February 23, 2021•667 words
If you haven’t been following lately, there’s a newly relevant form of digital scarcity called NFTs that are selling for thousands of dollars, sometimes even hundreds of thousands of dollars. NFTs are rare collectibles, whether they be digital artworks, music, memes, or domains. In most cases NFTs are just a smart contract application built on top of Ethereum, where each collectible series is its own smart contract. Hashmasks are one example. There are a total of 16,384 unique digital items, and each item is represented as an address on the Ethereum blockchain.
Onlookers are incredulous at the concept: how can infinitely duplicatable RGB pixels on a screen have value? Why would I pay thousands of dollars for a digital artwork that anyone can take a screenshot of and stare at locally for hours on end? This concept will never work, they say. NFTs are totally ridiculous, and should not have any value.
Yet it’s remarkable how soon we forget the arbitrary nature of…just about everything on this damned planet. Do you think it obvious that gold should have value, or physical paintings, or dollar bills, or Pokemon cards? These narratives were at one point invented. And some group of zealots were tasked with convincing everyone else that this should be worth something. When enough people were in agreement that these things had value, then at that point, those things become valuable, and remained perpetually valuable so long as the narrative retained enough believers.
The question is not “do NFTs have value?”, but rather, can enough people be in agreement about the value of NFTs as to create a liquid market? The answer of course is yes. Humans are nothing if not malleable in their beliefs. If you thought reality was grounded in any sort of objective nature, go talk to the billions of people that believe bearded men in the past could walk on water, or part the seas with a cane, or split the moon in half and put it back together. To these people, these beliefs are far more obvious than any scientific fact you can lob at them.
So who choses what has value and what doesn’t? The kids do. Today a bunch of gray-hairs in suits dictate what should and shouldn't have value. Yet if you can’t convince a generation of kids to buy gold, and they instead want to use their hard-earned money to buy digital art, where do you think the value goes over time when the kids inherit the globe? If you can’t convince the kids that the dollar is a safe store of value, and they instead want to use their hard-earned money to buy digital currency, where do you think the value goes over time?
Value is invented. It is decided. It’s not obvious. And it’s not exclusive. The common attribute amongst all stores of value is their relative rarity. It can be a piece of metal, it can be a piece of paper, or it can be a dildo. Ultimately, it’s the story behind the pixels/material/paper that contains the value, and not their physical characteristics. Not all digital art should have value. But if [some exceedingly famous person] minted a unique art piece and etched it on an Ethereum block, and sold that story to the public, do you not think this should have value? In fact, getting an exceedingly famous person’s autograph on a piece of toilet paper would instantly make the toilet paper valuable. How much would you pay for Da Vinci’s poop stain? You, maybe not much. But I guarantee you there is a market of Da Vinci aficionados that would pay millions of dollars for it, and its value would only go up over time. It’s the story.
I’ll even take this regrettable analogy one step further: if it was determined that Da Vanci’s poop occurred on the day he finished the Mona Lisa, the Poop Paper’s value would instantly rise from ten million dollars to a hundred million dollars.
It’s the story.