The Literally Ungraspable Allure of NFTs
Are physical goods worth more than digital ones? Is a physical painting worth more than a radical idea?
As I started investigating the non-fungible token—or NFT—craze, I wondered how and why people would pay thousands of dollars for a digital piece of art, trading card, meme, or virtual creature. According to EconClips, a YouTube channel about economics, “There are no goods of fixed value. They are valuable as long as people value them and only to that extent.”
EconClips’ video (which is also embedded at the bottom of this story) explains that people value, for instance, diamonds over water because water is still plentiful and its wide availability gives us a license to assign value to our more aesthetic desires and interests. In other words, we can pay $7,500 for Grimes’ 3D, animated portrait of a war nymph because we have the luxury of believing it’s worth it.
Still, NFTs stretch the definition of value and worth further than before, with many people—especially boomers like me—struggling to understand how anyone can pay so much for intangible ones and zeros configured into gorgeous, hyper-realistic art, clever doodles, and even digitally captured sports moments.
The token is the key
The value of this art and digital objects, though, is tied to something that is far less illusory than virtual ink on a digitally created page. On Nifty Gateway, where Grimes lists her work, each image, even duplicates, are assigned immutable tokens. I think of it like a limited set of lithographs, where each print has a number (“12 out of 250”).
So, even though you're buying something you can’t hold, put in your pocket, or hang on your wall (unless you want to display it in a digital photo frame), it is considered unique and ownable.
As Nifty Gateway explains on its site, “Until now, you could never really own a digital item. Nifties live on a blockchain, so no one can ever take them away from you, not even the person who created them.”
Exploring Nifty Gateway is like taking a walk through the most modern part of the Museum of Modern Art. Images are halting, synthetic, sensual, and disturbing. The images are often animated, run on a loop, and include a soundtrack.
Many of the artists, like electronic music artist Grimes, already have a following. However, there are other NFT marketplaces, like Rarible, which appear to offer a more eclectic collection of digital objects. Even its design is somewhat less precious than Nifty Gateway, featuring a less aesthetically pleasing look and a top-seller grid on the homepage.
It was on Rarible that I discovered a wide selection of digital trading cards, including a Luka Doncic NBA All-Star Game 2021 Card from KingDeckNFT ($826, but then you own the only one) and a collection of — I kid you not — digital Nike sneaker trading cards. For 0.003 Ethereum (roughly $5), you can own one of 10 spiffy-looking Nike Dunk SBN laser cards.
So hot! But…
Spend a few minutes online or on any social platform, including newbie Clubhouse, and you’ll run into an NFT story or discussion with many people wondering if they should open a crypto wallet (these sites require one if you want to bid) and start buying up NFT digital assets (or Nifties).
The allure here is, I assume, the same as the early days of bitcoin. Sure, none of us understood it, but even I wondered back then if I should try mining some coin just to see what happens (I did, and it nearly killed my computer). As we now know, some cryptocurrency pioneers are rich while the rest of us stand on the sidelines, squeezing analog currency tight in our sweaty palms.
Should we be pouring our money into NFTs, buying up NFT cards that represent tangible things, or the Pokémon-like CryptoMo Cards that offer digital protocols that you can use on other crypto assets? Maybe I should invest in something called Bitcoin Angel, a rococo-style piece of digital art featuring a painting of a classic sculpture in front of, naturally, a giant Bitcoin symbol sold for $975.
To be fair, the value of these digital assets doesn't always end with the current price of Bitcoin or Ethereum. Some artists add special features to the sale (some of these rewards, though, are tied to Bitcoin hitting a certain threshold).
On the other hand, what happens if the bottom drops out of cryptocurrency or these assets never increase in value? The entire tangible collectible market is based on the belief that your 1979 boxed Star Wars Boba Fett figure will retain and grow its value over time. Digital assets have no such proven track record and could, in a few years, be worthless. (Side question: Does an NFT lose value if it’s virtually unboxed?)
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I don't know what the future holds for NFTs. In the near term, the digital land rush will continue with artists, creators, and merchants of traditional collectibles flooding into the market, creating millions of asset tokens and gathering millions of dollars for collectors desperate to be part of the first wave.
I don’t think I’ll be joining them, but I’d love to hear some of your NFT tales as buyers, sellers, or creators. Feel free to share them here or with me on Twitter.