Are NFTs a Bubble? Its Correlation with The Metaverse and more…
Companies and Organizations are diving into the opportunity of NFTs. Here are what I believe about the current situation.
People say value roots from utility and necessity. Sort of, but not really for these days. What truly gives something value is the belief towards it. Belief — a concept aggregating every intangible sensation of humanity — creates the value. Either generated from a single individual or built-up by a large community of people, it doesn’t matter. What you believe to be valuable, is valuable.
Luxury brands sell their products at a significantly higher price than its original cost of production, because they know people value their products. Luxurious goods are the foremost means of expression for an individual’s socioeconomic status. Cool and expensive clothes, bags, cars, gadgets… mostly relate with overexpression, but who really does mind that? People love overvaluing. Luxury brands are, and will be the everlasting industry throughout the human civilization, because they don’t sell luxurious products, but they sell necessities reinforced by human beliefs and instinct. Luxury brands themselves will view each and every item they sell as an art piece, not just a product. That’s how value is generated.
Speaking of art, this is the rudimental area demonstrating the origination of value from people’s beliefs. The means and approaches of expression, legacy in the artwork, interconnection with the artist, the fact of ownership for an art piece… these all add-up to the eventual value of art. Here, no one interprets art in the perspective of utility and necessity. Logically, it’s just an old or modern piece of drawing on a canvas or something, using whatever sort of paint or material. And it decorates where I live; nothing else. I can actually buy something even more good-looking than this online, at the price below $50. There are even affordable copies of this if it’s popular. Art isn’t valued like this. People interpret through emotion — their beliefs. That’s how the art market and its community has been shaped. And here’s a notable disruptive innovation happening in this art world. NFTs.
A digital approach of guaranteeing ownership for an intangible asset in limitless forms, through an integration with the blockchain technology. People can buy or sell traditional paintings, modern graphics, basketball cards, virtual products such as clothes and bags, 3D models, real estate, even a single tweet; the list goes on. That’s what a Non-Fungible Token — aka NFT — is. Each NFT has a designated id, which is unique. Once a NFT is registered (minted) on the blockchain network, the id is provided; it cannot be replaced with an identical product — it is not interchangeable.
How is it being such a hype? Simply noting, a significant number of brands, organizations, sports teams, and newly growing startups are diving into this world of NFTs.
To name a few, Coca-Cola and Pringles released its NFT collection, Alibaba launched virtual real estate NFTs, Country of Georgia introduced its wines as NFTs, Dolce & Gabbana released its fashion-inspired collection as NFTs, Team Great Britain launches its NFT collection in the Tokyo 2020 Olympics, AS Roma announced a $42 million, 3-year exclusive partnership with Zytara Labs, a blockchain fintech firm, for launching its NFT collection, Steve Jobs’s hand-written job application is auctioned as a NFT… there are many more happened and to come.
Not only for artists and individuals, but also for companies and organizations, the world of NFTs is being a hype. Why? There are mainly two reasons for this: the upcoming future of the Metaverse and a new generation of memes.
Traditionally, there wasn’t a notable path for an individual digital artist to generate income from a created artwork. The only thing artists were able to do mostly was posting artworks on social media, get likes and comments; and use them as a freelance job application portfolio or a gateway to a product they’re selling. But the rise of NFTs allowed creators to directly sell their artwork digitally, at a decentralized marketplace.
As previously mentioned, NFTs are unique; thus, cannot be replaced by an identical existence. This provides people ownership for an asset in the digital ecosystem. Screenshots or copies of the artwork can be made and be distributed across the internet, but the valid proof for ownership is carved on-stone on the blockchain network. There are uncountable copies of Van Gogh’s artworks throughout the entire world. Everyone can have a copy, but only a fixed amount of people is allowed to have the real artwork. The same is applied in the idea of NFTs.
In the long run, as we approach closer to the Metaverse, it would be a compelling opportunity to display the NFTs one owns at a virtual estate. While in the short run, meeting various NFTs from different brands and organizations will bring unique experiences to the people and give opportunities to have new thoughts towards it.
Every rising innovation has both the bright side and the dark side — or the something to be made fun of side, for this case. NFT skeptics view it as an affront towards art and a disruption of the creative community. At the very beginning of the NFT boom, a lot of weird things were sold in unreasonable prices at the marketplace. To name one, Nyan Cat, which once was a viral meme on the internet in 2011. The creator of the original animation, Chris Torres, sold this as a NFT for roughly $580,000. More from this, in the current status of the NFT ecosystem, where everyone literally dives into the opportunity of NFTs, people are feeling more incredulous about this culture, believing it’s a bubble that will ultimately contract or explode in the future.
Are NFTs a bubble? To say my answer first: yes, it is a bubble. Though, it is very unlikely for this transition to disappear or significantly contract in volume.
Considering on a very basic perspective, the introduction of the NFT ecosystem was somewhat predictable. We faced several innovative digitalization throughout the timeline.
Beginning with the music industry. Back in the old days, the only way for people to listen music was to either listen to it from a radio or purchase a cd album from a record store. The introduction of an audio compression technology that enables people to store music digitally on their computers, became the inception of interruption in the record industry. As music can be easily shared between computers, the idea for buying a cd album to listen music sounded nonsense. The foundation of Napster was totally not welcomed by record labels. An online platform for sharing music for free, got established. Anyone was able to upload, search and download any music, with no restrictions. If music can be downloaded for free, it has no value. In the days when the price of a cd album was the only source for value of music, the appearance of the digital audio technology was a total destruction in the traditional business model. Musicians and their labels could not generate any profit as no one buys the only valued product, cd albums, to listen to music.
Next, the movie and television industries. People used to rent or buy DVDs, or visit the cinema to watch movies. TVs were the only source for in-house video contents. The introduction of online streaming services and video sharing platforms started changing the way of content distribution to consumers. In 2010, Netflix introduced its streaming-only plan that offered unlimited streaming services with no DVDs, but through online. In 2005, YouTube — currently the world’s largest video sharing platform — was founded. These two video services share one aspect in common. It provides the user the freedom and rights to choose what to watch. Prior to these services, people had to pay for cable tv channels to watch what they want. Obviously, they had no choice for tailoring their own watchlist. It was decided by the cable provider. They had to pay for a batch of programs which they don’t even watch, to get a few shows they want. Similarly for the case of cinemas, what was available to watch in the day was chosen by the staffs, not the visitors. Moreover, the current pandemic reshaped the thoughts behind group-gatherings and hygiene, which made the number of cinema sites to drastically plunge since 2020. The appearance of low-cost or even free online content distribution platforms was a total destruction in the traditional business model for video contents. Fewer people visit the cinema and subscribe to cable tv channels nowadays.
Everything that’s related with creative productions got digitalized. And they became a total gamechanger in the industry. Music went digitally online; images and videos went digitally online… but what about properties (especially art) and its ownership?
Humans are a species of expression. Our consumption and communication act as the means of expression. We mostly do not buy products because it’s necessary, but because of its ability of augmenting our expression. We do not combinate verbal and non-verbal communication to deliver messages clearly, but to express ourselves to others more clearly and uniquely. Consumerism provoked a misconception that increase in consumption strengthens the power of communication (especially non-verbal); thus expression. People hardly realize this, because they buy with emotion, and justify with logic. What you want becomes what you need. This is the core idea that companies and organizations are mostly targeting on. This is the current status of the NFT market, and that’s why NFTs are currently a bubble. They are targeting younger generations who are more open, active, and tech-savvy, to be their potential consumers. They are targeting them to implant an idea that the more unique and expensive virtual goods one has, the more special one will be. Different industries are rushing towards the world of NFTs for securing their future customers.
Still, the core idea behind NFTs is valuable. And that’s why the world of NFTs will remain even after the contraction of the bubble. It’s most likely for the digital economy of virtual goods take major proportion in the future economy. More virtual worlds will be created; and will be more deeply interconnected with our daily lives throughout time. Social media like Facebook, Instagram, Twitter, and Snapchat took major portion of our lives, in less than a decade. Imagine what the future will be like.
There will be houses, buildings, personal vehicles, and many more, on the virtual world. Art already exists in the virtual world of nowadays, and I believe this will be one of the core serendipities of joining and wandering around the virtual world. These need a valid proof of ownership in order to stay in place without being altered or manipulated. No one would want an unknown person to hack and suddenly take ownership of their properties in the digital world. Ownership is guaranteed via a trustworthy decentralized blockchain network, which is yet foolproof and extremely cost-inefficient for a hacker to malfunction the entire network.
Guaranteeing secureness and protection for asset ownership on a virtual world. This is the kernel idea of NFTs to be maintained and developed for the future. Currently the bubble in NFTs is created due to high expectancy of consumerism; its volume is likely to lower down as the issues with integration throughout different networks get resolved. Right now, for most NFTs, one can hold and own it, but cannot really be used somewhere for some purpose. And even if it does, the variety of platforms for its utility application is limited. Would I really want to own an original image that can’t be used elsewhere for any purposes excluding re-selling? Probably would have to reconsider this. But still, belief creates the value, and every belief should be respected.
Want to join the exciting journey of discovery into the Metaverse? Let me know what you think in the comments section. Connect with me on Twitter and follow up my Medium profile @yijisuk for the latest article.
