This week on Understanding Crypto, Paul Abercromie and James Burtt talk about identifying legitimate NFT investment opportunities.They advise prospective buyers to take the NFT's utility into account as well as the digital community in which it was created. James and Paul observe that current NFT projects continue to adopt Web2's business MO under the guise of Web3 decentralization. They advise consumers to exercise caution when making future investments in NFT projects.

Factors Affecting NFT Legitimacy 

Although many NFT ventures may seem to have successful launches, Paul argues that the only way to determine a project's profitability is through secondary sales. However, due to the usefulness of the NFT, buyers may occasionally decide to keep their purchase. In these situations, since the smart contract's initial contract address is minted on the blockchain, validity can be verified. The first contract address would not be minted on the blockchain if a false NFT was launched. Consequently, they suggest that potential buyers should consider the NFT's utility as well as the community where it was created before making any purchases. [Listen from 2:36]

Usability

Usability, which is the primary benefit users gain from purchasing an NFT, should be the major factor for any digital purchase, according to Paul. He contrasts the marketing techniques used by Web 2 content producers with those in web3, who frequently make dubious promises in an effort to entice unsuspecting clients. “Now in web3 we've gone so far backward you can write a sentence about what you might give to somebody in the future and that's supposed to be attractive,” he comments. He cautions listeners that buzzwords like community, metaverse, and Discord servers are intentionally used to entice customers to purchase their NFTs. “There are people who actually believe if I put metaverse in my sentence on my page, it's like an automatic path to gold.” [Listen from 6:35]

Web3 Community

Both Paul and James note that under the pretense of web3 decentralization, recent NFT ventures have adopted Web2's business MO. Only the owners benefit in the conventional Web2 business model; however, the decentralized approach of web3 ensures that everyone benefits equally. “This is the equivalent of becoming a stakeholder. So they go from being a customer or client to a stakeholder with vested interest in the overall brand or business,” Paul remarks. They warn that you should not trust a business if it makes money off investments in exchange for access to future web3 spaces.”The balance is shifted to one side; only the seesaw is to the owner of that project, not to the community as a whole.” On the other hand, NFTs developed by businesses like Moonbirds have made sure that all members benefit and that as the company grows, so does the community. [Listen from: 9:44]

Roadmap

Investors should consider whether these NFTs are actually beneficial or have utility in the real world, James and Paul suggest. “If it was launched as a traditional business and you had to buy a membership card, who would buy it?” James encourages owners to question the importance or usability of the NFT before they create and launch them.They ask that prospective buyers inquire about the following issues. 

• Do you have confidence that project's leaders will be able to deliver the road map? 
• Is this road map practical?

“So I think you have to be very realistic when doing assessments and spending your hard earned cash on NFT projects. You've just got to be sure, that utility is there,” says Paul. [Listen from 17:08]

Key Takeaway

• Potential customers should explore the developers' digital community and consider the NFT's utility before making any purchases.

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram