What makes an NFT project “blue-chip”?
It is difficult to give “blue chip” status to projects in an industry as volatile and new as NFTs. Many NFT projects advertise themselves as blue chip projects, but are they?
Footprint Analytics uses its own Blue Chip Index to measure the strength of the NFT industry. This article will explain how we define blue chips in the context of NFTs and how this classification can help analysts.
What is a “Blue Chip NFT”?
In the context of the stock market, blue chip refers to shares in a company with long-term stable growth, large traditional industrial stocks as well as financial stocks. Also seen as a long-term investment that generates steady returns, the stock is often considered relatively safe, as is the case with companies such as Berkshire Hathaway.
Footprint Analytics – BlueChip Index since 2022
The blue chip stock index pictured above is an index that tracks the market share of more than 20 well-known, financially stable listed non-financial companies. It refers to the algorithm of the S&P 500, calculates the sum of all values (in USD) of [X] blue chip NFTs per day, and then shares it with [X] NFTs.
What factors determine a blue-chip NFT project?
CryptoPunks and BAYC are the first projects that come to mind when you think of blue chip NFTs. They are considered by all to be industry leaders mainly because they have the following characteristics.
- Backed by a strong team and financial support
- Frequent presence in NFT sales ranking
- Recognized by the market and a popular brand in the NFT sector
- Compared to the transactions of projects like Terraforms and Meebits, CryptoPunks and BAYC have almost no wash trading.
Footprint Analytics – All Time Top 10 Most Washed Collections
Footprint Analytics – All Time Wash Trading Stats of Bluechip ERC-721 Collections
Therefore, it is not possible to judge whether the project is a blue chip NFT from a single indicator. To determine whether a project should be included in the Blue Chip Index, Footprint Analytics looks at four other factors:
Quality of design is essential for the long-term success of a project. CryptoPunks, for example, were once sought after for their punk pixel style as an OG NFT, making the pixel art style popular, and many derivatives replicated them, making pixel art projects stand out in the space. So the innovative design art style will make the project stand out from some of the more bland NFTs.
What are the privileges of having NFT and how useful is it for the user? Will it add value? These are all questions that users should consider. Ongoing utility refers to the benefits that come with being part of the community and having an NFT, such as the project owner providing a whitelist for minting other projects, airdropping NFTs to holders, etc. This not only increases the lifetime of the NFT, but also increases the value of the project. For example, BAYC holders were rewarded with a BAKC airdrop.
- Volume and floor price indicator
The transaction volume is the basis for verifying the floor price, which is not determined by the holder’s arbitrary pending order price, but through market transactions. It always follows the fluctuations in the market. If the floor price goes up, the volume decreases, and if it goes down, it increases. Therefore, the floor price has become the most intuitive blue chip indicator. The higher the floor price of the purchased project, the higher the value.
Society also plays an important role in assessing whether an NFT project is a blue-chip NFT. Most blue-chip NFT projects have their own dedicated communities.
Blue Chip NFTs: 3 Examples
In general, NFTs are considered a high-risk investment in a market filled with speculation and volatility. Blue-chip NFTs are relatively less risky – but anything can happen. Most NFTs fail to build a brand, while blue-chip NFTs have done just that.
Footprint Analytics – Bluechip Collection
BAYC includes 10,000 Bored Apes and entitles the holder to access an exclusive online club. Although it launched later than CryptoPunks, it outsold CryptoPunks by over a year.
The biggest innovation is that BAYC gives the commercial rights of avatar images to the holders and the community, which promotes PFP NFTs to the general public. The floor price has reached as high as 73.15 ETH (as of November 10), which is several times the floor price of other NFTs. It has become a new favorite among celebrities and is arguably the biggest brand in the NFT market. It also released other successful NFT series including MAYC and BAKC.
CryptoPunks was one of the first successful NFT projects. Launched in 2017, CryptoPunks has 10,000 unique digital characters and some of these NFTs were even auctioned off by Christie’s and Sotheby’s. It provided the inspiration and basis for the ERC-721 standard that later NFTs developed. The project has now been acquired by Yuga Labs.
Azuki is a community-built, decentralized metauniverse brand popular for its Japanese manga style and high aesthetic appeal, and for its strong branding, with the first batch of NFTs selling out in just a few minutes. Azuki has major innovations that must be mentioned, which are new embossing standards, whitelist screening mechanisms and sales methods.
- Azuki has developed a new algorithm that uses batch-casting to create multiple NFTs for a single gas fee, significantly reducing the cost to users.
- It removes the random whitelisting method and combines various criteria to complete the whitelisting process.
- The sales method is Azuki to sell in three stages: Dutch auction (reduced price auction), whitelist minting, and public sale to provide more benefits to the members of the community.
In summary, blue-chip NFT is a good starting point for users who want to understand the market. It is possible to summarize the characteristics of these projects and analyze relevant metrics to compare new NFT projects, how far they have reached and how far they are from blue-chip NFT projects.
This piece is contributed by Footprint Analytics society.
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Disclaimer: Views and opinions expressed by the author should not be considered financial advice. We do not provide advice on financial products.