‘‘Tom said to himself that it was not such a hollow world, after all. He had discovered a great law of human action, without knowing it -- namely, that in order to make a man or a boy covet a thing, it is only necessary to make the thing difficult to attain.’’ - Mark Twain
Many of the largest and most popular NFT collections are generative art. Generative art refers to art where the creators have employed an algorithm and/or an autonomous system to aid in the creation process. The algorithm generates a unique ID for each NFT, and each will possess a different combination of traits based on that ID. These traits and their combinations ultimately introduce the quality of rarity.
NFTs, or Non-Fungible Tokens, utilize blockchain technology to establish ownership and represent a unique digital asset. Nansen explains NFTs in greater detail for investors newer to the space: Everything You Need to Know About NFTs.
This article’s primary focus is NFT rarity. We will provide a practical guide for participants who want to discover the rarity of their NFT and how that rarity might impact price. Rarity plays a central role in determining an NFT’s value. The rarer something is, often the higher the price it can command. This follows common sense economic laws of supply and demand. More specifically, the law of the supply curve: lower supply equates to a greater price.
Participants must remember that an NFT’s rarity cannot be fully understood until an entire collection has been revealed, and even then might not be entirely obvious. OpenSea, the leading NFT marketplace, allows investors to view the rarity score for individual traits, but does not provide an overall rarity score; this is where Nansen comes in.
Everyone can access Nansen's NFT Paradise Dashboard, which gives an excellent breakdown of market movement and developing trends within the NFT space. Featuring various time filters, investors can locate time-tested and established projects or chase up-and-coming projects fighting their way through the ranks.
Similarly, everyone can access Nansen's NFT God Mode Dashboard overview tab once they have found a collection that interests them. The overview tab provides a clean graph tracking the average price and trading volume. Above are the price action and volume for the Bored Ape Yacht Club over the past ninety days.
However, investors who truly want to track the NFT market’s pulse and dive deep into NFT rarity will need to sign up for a Nansen premium account.
What is NFT Rarity?
With each NFT possessing different trait combinations, some are statistically more unique than others. NFT rarity is a metric measuring the uniqueness of an NFT in comparison with the other tokens within the collection.
An example of a rare trait is the Solid Gold Fur trait found within the Bored Ape Yacht Club (BAYC) collection, with only 46 members possessing this trait. You can read an overview of the BAYC collection here: More than JPEGs: How Bored Ape Yacht Club Built an NFT Empire. The rarity of this trait equates to 0.46%. But overall rarity is a more complex measurement taken by aggregating all of the rarest traits; unusual or unique combinations of traits can lead to a higher rarity score than a token with just one or two rare traits.
For instance, the second rarest piece within the BAYC collection is 7495. It possesses the dagger in mouth trait, a cross earring, a cyborg eye, and DMT fur. The amalgamation of these rare traits gives it a high rarity score, despite not possessing one of the single most unique traits. Interestingly this NFT has yet to be sold since it was minted despite countless generous offers on OpenSea. This rarity dashboard feature can only be accessed by Nansen standard subscribers and above.
How Does NFT Rarity Work?
Three main criteria determine the rarity of an NFT. First is the individual trait-based rarity; how many members of the collection possess the same trait? Secondly, the cumulative trait-based rarity. This total rarity score is calculated from the combination of traits. Thirdly, subjectivity; something attractive is more appealing. More people want it, and higher demand makes these NFTs more challenging to acquire, thus making them rarer.
Subjectivity factors into an NFT’s rarity beyond statistical probability; attractive artwork at times commands a premium. Kitaro World, a collection of 7,777 cats with an art style reminiscent of Hayao Miyazaki – the creator of Studio Ghibli – saw visually appealing tokens command higher prices than more statistically unique members of the collection.
Nansen’s NFT God Mode dashboard featured above shows the Moonbirds NFT Collection ranked by last sale price. Rare collection members dominate the top sales highlighting the potency of rarity in determining value. Moonbirds has a floor price of 9 ETH at the time of writing, yet the most atypical members sell for more than thirty times that value.
The overall demand for the collection also affects the rarity. Nansen provides a guide on how to utilize the other Rarity dashboard offered currently tracking hundreds of collections, and how it calculates its overall score: Utilizing the Rarity Dashboard.
What to Look out for When Assessing NFT Rarity?
Each collection piece will possess sub-traits of the larger trait groups, and sometimes NFTs even have varying numbers of traits, further affecting rarity.
Investors should pay attention to two core aspects: individual trait rarity and statistical rarity. The trait rarity ranking is how many other collection members possess the same trait. The rarest trait amongst the BAYC collection is the ‘Bored Unshaven Pizza’ trait of the mouth sub-trait group, with only 0.26% of the collection owning this trait.
Another thing investors should watch for is community preference. Certain traits often become popular amongst the community; therefore, NFTs possessing this trait can command an increased price. An example is the Solid Gold Fur trait mentioned in the BAYC collection.
How to Check NFT Rarity?
An NFT owner wants to check the rarity of their NFT; perhaps a trader wants to purchase an NFT close to floor price that possesses a rare trait, or maybe a lucky person has minted or bought at the floor and wants to find out more about the NFT they own. Nansen covers all bases. Enter NFT God Mode.
Azuki, the 10,000-strong anime-themed collection, will be used as an example. This collection has been one of 2022’s best performers, and this nostalgic artwork proved a hit amongst investors.
Investors search for their desired collection, and the NFT God Mode Rarity dashboard ranks each piece by its statistical rarity.
For individual NFTs, Nansen's NFT Item Profiler shows the specific score associated with that NFT, all associated trading activity, and a full breakdown of unique traits. Look at Azuki #4363.
Azuki #4363 possesses two of the spirit traits that have become the collection's most desirable traits.
Nansen's Rarity Profiler Dashboard enables investors to search each collection via specific traits. Above are all the Azuki members possessing the coveted type spirit trait.
Nansen’s Item Profiler dashboard has recently rolled out a price estimate function. Using sales data and traits, it calculates a potential price and matches it against the listed price: NFT trading made easy. Above is a further breakdown of the price estimate tracked across 90 days, and listed are potential opportunities where Nansen’s algorithm has detected a divergence between the listed price and the estimated price.
This feature is also available on NFT Paradise under the NFT Sniper tab, where it showcases the top 5 most undervalued listings from each collection on OpenSea based on estimates from our price estimator model.
Nansen provides these unrivaled insights by synthesizing colossal volumes of on-chain data and tracking millions of wallets. Educating investors also remains a primary focus, and attached is a guide to essential NFT analytics tools: Best NFT Analytics Tools.
In conclusion, Nansen’s insights allow investors to search and comprehend the rarity of their NFTs. With the ability to search by collection, by trait, or even see price estimates for each piece, Nansen exists as a requisite tool for any investor active in the NFT space.