NFTs: Nope, not hype.
Last week, I had the privilege of having lunch with Chanel and Chin, both practitioners in the NFT space. Chanel had recently quit her job to run her own Tasty Toasties NFT collection, and Chin had just joined the NFT marketplace “X” to drive growth and global expansion.
The conversation at lunch was delightful—we spoke about how Ghozali became a millionaire from selling his selfies, how Singaporean influencer Irene Zhao started her own DAO, and how there’s even a hybrid project of the two which raised 20.2eth.
Interestingly, lot of people seem to be against the very concept of hype, because of various assumptions. Some believe that hype damages the very formation and “sustainability” of an organic community; some others believe that there is no need for hype if you have a good product.
So are NFTs “just hype”?
What Are “NFTs”?
NFTs only started gaining wider attention after digital artist Beeple auctioned off his artwork at Christie’s in March 2021. The piece sold for a massive $69 million to a crypto whale in Singapore. With the total sale of Bored Apes Yacht Club NFT collection (BAYC) recently surpassing $1 billion, “non-fungible tokens” (NFTs) were hailed as one of the most hyped topics of 2021, with the trend likely to continue into 2022.
Very recently, we also read news about the 9 Singaporean companies that are exploring NFTs for their brands and businesses. Because of the vast media attention given to this phenomenon, some have labeled NFTs as “a speculative bubble” and some others have called for increased regulation.
There are many types of NFTs, ranging from collectibles, profile pictures (PFP) artwork, event tickets, gaming, virtual items, memes, and even Web 3.0 domain names. In short, a secure network records the sale of the above items on a digital ledger (“the blockchain”), giving buyers proof of ownership and authenticity.
Yet, with all these incredulous statistics, NFTs are not just “unsustainble” hype. Here are three reasons why:
Reason #1: With NFTs, You are Buying Social Clout, NOT Copyright
Some people think that NFTs infringe on creators’ copyrights and tend to disregard them. Frankly speaking, this sort of argument is misleading and is not consistent. This is because it assumes that the fundamental element that gives market value to the NFT is the copyright of the artwork.
Instead, let me posit to you that the central element that gives the NFT value is social clout and not copyright. In other words, ownership of an NFT makes it verifiable that you are taking part in an innovative digital movement. It has nothing to do with stealing the rights of a creator.
Now, the determination of the market value of NFTs, therefore, lies in the immutability and the verifiability of ownership. Because there are now particular NFTs that are highly coveted, you become an important person in the community with verifiable social standing. People both inside and outside of the community will look up to you.
Think about it logically for PFP NFTs—the difference between simply right-clicking the BAYC .jpeg file, setting it as a profile picture, and actually owning it is simply being able to show it as a measurable fact, thus confirming that you are verifiably part of a movement.
Therefore, the NFT is not just a part of a .jpeg file. Human beings are meaning-fuelled creatures, which signifies that we intrinsically want to be part of something larger than ourselves.
Are there parallels to this concept and the human desire to be part of something larger than ourselves? Of course! Humans have always sought an existential approach to exploration, often pursuing meaning through religion, civil movements, celebrity worship, and contributing to different types of communities. NFTs just raised the bar. Before NFTs came about, you simply couldn’t visibly and verifiably prove that you have X amount of social capital and power in a certain community. NFTs make this possible.
Reason #2: NFT is a Radical Disruption to Traditional Business Models for Creators
Rendering games and creating artwork used to be skill sets that weren’t very financially rewarding for most. NFT changed this, by revolutionizing the business models of these two industries. I’d like to share an article here by Brian Fyre, titled “After Copyright: Pwning NFTs in a Clout Economy.”
In this article, Brian Fyre posits:
“But the NFT market suggests upfront investment could be a viable business model in areas other than the art market. If investors believe work is or will be important, and is underpriced relative to its expected future value, they’ll be delighted to invest in it, so long as there’s a resale market. And there it is. When people invest in the NFT market, they are literally investing in the expected future value of the works they own. Or to look at it in another way, they’re investing in the careers of the authors who created those works. They’re essentially buying a fractional interest in that author’s career, represented by an NFT of one of that author’s works.
This is great for authors because it means they get paid upfront, whether or not the works they create turn out to be successful. Copyright only ever rewards successful authors. NFTs at least promise to reward any author people think might be successful. Moreover, they reduce the need for intermediaries. Realizing the value of a work in the copyright market typically requires a distributor, who claims a substantial share of the revenue. The NFT market enables authors to connect directly with their investors.”
After reading this paper, I was dumbfounded. Can you imagine investing in the future careers of young and driven young people through NFTs and upfront payment? This is an incredibly empowering notion because it encourages people to experiment in any way they want or desire, without the fear of failure, since the project money would be handled upfront. This is the beauty of decentralized projects, because once your vision and mission are clearly articulated, fundraising tools can be easily and effectively utilized.
I’d like to share an insight from my Multiverse Labs colleague Jake, a young Korean chap in his mid-20s. He points out that the market value of any piece of artwork including music, movies, dramatizations, etc. not only comes from the activity of creation but from trading as well. This links back to the idea of social clout and why art gallery owners earn more than single artists.
Since we can now vividly imagine the possibilities of this new business model working by looking at the solid data of successful NFT projects, what makes you think NFTs are simply going away?
Reason #3: People Dismiss Intense Discussions & Things They Don’t Understand As “Hype”
As with all new technological innovations, there are bound to be intense and incredibly polarizing discussions. There will inevitably be early adopters in any industry who will try to make a quick buck through unconventional processes. Because of this, some observers label NFTs as scams/hype, and others associate NFT trading with money laundering. Sounds familiar? Because it is. People said the same thing about Bitcoin since its inception in 2009.
Admittedly, a group of obscure venture capitalists (VCs) have recently been caught throwing liberal amounts of money at projects with the words “GameFi” and “NFT,” creating a false impression that the whole space is “all hype.” It truly isn’t that difficult for founders of blockchain projects to get funding in the current business climate. And to that, let me just say that the public should do their own due diligence and research before investing any pocket change.
The key takeaway here is this; just because something isn’t widely understood, it doesn’t mean that it won’t last. In the fast-moving blockchain world, we really don’t know what we don’t know! So perhaps it might be wise to rethink that assumption.
As my friend Daniel Yap puts it-
“Hype” is an excuse many people give for not wanting to understand what they don’t understand. Even a passing fad holds insights into market psychology and trends that are valuable to anyone.
If NFTs Are Here To Stay, What Would You Choose?
Technological cycles of change are getting shorter and shorter. We have to learn how to make better choices with faster and less complete, highly asymmetrical information.
Some say “hype” isn’t sustainable- yet frankly, what IS “sustainable” these days with a static game plan? You might plan the hell out of something, and by the time you are done planning, the market’s done too. Your plan has become obsolete and you have completely wasted parts of your life away that you will never get back again.
“Sustainability” is in the growth mindset, and it is this agility and open mindedness that is our new security. While “ape first and understand later” sounds risky, you can ape small first and ape incredmentally while you understand the NFT reality. Will you then, take the red pill?
