NFTs are unique digital assets providing ownership status to collectibles like digital arts. The increase in popularity of NFTs made investors utilize the platform to sell their pieces of art like songs, pictures, and videos. The worth of all NFTs is not the same, each NFT has its own worth. The value of an NFT is determined by Rarity, each NFT has a Rarity Score. Understanding the concept of rarity is important for making informed decisions regarding the buying and selling of NFTs.
Table of Content
- What is NFT Rarity?
- How does an NFT Rarity work?
- NFT Rarity Basic Calculation Formula
- NFT Rarity Basic Calculation Formula
- Factors that Affect NFT Rarity Value
- How to Determine NFT Rarity?
- Methods to Calculate NFT Rarity
- Why Does Rarity Value Matter for NFTs?
What is NFT Rarity?
NFT rarity is a measure that represents the uniqueness of an NFT. Though two NFTs can share a similar trait, they are not fully identical. Being unique, they come with different prices, and the value of an NFT is determined by its rarity. The higher the rarity features the higher the value of the NFT.
How Does an NFT Rarity Work?
When a new NFT is minted, it exhibits unique traits and characteristics, which can not be altered. Though there are chances for an NFT to share one or two traits with other NFTs, they can never be identical. NFTs with more uncommon features are considered more valuable than ones with more similarities.
By analyzing the NFT rarity beforehand, NFT investors can make informed decisions while collecting an NFT. A beforehand analysis saves time and money and moreover gives an additional advantage over other traders in the market.
NFT Rarity Basic Calculation Formula
NFT Rarity is calculated by using the formula,
Rarity Score= 1/ ([Number of items with the same Tarot Value] / [Total Number of Traits in the Collection])
Factors that Affect NFT Rarity Value
The rarity of an NFT allows an investor to choose the best NFT product. The product with high rarity value is more priced than their competence. Factors affecting the rarity value are,
1. Traits
The higher the similarity in traits the lower the rarity of the NFT. A product with unique traits is traded at a higher price than the one with common traits.
2. Scarcity of the Item
Scarcity describes the number of NFTs available from collections across the trading platforms. The higher the scarcity rate the lower the demand.
3. Historical Importance
NFTs minted with historical significance are considered rarer than the ones without any historical significance.
4. Developer Popularity
Popular developer’s NFTs get more traction than less popular developers. An NFT minted from a popular collection requires no or less marketing. People check for the developers while buying an NFT.
How to Determine NFT Rarity?
NFT Rarity can be determined in different ways.
1. NFT Rarity Sites
NFT Rarity sites help analyze the rarity of an NFT, whether it is rare or high in demand. Rarity Tools is one of the popular rarity analyzing sites.
2. Rarity Rank Extension
By using the rarity rank extension investors can analyze the rarity of NFTs and their unique features. However, installing these extensions can be dangerous and results in stealing of the personal data.
3. OpenSea Tool
An OpenSea Tool allows users to create, buy, and sell NFTs. By viewing the details of an NFT users can get an idea about the rarity of the product, making them decide whether to buy or not.
Methods to Calculate NFT Rarity
Calculations of an NFT Rarity can be done using different methods. Here we describe four different models to calculate the rarity of an NFT.
1. Trait Rarity Model
In this method, a comparison of the rarest traits of each NFT is made. The highest score is given to the NFT that has the least common or unique traits. The major drawback of this method is the ignorance of overall rarity in favor of prioritizing only the rarest NFT.
2. Average Trait Rarity Model
This method calculates the average rarity of all the NFTs. The rarity of each NFT is taken in percentage and divided by the number of NFTs to obtain the average rarity value. The main issue of the average rarity method is the emphasis on the overall rarity of each trait without considering the individual NFT Rarity.
3. Statistical Rarity Model
In this model, the total NFT Rarity is calculated by multiplying the trait percentage of all NFTs. The NFT with a lower value is considered rarer than the ones with a higher value.
4. Rarity Score Model
This is the most common method used for calculating rarity. This model calculates the frequencies of each trait. It analyzes the commonness and rarity of every trait and provides a score. The less-appearing traits are rewarded with higher scores than the ones with common traits. By aggregating the scores the rarity is calculated.
Why Does Rarity Value Matter for NFTs?
A rarity determines the value and demand for a specific token. Some traits are very common in NFTs, while others are least common. The NFT with the least common traits is sold at higher prices than an NFT with the most common traits.
The rarity value allows investors to learn which NFT has the least common traits. By investing in such NFTs investors can earn more profits than other NFTs with more similar traits.
Final Thoughts
Rarity value represents the uniqueness of an NFT. It allows a user to analyze the value of an NFT and make informed investment decisions. However, rarity is not only the factor that determines the value of an NFT, it is just one among the many.
