Buy Crypto
Pay with
Markets
NFT
Feed
USD

Everything You Need To Know About NFT Derivatives

2022-12-08

Main Takeaways

  • NFT derivatives are NFT collections that look extremely similar to popular NFT projects.

  • While there are NFT derivative projects created without the intention of building long-term value or an engaged community, not all derivative NFT projects are merely cash grabs. 

  • When looking to purchase any digital assets, always do your research and make sure you’re aware of the risks and what you’re purchasing. 

From taking over one industry after another to establishing itself as a cultural zeitgeist since its rise in popularity in 2020, the non-fungible token (NFT) market is now worth billions of dollars. 

If you’ve been browsing around NFT marketplaces, you would likely have come across a few NFT collections that look very similar to some popular NFTs. Known as NFT derivatives, these NFTs usually contain attributes of existing projects without introducing many new elements. 

Let’s take a quick look at all the things you need to know about NFT derivatives.

What Are NFT Derivatives?

For those new to the space, NFTs are cryptographic tokens representing unique digital assets hosted on a blockchain. Each token is a unique asset that is either entirely digital or represents a tokenized version of a real-world item — think real estate or apparel. Moreover, each NFT contains unique metadata and identifiers that separate them from other tokens. This ensures they’re almost impossible to alter or forge. Currently, the most popular use cases for NFTs are collectibles, like digital art

NFT derivatives are NFT collections that pull attributes and styles from popular NFT projects. Besides bearing a strong visual resemblance to the original NFT, a derivative will also have a similar name. 

Popular NFT collections, such as Bored Ape Yacht Club (BAYC) and CryptoPunks, are the primary sources from which many derivatives draw their inspiration. Some NFT derivative projects even draw from elements of two original projects at once. For example, the Society of Derivative Apes (SODA) is an NFT derivative project that combines the features of both BAYC and Doodles. 

Most derivative projects take elements from versions of existing projects without getting authorization from the NFT project after which they’re modeled. Unless there’s a formal notice of partnership issued by the original project, you can assume a derivative NFT is unofficial. 

However, a popular project’s founding team may release a subsequent drop as a spin-off of their project. These types of NFT collections are often referred to as official derivative projects. For example, Mutant Ape Yacht Club and Bored Ape Kennel Club are official projects released by The BAYC founders, which come with NFT utilities such as exclusive community access and unique membership perks.

Why Are People Interested in Creating NFT Derivatives?

The rise of NFT derivatives can be attributed to the increasing adoption of NFTs around the world. Derivative projects tend to get mixed reviews from the NFT community. Some see them as unoriginal copycat versions of existing projects, while others think of them as an homage to the original collections on which they’re modeled.

However, there are many reasons why a digital creator may decide to create a derivative project. There’s also a difference between an unofficial derivative project, an affiliated derivative, and a spin-off drop by a project’s founding team.

NFT Derivative Projects: The Good and the Bad

With NFTs’ increasing popularity and explosion in market value, some creators create derivative NFTs to profit from the likeliness of a popular project. These kinds of derivative projects generally exhibit characteristics of a rug-pull scam. 

The primary objective of these projects is to sell as many NFTs as possible. The person or group of people behind such a derivative project might hype up their collection on social media, promising exciting roadmaps and other enticing benefits with no intention of executing any of this past mint day. Unfortunately, most buyers only find out too late that they've been duped. 

The best way to avoid becoming a victim of a rug-pull scam is to do your own research (DYOR). It's always good practice to look into the team behind a project and evaluate their long-term plans. To learn more about how to evaluate an NFT project, read our article on 6 Key Indicators for NFT Collectors to Evaluate NFT Projects

If you spot collections that do not meet our content guidelines when browsing on Binance NFT, you can file a report. We'll investigate and delist them if we find that they've violated any copyright infringements or are suspected of being a rug-pull scam. For more information on how you can file a report with the Binance NFT team, check out our guide on How to Report Violations on Binance NFT.

While there are NFT derivative projects created without the intention of building long-term value or an active community, not all derivative projects are cash grabs. Sometimes, they can be a fun way for community members to explore their creativity. For instance, both Noodles and Jenkins the Valet are derivative NFT projects that have built long-lasting value and received support from the founders of the original collection. 

Moreover, a derivative NFT project that has a solid roadmap and long-term plan can potentially diversify the space and even lower the barriers to entry for newer collectors. 

Visit Binance NFT to start discovering a wide range of premium NFT collections today!

Conclusion

Although the emergence of derivatives may help diversify the NFT market, not all derivative NFTs are created equal. Some are created to ride on the coattails of the original projects they’re derived from, while others are created to show appreciation for the original projects.  

Now that you’ve gotten a crash course on what a derivative NFT is and how to spot one, always remember to DYOR, don’t give into the fear of missing out (FOMO), and ensure you’re familiar with the risks before purchasing any digital asset.

Explore the Colorful World of NFTs 

Browse and discover premium NFT collections on Binance NFT, a marketplace where artists, digital creators, and NFT enthusiasts come together to explore and trade digital collectibles. Stay in the loop on all things NFT by joining us on Twitter and Telegram!

Enjoyed the read? Check out the following articles for more information:

Disclaimer: NFT trading is unregulated and subject to high market risk. Please make your trades cautiously. There may be no recourse for any losses. You understand and agree that your access and participation in this activity is at your own risk. Binance NFT Marketplace does not give any advice or recommendations regarding your NFTs.