NFT weekly: NFTs done right… and how things can go wrong

At Stratisphere we are always looking out to see what’s new, and one release we had an eye on this week was Porsche’s 911 NFTs. Those with their pulse on the market will know that this hasn’t gone to plan for Porsche, with significant backlash leading to the release being reduced and Porsche being forced to admit that “our holders have spoken”. This week we thought we would ask the question- why is it that some NFTs fail?

Conventional economic wisdom tells us that exchanges will only take place when the buyer values a good at least as much as the seller does, these are the simple laws of supply and demand. Although NFT markets are often presented as irrational, this is far from the case, and understanding how the market works can be done through a thorough analysis of supply and demand.

On the demand side, NFTs must offer value to their owners. NFT minters far too often think that rarity and a brand name will be enough to create value, and increasingly we are seeing this assumption fail. NFTs need to be more than just a virtual picture, as they will have more value if they have artistic merit or give the holder something tangible. For instance, minters can send something to the buyer in real-life, offer them a discount on your physical product, or give virtual boosts in the metaverse. Many of the NFTs on our platform take this approach, with many having in-game uses for titles like Dawn of Ships and Corgi Dash. Although Porsche has promised some customisation at a later date, buyers seem unconvinced that this has given the tokens sufficient value.

On the supply side, companies need to understand the web3 market and set supply to match this. Perhaps the Porsche release failed because too many NFTs were released at too high of a price, which caused Porsche to reduce the number of NFTs on offer when it became apparent that they had set supply too high. The early days of unconstrained enthusiasm about the future potential of NFTs is over, and in its place is a more mature market where people have a better idea of the future prospects of NFTs and their value. This means that the web3 community has become very adept at spotting brands merely trying to hop on the web3 money tree.

All this to say, that the failure of individual NFT releases does not mean doom for the market as a whole. NFTs can be done right- it’s just that some people do it wrong.

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