In our world today, It’s pretty typical for us to associate value with scarcity. For example, we can collectively classify gold, diamond, copper, and aluminum as metals; however, gold and diamond are more valuable than copper and aluminum simply because they are rarer than the others.
Similarly, assessing rarity in NFTs is a vital tool for determining worth. Fungibility is the attribute of an asset to be exchanged for another similar asset for the same value; for example, 1 BTC in your wallet has the exact same value as 1 BTC in Elon Musk’s wallet; hence, they are easily exchangeable for each other. However, if you have an item in the BAYC collection and Elon Musk also has an item in the same collection, your NFT may be more valuable than Elon Musk’s because each NFT is inherently unique.
This distinctiveness can be attributed to the NFT’s rarity. Hence, all 10,000 items in a BAYC collection look alike, but all have distinctive features. That’s why one can be sold for over a million dollars and another for less than $500,000.
What is NFT Rarity
Rarity determines the peculiarity and distinctiveness of an NFT, which speaks volumes about its inherent value. Rare NFTs are usually more expensive than others in a collection because they have the rarest traits; however, some NFTs are rare because they lack many traits.
How to Calculate NFT Rarity
NFT rarity can be calculated by evaluating its rarest trait, estimating the average rarity of all traits, or examining rarity statistics.
Rarest Trait Ranking
The simplest method of ranking NFTs is by comparing the rarest trait of each NFT.
For example, if “NFT A” has three traits with 10% rarity, 40% rarity, and 70% rarity, respectively, and “NFT B” has three traits with 40% rarity, 50% rarity, and 60% rarity, this method would recognize “NFT A” as the rarer one.
This method is somewhat limited because it ignores the overall NFT rarity and ranks items by only taking the rarest traits into account, hence presenting a skewed view of the NFT’s rarity.
Average Trait Ranking
This method evaluates the average rarity of all traits present in an NFT and then ranks different NFTs by their weighted average.
For example, if we consider the casestudy above, NFT B with an average of (40 + 50 + 60)/3 = 50% will be considered rarer than NFT A with an average of (10+ 40 + 70)/3 = 40%.
This method also has its limitations as it overstates the overall value while watering down the influence of the peculiar trait that makes the NFT rare.
Rarity Statistics
Like the average trait ranking, this method also attempts to get an overall outlook on the NFT’s rarity via multiplication. For example, NFT A above would have a statistical rarity of (10 * 40 * 70) = 28000 = 28% rarity. Conversely, NFT B would have a statistical rarity of (40 * 50 * 60) = 120000 = 120%
Again, like other methods, this is also skewed as it totally waters down the rarest trait because of a significantly weaker one.
Hence, to bring the best of all worlds, a “Rarity score” formula was invented.
What is “Rarity Score”?
Rarity score was invented by “Rarity tools,” which evaluates the rarity of an NFT by individually evaluating a rarity score for each trait, and then the sum total of all individual rarity scores will be the NFTs overall rarity score;
Hence, the “rarity score” gives an insight into individual and overall traits without overstating one or downplaying the other.
The rarity score for an NFT is calculated thus:
Rarity score for a trait value = 1 / (n/T)
Where n = number of items with the trait value, and
T = Total number of items in the collection.
Top Tools for Evaluating NFT Rarity
You may be worried about having to do some arithmetic computation for every collection; that appears stressful. However, the good thing is that you don’t have to do the math yourself. There are several NFT rarity tools that evaluate the rarity score in just a few clicks.
Rarity is essential in determining the worth of an NFT or an item within an NFT collection. The rarer your item is, the more valuable it will be.
There are over a dozen rarity checkers with different interfaces and slight distinctions in features; however, they all effectively do the basics. If you would be investing in any NFT collection, it is vital for you to check out rarity statistics to give you adequate insights into how valuable your intended item is.
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