used as a governance instrument, or what? And how many investors got access to investing in the token before the public did? Answering these questions will help you gauge how to adequately organize your positions. A good example to start studying is Axie Infinity’s $AXS tokenomics.
At the end of the day, you are the captain of your own NFT and crypto ship. It’s up to you to shrewdly navigate these strange, futuristic waters.
The good news is that all the info you need to do that is basically freely available on the internet. With some digging and dedication, you can be a first-class NFT researcher in no time.
- 👀 Pick a newer NFT project that you’re not yet familiar with and apply the aforementioned research steps in order to learn more about it!