One big question with the non-fungible token or NFT marketplace these days is – how can you tell if an NFT is rare? What does NFT rarity mean for the market, and for how do you use it strategically?
The answer takes some explaining, partly because of the newness of these digital assets and also because of the complexity of the market.
We’ll take you through some of the major points on how buyers and sellers (and others) value NFTs in terms of rarity…but before we go any further, I need to disclose that I’m not a financial adviser, and this is not financial advice. If you need financial advice, seek a professional.
NFT Rarity in Art and Collections
First of all, we really need to distinguish between two fundamentally different types of NFT rarity.
One is in the art world or in intellectual property, where one NFT is tied to one (and, mostly, only one) digital artwork.
The other is in collections, where NFT makers create these branded sets of NFTs that gain their own momentum and traction in the market. Then people actually compare and contrast individual NFTs in a collection to determine their rarity.
We’ll discuss each of these in detail to show how NFT rarity is done and how investors conduct this kind of due diligence.
NFT Rarity in Art
In the art world, NFT rarity has to do with how appealing something is as a standalone art piece.
For example, when Beeple (a hugely popular NFT artist) sold the Everyday NFT at Christie’s for $69 million, that was based on the appeal of that individual “rare” artwork.
The buyer, presumably, didn’t use a bunch of metrics to determine rarity because it wasn’t part of a collection. He purchased it because of its individual value, whatever that may be.
In fact, in the NFT art world, it’s the popularity as well as the rarity that’s important in evaluating NFT value.
If the idea of selling your own artwork as an NFT is intriguing, you will want to check out this NFT artist guide.
Another significant example is the meme NFT. Suppose somebody took a home photo and added a caption to it, and it became a meme. If it went viral, there is some real digital value there, at least in the eyes of the market.
So if somebody waits until that meme has become an Internet sensation used by millions of people, takes that original photo, and makes it into an NFT, it’s easier to see how something like that is worth owning, maybe not for $69 million, but for some smaller amount of money.
If memes sound exciting to you, check out this winning article: “How to Collect and Buy NFT Memes | 6 Easy Steps.”
You could say it’s “rarer” than other kinds of individual artwork that are kind of run-of-the-mill and always available from many different makers – for an extreme example, think of a stick figure hastily scrawled on the back of a napkin.
Here are numerous ways to possibly make your NFT more valuable.
NFT Rarity in Collections
NFT rarity in collections is quite different, and this is often what people are talking about when they refer to a rare NFT or to finding relative NFT rarity.
To begin with, you have certain collections like Cryptopunks and Bored Apes that are available on OpenSea (or elsewhere) and have more household familiarity and brand appeal.
Other collections might be out there somewhere, but people don’t really know what they are or where they are.
Ever ask yourself, “why do so many NFTs look the same?” Well, it’s tied to the collection aspect of NFTs, which is highlighted here.
So in talking about NFT rarity in collections, let’s take some of these major collections as examples.
Determining NFT Rarity in Collections
Okay, so how do you determine which NFTs in a given collection are the most rare?
The short answer is that you take the NFT’s traits and characteristics and look analytically at the numbers.
In some ways, this starts to look like the weighted inputs that make machine learning programs work, or some kind of complex quantitative analysis like people do on Wall Street. And that sort of makes sense.
First of all, let’s talk about what the traits are.
It’s important to start with the understanding that there is a trend in these major collections where creators make a particular character and change little things about that character to create dozens or even hundreds of NFTs. You’ll have a Bored Ape of a particular color, with a certain hat, with a certain expression or other features, wearing different clothes, etc.
Suppose you have a Bored Ape NFT that has a certain unique type of feather in a cap and a winking eye that is not found elsewhere in the collection.
When you’re analyzing the individual NFT, that puts that NFT’s rarity at a higher score.
With that in mind, let’s talk about four major ways that investors and buyers look at NFT rarity in collections.
Trait Rarity
The first one is what we just described – trait and character analysis. Buyers can look intuitively at the individual NFTs in the collection to see which ones they think are most rare. But that doesn’t really address the quantitative side, as we’ll see.
Average/Mean Rarity
Here, the investor or whoever is evaluating is taking all of the traits and their individual rarities and combining them in an equation to determine the average mean rarity.
So if there is a certain percentage of characters in a collection that have the feather in the hat, and that percentage is 3%, they take that and combine it with the 5% of characters that may have the same color – and you do that for all the traits and come up with a number.
Statistical Rarity Model
In this type of rarity analysis, there’s another quantitative pattern that looks somewhat like the average or mean but works a bit differently in terms of calculations.
You’re still taking the traits and adding up their percentage values.
See more about how this works at NFT Stats.
Rarity Score Model
This last one is particularly important because of the way that the NFT community has jumped on the bandwagon in trait and attribute analysis.
The rarity score model takes that trait rarity and puts it against the number of NFTs in the collection.
Some people describe it technically as “one, over the number of NFTs with the trait value, and the trait rarity of that trait value.” One difference with this model is that you come out with a fraction instead of a percentage.
Third-Party Rarity Scores
Here again, the terminology can be confusing because although the fraction-based calculation is called a ‘rarity score model,’ you can also get on the Internet and ask other established experts for their suggestions and recommendations in the form of “rarity scores.”
You can find third-party NFT rarity scores that take all of the above into account – and give you a number. You may not be doing the calculations yourself but instead accepting what someone else has calculated for that NFT.
Or, again, you can go back to intuitive analysis. Sometimes people buy NFTs just according to what colors and styles they like the best.
That’s especially true if they’re tending to use the NFT as a digital avatar for themselves on some digital channel like Discord, social media, or a cryptocurrency exchange.
Rarity, Gas Fees, Blockchains, and Coin Values
Another point with NFT rarity and purchasing is to keep in mind how different blockchains work.
Ethereum, the “beginner” blockchain for NFTs in so many ways, tends to come with high gas fees for investors, so people are abandoning that model and looking for other blockchains like Solana or Bitcoin SV.
I mean, have you ever wondered how much it costs to mint a collection of 10,000 NFTs on Ethereum? Well, it’s documented here.
But the bottom line is that the cryptocurrency values are changing, too, so your NFT value is based on another transitional value in terms of its payment medium.
Think of it as ‘volatility squared’ – the value of your NFT is going to be changing quickly, for any reason, or seemingly for no reason at all.
So you also want to buy the best NFTs made with the best blockchains in order to triumph over this particular challenge in the market.
There may be some trial and error in play here, and you’ll have to sort of try things out and see where they go. Still, with a better understanding of the gas fees and the underlying cryptocurrency values, you’re making more informed decisions about NFT purchases.
If you are curious about minting costs, this article will help:
In addition, you can also get more information from a given crypto community. People post on platforms like Reddit and Discord about their strategies, and you can take a page from their playbooks or factor that information into your own strategy.
Closing Thoughts
We hope this answers some of the questions about NFT rarity. It’s different when applied to collections, and it’s really a sort of game that investors play to keep ahead of what they think of as the NFT bubble.
In other words, if you want to buy NFTs, you want to buy the best ones with the most lasting value and get some sort of profit out of them, regardless of what happens in the general market.
The best way to make decisions is with knowledge, and that’s why we packed this website with some gems. Check out these viral posts, and keep learning!