How to choose NFT projects in the post-PFP era?

Written by: autometafi.eth, Deep Tide

This topic was the title of my speech at Inke in Meta Space, but I didn't present it very well that day. I have always felt the need to organize it into text so that everyone can clearly understand what the huge opportunities in the next phase of the NFT market are and how the judgment logic is formed.

First, we need to take a look at the current state of the NFT market. From today's Opensea trading ranking data, the 15th place's 24-hour trading volume has dropped to nearly 100 ETH.

We can look at the trading volume data from two months ago, on June 8th.

The current market trading volume is less than 1/20 of what it was two months ago. What has caused such a massive shrinkage?

First, we need to rule out the impact of cryptocurrency prices on NFT market trading volume. On June 8th, the price of ETH was around 1800, and today it is around 1700, so the price fluctuations of ETH are not directly related to the NFT trading market.

So what is the reason behind this? Where are the solutions and paths forward?

1. 99% of NFT projects have uncontrollable product and service delivery times and quality

Most project teams only have a demo during the promotional period. After the minting ends, very few project teams can deliver PFP avatars immediately, and most teams even need a very long period to release their artwork.

The actual applications that people are truly looking forward to in the roadmap, such as GameFi / X to earn / Metaverse, which could generate large user participation, have delivery cycles that require at least 3 months, with most taking 6-9 months. During this long waiting period, due to the drastic changes in market sentiment, users become impatient, and when another new project appears, they will immediately withdraw, leading to the floor price of the project plummeting within 3-7 days of issuance.

Moreover, projects that have kept users waiting for months also face issues such as insufficient early fundraising and severe internal disagreements within the team, ultimately failing to deliver high-quality products and services on time.

As our users repeatedly experience such cycles, they develop doubts and disappointment towards any project, causing everyone to shift from diamond hands to flippers.

2. The PFP market is saturated and cannot accommodate new projects

The starting point of the NFT market's boom cycle cannot be mentioned without BAYC, which activated the entire NFT market. The rise of the PFP market is due to two factors:

First, the need for self-expression and group identity among users. NFT projects inherently possess more community cohesion than FT, as people gather around the recognition of the design of NFT projects and the underlying cultural spirit. They also need to express this value recognition through social platforms (Twitter, Discord, YouTube, Instagram, Facebook, WeChat) using their avatars, which implicitly conveys their social status in the NFT field.

I can see many NFT project founders will definitely switch to using blue-chip NFT project avatars, which conveys two messages to the market:

• I entered this market early, I am familiar with it, and the big shots in this community may support my NFT project;

• I have sufficient funds, so I won't be overly eager for quick gains;

This has allowed blue-chip NFT projects to maintain relatively high prices in terms of coin value. At the same time, users who profit from blue-chip NFT projects will invest in other early projects, supporting the overall market's prosperity.

Second, BAYC was the first to deliver the commercialization capability of IP to users, allowing them to freely use NFT IP for product marketing. The community's recognition also provided the first batch of users for commercial applications, leading to more NFT projects quickly following suit with the commercialization operation model based on PFP avatars.

However, since last year, from BAYC to now, an overwhelming number of PFP NFT projects have emerged, covering various niche groups completely. When new PFP NFT projects can no longer bring users a sense of glory, the accumulated commercial value also loses its foundation.

3. Pass cards cannot support the prosperity of the entire NFT market

Starting with Moonbird, various Pass card projects have begun to rise, attracting market attention. Due to the overall heat of the NFT market, project teams with market resources and tool development capabilities have adopted issuing Pass cards as a monetization business model, while also providing additional benefits to Pass card holders.

However, Pass cards are inherently unable to be issued in large quantities. Projects with more than 3000 Pass cards find it difficult to provide excess value to numerous users, thus lacking the ability to independently support the market.

Moreover, most Pass card project teams lack capabilities beyond providing NFT project information. When the NFT market no longer continues to thrive, the value of the Pass cards themselves also declines. For example, the AAC community saw its Pass NFT once highly sought after in the secondary market, but when the NFT market returned to calm, the price of the Pass cards also dropped significantly, forcing the community to return all the profits from issuing Pass NFTs to NFT holders and reduce transaction royalties to zero.

Moonbirds' shift to the CC0 protocol has also led many users to worry that Kevin Rose will no longer provide continuous resource value to Moonbirds users, prompting them to flee. This indicates a high dependence of Pass card users on resource capabilities.

When anything arises that affects the ability of Pass card projects to provide quality value, users will choose to vote with their feet.

4. The gradual disappearance of the Freemint market

The Freemint market, which started in March this year, experienced several months of peaks and has seen super projects like Goblin, Shit, God Hates NFTees, and The Saudis.

Due to the low entry cost, many users became very enthusiastic. However, by mid to late July, as the price of ETH rebounded, the number of valuable projects in the Freemint market has decreased significantly.

The reasons are likely threefold:

• The longer the participation in Freemint projects, the more losses incurred. Since 99% of projects cannot recover gas costs, truly diamond-level projects, eager to recoup their initial gas costs, have not achieved hundredfold profits;

• Freemint projects have a very high abandonment rate because the project teams do not earn revenue. If they do not sell at the beginning, they become small images stuck in hand;

• A large number of scam projects have caused significant losses for many big holders, leading to a retreat of funds.

Freemint projects are essentially projects where early participants profit at the expense of later participants. When everyone is unwilling to take over in the secondary market, the primary market will naturally gradually disappear.

Conclusion:

1. If the funding basis for the project team's delivery of core products and services comes from the mint income of NFT projects, or if the project team of a Freemint project lacks financial strength, do not expect subsequent products and services. If the project's volume is decent and you have a whitelist, you can consider short-term trading under favorable liquidity conditions;

2. If the core products and services of the project team do not have an immediate delivery cycle after minting, and the project team has not issued any well-known projects or cannot prove sufficient financial strength to maintain team stability and ensure delivery cycles and quality, do not hold the project long-term;

3. If the project team's new project is merely a PFP project without long-term planning and lacks a complete spiritual core to resonate with users in the initial phase, do not participate just because the avatar looks good;

4. For any Pass card project, clarify what rights it can provide. If it only offers Alpha information about other NFT projects without additional value-added services, proceed with caution;

5. Be cautious when entering the Freemint market unless the project team's products and services can be experienced immediately, or the project team can be verified to have sufficient funds for long-term operation;

The above discusses a key reason for the NFT market's bearish turn, but the demand for this market will not disappear. Those project teams that only want to make a quick profit in this market will eventually disappear, while those that can solve the above problems will bring new wealth effects to this market and reactivate it.

Below are several potential trends that may activate this market. Projects that meet the above conditions can be closely monitored and participated in based on your judgment. DYOR!

1. Non-pure PFP projects that can deliver products and services immediately, with rich gameplay that allows users to compete against each other, and should also be paired with token issuance.

Rich gameplay is definitely the core key to attracting users. We can see the impact of the Shit NFT project on the entire NFT market. A Freemint project, at its peak, brought each holder a profit of 7 ETH, becoming the biggest highlight of the market at that time.

From the project's review, we can summarize several characteristics of Shit:

• All development and graphic preparation work were completed before the project minting phase. After the project started, there were basically new gameplay announcements every 2-3 days, maintaining extremely high heat across various social platforms, continuously attracting new users and driving the project's wealth effect upward;

• The gameplay is not limited to airdrops, burning, and synthesis, but also sets the concept of genesis to promote competition for resources;

• The introduction of tokens allows many cryptocurrency players and big holders to participate with low barriers. Since NFTs themselves cannot match the liquidity and capacity of cryptocurrencies, many players and big holders cannot bring new funds into the NFT market, which is a core reason. However, after NFT projects combine gameplay with token issuance, the influx of incremental funds drives up token prices, and the rise in token prices further boosts the floor price of NFT projects;

• The gameplay implies direct competition among users, with mutual gains and losses and a pull effect, making everyone eager to guess and try in interactive gameplay, keeping the market continuously active;

Later, Shit also saw similar clones, but none reached the height of Shit. A core reason is that the gameplay was too monotonous, limited to airdrops and synthesis, lacking user competition, leading to low application value for tokens, unreasonable economic models, and no large-scale consumption scenarios for tokens, resulting in supply exceeding demand, which fails to attract funds from outside the NFT market.

2. Predicting the future through understanding the project team's background and strength

If before minting, we can filter the project's strength and capabilities through several methods:

• The project team has significant brand strength and influence in Web 2.

For example, publicly traded companies in the traditional internet sector tend to have good price performance for their issued NFTs because they possess the ability to continuously launch and upgrade products and services, along with sufficient promotional budgets. When prices hit a low point, there is still an opportunity to attract new users to maintain a stable price. As long as the future is promising, short-term price fluctuations can be ignored;

• The project team has previously issued successful projects or holds high influence in certain fields.

Such projects generally perform well due to the wealth effect generated in the early stages, and they have ample funds. When the market has clear directions and highlights, funding and technical capabilities will not be a constraint;

• Judging the project team's development and operational capabilities through NFT design and initial gameplay.

NFTs in the future will not be a simple product; they will more likely become entry tickets or membership certificates for GameFi / X to earn / Metaverse.

If we can see the potential for providing good products and technical capabilities in the early design and gameplay development of NFTs, and if the roadmap provides a clear timeline for the next phase of products and services, such projects are suitable for lurking in, waiting for the next big explosion in the market.

3. Predicting the next big explosion point in the market: the Metaverse will reactivate the market

As the PFP era has passed, Pass cards cannot dominate, and Freemint has stepped off the stage, where will the next NFT hotspot emerge?

The Metaverse will become the focal point by the end of this year. Although many NFT projects will claim that our development plan for the next phase is the Metaverse, 99% of these claims will be unachievable due to the extremely high technical barriers to providing a Metaverse.

Let’s look at a definition of the Metaverse:

A digital space extension network, including immersive 3D experiences of augmented, virtual, and mixed reality, where these experiences are interconnected and operable, allowing users to easily move between them and interact and explore with people from different physical spaces.

From the definition of the Metaverse, we can see two keywords:

● 3D Experience: This means that whether the current PFP NFT projects can transform a flat image into a full 3D model is a huge challenge. Moreover, this requires a complete digital model that can be output in an engine, allowing users to have a virtual reality feeling. Transforming a flat image into a three-dimensional model is extremely costly and time-consuming, and the effects of pseudo-3D are very poor. This barrier can filter out 99% of teams claiming to work on the Metaverse.

To determine whether all the projects you hold possess Metaverse-related capabilities, you only need to ask the project team one question: Will my PFP eventually become my digital twin? When can it conduct a live broadcast based on my voice, combined with my facial micro-expressions, eye movements, body language, and lip movements? Or at least see a demo?

Because this is far more difficult than creating 3D models of land and buildings. If they cannot achieve this, it is highly likely that they will not be able to launch a Metaverse in the future.

● Interaction and exploration among people from different physical spaces: As a species that does not excel in strength or speed, humans have reached the top of the Earth's biological chain because we can greatly promote division of labor and cooperation through communication, allowing efficiency to grow exponentially.

Those who have read "Sapiens: A Brief History of Humankind" understand the concept of Dunbar's number. The number of acquaintances we can maintain is 150, which is also the size of a clan in primitive tribes.

One important reason for this limitation is the constraints of physical distance and language communication abilities. The emergence of telegraphs, newspapers and magazines, radios, telephones, televisions, and the internet has broken through the physical limitations of communication, leading to explosive development in human society over the past 200 years.

However, the limitations of language and text communication have not been broken. Purely language and text, including sound, can only convey 1/3 of the meaning we want to express. Only in face-to-face communication do our body language, eye contact, and that indescribable spiritual tacit understanding carry the remaining 2/3 of the communicative efficiency that language, text, and sound cannot achieve. Therefore, in today's society, no matter how heated our communication is over the internet, it cannot compare to the trust generated by meeting in person.

This limitation will also be broken by the technological innovations brought by the Metaverse.

When we can convey our emotions through our digital twin in the Metaverse, using our eye contact, micro-expressions, and body language in the virtual world, the Metaverse will undoubtedly bring communication efficiency that traditional internet cannot achieve, reducing trust costs, which will greatly promote the growth of the economic ecosystem within the Metaverse, gradually breaking away from the cold, numerically generated Ponzi system, thus bringing revolutionary new experiences.

So the second barrier lies in whether our digital twin in the Metaverse can convey our true feelings.

When the virtual person inside opens her eyes, the subtle panic and anticipation in her gaze cannot be accurately expressed by an ordinary 3D virtual person without facial expressions.

At the same time, if we are adept at capturing information from the capital market, we will find that they have already begun to layout related projects early.

On August 3rd, Binance officially announced its investment in Lifeform. Lifeform's products include: 3D avatar creation tools, visual DID protocols, secure and innovative contract solutions, Web3 avatars based on decentralized identity systems, and Metaverse engine software development kits (SDKs). The virtual human NFT project HALO comes from Lifeform.

From the above, we can clearly see Binance's investment logic. First, they judge that Metaverse products are about to emerge, and they also recognize that the creation of 3D virtual humans is a key technological capability for the Metaverse.

Binance has already placed its bets on the future trend, and you should not overlook this!

Conclusion:

1. Future NFT project investments need to pay close attention to project teams that have mastered 3D virtual human technology and have clear Metaverse plans in their roadmap;

2. Users should be able to interact frequently with the project immediately after NFT minting, with rich gameplay and a mature token issuance mechanism;

3. The project team's roadmap should be clear, and they should have proven their product design and development capabilities through already issued NFTs, while the delivery cycles of key products and services should be approaching and controllable;

4. The project team should have sufficient financial strength or successful experience, or strong influence in Web 2;

When encountering projects that meet the above standards, do not hesitate to be among the earliest investors. Perhaps we missed BAYC, Azuki, Moonbirds, CloneX, and Shit because we did not have a clear NFT selection strategy at that time, but in the future, we can rely on this judgment logic to find that NFT project that can bring you hundredfold returns.