7 Questions to Ask Yourself Before Buying an NFT

Is the Project / Smart Contract Verified? 

On the blockchain, everything is traceable and verifiable, so it’s theoretically impossible to buy a counterfeit. You still have to be careful to make sure you are purchasing assets that were created by the original Smart Contract. This can be verified very easily on some Marketplaces (like OpenSea) with their verification badges.

Who is the Team Behind the Project?

It’s always good to know who is behind the initiative: are these blockchain veterans, renowned artists or strangers who are trying to pass themselves off as stars? Take the time to explore the ‘About Us’ or ‘The Team’ pages of each project and do some research on the founders … It doesn’t take a lot of time and sometimes it helps you avoid terrible scams.

What Makes the Asset Valuable?

This question is far from trivial and the answer depends on each use and each context. Does the object offer real use value within a project? Is this value likely to be increased or decreased over time?

Is the Project Truly Decentralized? 

Without becoming overly technical, it’s important to understand how much your assets ‘really’ belong to you. Does a publisher have the ability to suspend your account or access the content of your wallet? Are the assets of the NFT, its asset and image, video, etc. secured by a 100% decentralized blockchain?

Is There a True Scarcity? 

How does the project / artist ensure the scarcity of assets? Is there a risk that your ultra exclusive 1/1 edition will be supplemented by hundreds of other comparable assets in the future?

What Kind of NFT Is It?

As the NFT ecosystem is already extremely broad, from art to gaming and metaverses, the due diligence process is necessarily different depending on the asset type. 

However, keep in mind that ‘categorizing’ an NFT project is not so easy and in some cases, you’ll need to observe more carefully the types of assets for sale beyond the segments themselves.

How Long Will I Keep It For?

In many ways the value of an NFT depends on the use you’ll make of it. A long-term investor will buy an NFT and not touch his investment for years, while an active NFT trader will want to sell it as soon as possible. Buying an artistic NFT can also be about supporting the artist, as  seen amongst metaverse artist communities who often buy to encourage their friends’ creativity.

Knowing how long you plan to keep the NFT in your portfolio is paramount to defining a buying strategy.

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