With an understanding of what  NFTs are and their potential in smoothing and securing the way we transact, you'll likely want to invest in some. 

At this stage, you must have heard a lot of good stories about NFTs. You must have also heard terrifying things about them too. Now you're faced with the task of sorting the good ones from the bad ones. You're also faced with the task of making investments with a degree of safety. 

In this article, we'll address the things you need to look out for when investing in NFTs, and how to identify promising projects. 

What makes a good NFT project? 

People create projects for a lot of reasons. A large number of them just want to build a community, get the community to invest, then rug the project when they've amassed enough money. Others want to build a good project, but do not possess the insight to keep it going. 

However, there are projects out there that are authentic and possess both the will and insight needed for steady growth. Keep in mind that longevity is a crucial way to identify a good project. 

To spot a good project, always look out for the following:

Purpose

The first thing a good project presents is a purpose. From the jump, it answers questions like Why was the project created? What is it working towards? 

A purpose determines the direction a project will take, its destination, and how it intends to get there. The purpose also seeks to appeal to people's emotions, and will, to an extent, determine the size of the community the project is able to build. 

Tip: Always try to ascertain the purpose of a project. Does it resonate with people? If it does, then chances are that such a project will attract a huge community. 

The Community

This refers to the following the project enjoys. It is a group of people who identify with the project

NFTs, like most other blockchain technologies, depend on hype. The bigger the community, the bigger the hype, and the bigger the demand for the project. Because NFT collections are usually limited, the demand created by a huge community for a limited number of items will eventually drive the value up. 

So it is good practice to research a project thoroughly before investing. Check out their social media pages and gauge their following and its growth rate. Platforms like Twitter and discord are most popular with NFT projects. 

Utility building

Utilities refer to the use cases that an NFT affords its holders, apart from its monetary value. What are the perks available to a holder for holding on to an NFT, and not selling? 

Some projects offer exclusive memberships to a club, where the NFT serves a dual purpose-  membership card and fees. Belonging to a club like this may guarantee access to events, access to celebrities, etc. Other projects even allow their users to license their NFTs in exchange for money. The utilities a project is able to build, are what sustain it, keeps its community intact, and attract new investors. 

Therefore, always find out what utility a project offers before investing. 

Structure building

With the recent drive toward Augmented Reality(AR), business entities are positioning to take advantage of this shift in the way we view reality. They do this by building infrastructure in what is known as the metaverse. 

When assessing a project, it is important to know how it is positioned to take advantage of future trends. What structures have they built? How have they optimized these structures for the use of their holders? Answering questions like this show that the project thinks of the future and is actively investing in it. A rug is unlikely to occur in a project that keeps investing in the future. 

Conclusion

Due to their highly speculative nature, it is very important to understand an NFT project and how it works before investing in it. Factors like the purpose of the project, the size of the community behind it, its utilities, and infrastructure should be taken into account before a decision to invest is made. 

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