Across the NFT space, it’s hard to cut through the noise. Misinformation, unrealistic roadmaps, misleading influencer posts, and inflated Twitter follower counts make it difficult to determine which communities are well-positioned to create long-term value for their members.
The challenge of evaluating community health has led countless first-time and experienced Web3 users to make mistakes. In many cases, individuals buy-in to NFT projects expecting to maintain long-term relationships, engage actively in community governance, and extract value as promised by the core team. In reality, many of these projects have delayed or altered their roadmaps, suspended their engagement efforts, raised the stakes of membership, or even abandoned their community full-stop (the “rug pull”). According to Nansen, approximately one-third of NFT collections have “expired” (little to no trading activity), while another third are trading below mint price.
Several standardized metrics have emerged that can help determine which communities have real staying power. Growth, Engagement, Retention & Contributor Quality stand out as relevant indicators of legitimacy and long-term success.
Many NFT projects experience similar phases of growth at the outset (Mint, Reveal, and Airdrop). It’s important to understand what contributes to these phases, how to spot them, and what they mean for the long-term trajectory of Web3 communities.
The success of a project's initial mint indicates its ability to generate grassroots engagement. Initial mint metrics rarely predict the underlying community’s long-term viability; rather, they showcase the core team’s ability to market their value proposition on social media before raising capital. If a project “mints out” immediately, it’s clear that the core team can effectively generate hype. If a project doesn’t mint out immediately, it can still find success long-term. Here are examples of both:
Many NFT projects sell their pieces in a state of “pre-reveal” – minters get an identical NFT (often reflecting the project’s logo) that eventually transforms into a unique piece. In many cases, projects experience a sharp and immediate dip in floor price post-reveal. Here’s why:
Collectors gamble on rarity. Unique traits (<1%) are valued higher than floor traits. Pre-reveal, it’s impossible to know which traits each NFT will pull. Collectors are willing to pay a premium to play this game. This isn’t a hard-and-fast rule, but it often holds true. Collectors must pay attention to how quickly (and how low) the floor price settles, as that can indicate long-term stability. Here are some examples:
Projects will create additional NFT collections or airdrop rewards to their community members in hopes of generating engagement and giving holders something to look forward to. Airdrops can represent:
Projects will create a second collection with cheaper entry points to attract more members.
Projects will launch additional collections in attempt to deliver on their roadmap promises, such as “the development of a metaverse” or “the creation of a blockchain game.”
In some unfortunate cases, project founders will launch additional collections to extract revenue from their community – by building hype around an NFT drop while promising overly-ambitious benefits or without indicating the purpose of raised funds.
Retention metrics can be a strong indicator of community viability.
A community’s unique holder percentage represents both its total size of financially-committed members and the number of wallets that hold only one of the collection’s NFTs. A 50%+ unique holder ratio is a strong indication of community health, as it demonstrates that the community is composed of more unique individuals rather than a few whales with outsized shares. This metric can be particularly telling, as NFT holders serve as the most active flag bearers of a project’s brand.
DeadFellaz steadily grew its community over time.
Doodles experienced more volatile community consolidation phases but stabilized at a solid level.
CyberBrokers has yet to be able to grow its membership beyond ~3,400 holders.
Projects that are able to give their communities something to look forward to are best-positioned to retain members. This often takes the form of “utility offerings,” or benefits (as outlined in a roadmap) that come to those who stick around. Oftentimes, projects experience their most significant floor price growth when they build grassroots excitement ahead of a promised event or announcement.
Yuga Labs’ Bored Ape Yacht Club has mastered the art of generating and publicizing hype-sustaining incentives. Since April 2021, Yuga has consistently delivered on their roadmap in strategic increments that leave holders excited for what’s to come. Here is what they’ve done so far:
Other examples of utility that NFT collections have provided:
Engagement metrics are the easiest to standardize across communities and can be particularly helpful for determining strength of community at a single point in time.
NFT profile pictures can be an important signal, as they represent spot endorsements that strengthen the brand.
Influencer NFT PFPs are one of the strongest engagement generators that often lead to a bump in interest from prospective members.
This metric can be misleading (due to bot accounts) but can provide a directional indication of project reach and community size.
A vibrant Discord can be a critical indicator of community health. Here are some metrics to look out for:
Project and contributor quality is subjective as different aspects of NFT collections and their offerings appeal to some but not all. However, there are some legitimate trackable metrics that can be used to determine community legitimacy.
A project’s team is arguably the most relevant metric to carefully review ahead of joining a Web3 community. Here are some important questions to ask:
Is the team doxxed, or have they chosen to remain anonymous?
If the answer to the questions above is a resounding yes, community legitimacy often follows.
Most projects’ roadmaps are highly ambitious and pledge to achieve multiple milestones on different fronts in a short period of time. Here are some important questions to ask:
Quality influencers and whale investors associated with a project in its early stage can help indicate legitimacy. Notable Web3 stakeholders engaging with a project online reflects its standing within the Web3 community. However, it’s harder to verify the veracity of an influencer’s wallet holdings, since notable individuals and holders of top projects (Ex: BAYC) often get airdropped random NFTs to create the illusion that they are aligned with a certain project.
These metrics aren’t perfect – anonymous teams have fulfilled their ambitious roadmaps, and established creators have abandoned their active communities. These metrics will continue to evolve over time, just as the NFT industry and technology itself transforms in the years to come.
On the other side of things, Web3 projects across the industry will need a digestible and comprehensive community analytics platform that helps them gauge the health and attitude of its membership.
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