Decrypt the NFT Market: Connection Drives Economic Demand – A Meta-Analysis and Reflection
This meta-analysis probes into the strategic insights gathered from some eminent sector thought leaders. Their general views are that NFTs are proving to be culturally game-changing. It also addresses why some of the most valuable ones are being priced millions of dollars while others yield a pittance. One of the rarest iterations resold on October 20 for $2.7M; their derivative Mutant Apes, selling out for $96M in one hour before, at least temporarily, doubling in price; and the Degenerate Apes. Meanwhile, Fred Ehrsam, a cofounder of Coinbase, believes that 90% of them will be worthless within 5 years. What makes the difference between bonanza and dud? Is it simply “being in the right circle, having the right information at the right time”? Or is there more to it than that? Culture eats strategy for breakfast. Don’t Follow the Suits, Follow the Weirdos. Fame hath its privileges and a comparable dynamic exists within crypto culture. There is a strong human urge to belong. This also drives demand. The most potent connective tissue holding a community together is that of a powerful shared story. Potent and valuable. A powerful story delivers a Network Effect on steroids.
Ralph Benko
General Counsel to NewPavilionArt.com; coauthor, Redefining the Future of the Economy
Photo by Viktor Forgacs on Unsplash
The below meta-analysis probes into the strategic insights gathered from various eminent-sector thought leaders. Their general views are that NFTs are proving to be culturally game-changing.
It also addresses why some NFTs command millions of dollars while others — if they sell at all — yield a pittance.
Mona Lisa, by Leonardo da Vinci, courtesy of Wikimedia. Public Domain.
The tl;dr?
- Prices of everything are determined exclusively by supply and demand.
- Assessing supply is a craft.
- Assessing demand is an art.
Introduction
Trillions of pixels have been generated in 2021 about the nearly-hallucinatory prices realized by a handful of NFTs:
- Beeple’s Everydays, $69M;
- Hirst’s “The Currency,” 6x oversubscribed at $20M, market cap now is estimated at $500M;
- the CryptoPunks, wherein the owner of #6046 reportedly turned down an offer of $9.78 million.
Then, there’s the Bored Apes Yacht Club (BAYC): One of the rarest iterations resold on October 20 for $2.7M; their derivative Mutant Apes, selling out for $96M in one hour before, at least temporarily, doubling in price; and the un (or dis) associated Degenerate Apes selling for as much as $1.7M for the rarest.
Furthermore, what should one make of the Doge NFT, purchased for a bewildering $4M and then syndicated … to realize a $550M market cap?
For obvious “doge bites man” reasons, much less media attention is being given to the tens and hundreds of thousands of NFTs which realize little upon being sold… that’s if they sell at all.
Many of these, listed on exchanges such as OpenSea.io, demonstrate splendid artistic quality.
Quality certainly matters. Yet it obviously is just one factor in establishing demand.
What else matters?
Prices of everything are determined exclusively by supply and demand. What drives demand?
For one example, the excellent — but not yet established — young Pablo Picasso’s work became far more collected, and, thus, valuable, after he achieved international notoriety. The notoriety came from the massive publicity he received after being accused (although not convicted) of helping to steal the Mona Lisa from the Louvre.
That theft also ended up making the previously somewhat obscure Mona Lisa into the world’s most valuable painting.
“In the aftermath (of its return), with the painting gracing the front pages of newspapers the world over in the hoopla after the initial theft, and then again when it was found, and yet again during the well-publicized return to France, it had now come to be considered the world’s best known, and most valuable painting.
The Louvre saw a reported 100,000 people come view the painting in the first two days after its return alone, and it’s been one of the biggest draws at the massive facility ever since. As art critic Robert Hughes would lament, ‘People came not to look at the painting, but to say they that they’d seen it… The painting made the leap from artwork to icon of mass consumption.’”
Splendid in quality or not, many beautiful NFTs command but a hundredth, thousandth, or a few ten-thousandths ETH at sale. If they sell at all.
Meanwhile, Fred Ehrsam, a cofounder of Coinbase, believes that 90% of them will be worthless within 5 years.
So, which NFTs are likely to “moon” and retain, or even heighten, their value in the aftermarket, and which are more likely to fizzle?
The Secret Origin Story: “And Vitalik Wept”
On the theory that “as the sapling is bent so grows the tree,” let’s recount the newly embellished Secret Origin Story of NFTs. This embellishment was recently discovered and revealed to the candid world.
Crypto superhero Vitalik Buterin conceived Etherium, the taproot of NFTs, after having been nerfed to tears in World of Warcraft. As distilled by Owen S. Good at Polygon:
“’I happily played World of Warcraft during 2007-2010, but one day Blizzard removed the damage component from my beloved warlock’s Siphon Life spell,’ Vitalik Buterin, the programmer who developed Ethereum’s original concept in late 2013, says in a bio hosted at about.me. ‘I cried myself to sleep, and on that day I realized what horrors centralized services can bring. I soon decided to quit.’
Ethereum’s World of Warcraft ties have been mentioned by Buterin before, including in a 2017 Wired profile. His about.me bio created a social media stir this weekend when Thomas Shadwell, a Google engineer, noticed and tweeted the comment.
“Buterin expressed broad suspicion of corporations in that Wired profile … telling the publication, ‘I saw everything to do with either government regulation or corporate control as just being plain evil. And I assumed that people in those institutions were kind of like Mr. Burns, sitting behind their desks saying, ‘Excellent. How can I screw a thousand people over this time.’”
…
“Buterin conceived of the platform that would become Ethereum in late 2013, announcing it along with three financial backers at a Bitcoin conference in Miami a few months later. Ethereum was positioned as a more robust platform that could incorporate real-world assets, such as stocks and property. This led to NFTs, or Non-Fungible Tokens….”
Thus, it appears, NFTs are rooted in an anti-government regulation, anti-corporate control, ethos.
Bonanza or Dud?
As for what makes some NFTs super valuable and others duds at market:
Last September Bloomberg’s Justina Lee and Madeline Campbell piece Would-Be NFT Millionaires Throw Darts and Hit Duds elegantly explored the under-reported subject of NFT duds.
“As co-founder of a website tracking the spectrum of digital collectibles, Gauthier Zuppinger has seen it all. Drawings of toads, apes, abstract blobs, octopuses on heads, fire-breathing devils, and more.
“Since last month, as non-fungible tokens supplanted meme stocks and minor coins in speculative imaginations, his website has added 169 collections — more than the prior 12 months combined. For anyone convinced they possess an investing edge to become the industry’s Warren Buffett, the chief operating officer of Nonfungible.com has a word of warning.
“’Maybe 90% of collections minted today are totally useless and meaningless,’ Zuppinger said from Paris.
“Last week’s $24 million Sotheby’s auction of ape tokens, the $180 million Doge meme and other surreal superlatives from the summer of NFTs have all painted a pixelated picture of easy money. But the market is in fact a vast sprawl of varying investing outcomes, data compiled by Bloomberg show.
“’It’s just really a tiny piece of the community and some extremely lucky or well-informed people,” Zuppinger, an early enthusiast of virtual worlds, said in reference to the market success stories.
…
“One of the most prevalent investing outcomes: Getting stuck with something nobody else wants. In the 90 days through Monday, roughly 1.9 million assets were sold on the largest marketplace OpenSea. But about three quarters never saw another transaction.
“For those that do find buyers, the market is dominated by high-profile, high-value works. The most actively traded 3% of collections accounted for 97% of all dollar volume.
…
“’Ninety-nine percent is about being in the right circle, having the right information at the right time,’ said Zuppinger. ‘In the NFT space, you live with this constant frustration that you have missed a chance to make $1 billion.’”
What makes the difference between bonanza and dud? Is it simply “being in the right circle, having the right information at the right time”? Or is there more to it than that?
The NFT metaverse is so new and so novel that it would be premature to proclaim certainty. Yet there are some qualities that at least some of the pieces commanding extravagant prices seem to have in common. Follow
along.
This just in from the Department of Redundancy Department: Price is determined exclusively by supply and demand.
What factors drive NFT demand?
The ABC2s of NFTs
Here are some identified ABC2s for optimizing the chance of finding bonanza NFTs:
- Antihero Attitude.
- Bizarre Beauty.
- Celebrity and Community.
Spoiler alert: There is an added factor to be revealed toward the end of this essay.
Before digging deeper into the reports of the opinions of the Masters of the Metaverse, the NFT creators, collectors, and cultural critics, let’s summarize what many astronomically valuable NFTs seem to share. What seems to be driving demand to generate sometimes extravagant prices?
Antihero Attitude?
As Peter Drucker once, reportedly, told Mark Fields, president of Ford:
“Culture eats strategy for breakfast.”
So first let’s look at the crypto culture.
Beeple’s Everydays, Larva Labs’ CryptoPunks, the Bored Apes Yacht Club, among others, project a certain kind of insouciant libertarian, or, more precisely, anti-authoritarian, attitude toward “the suits.” That’s right out of the “And Vitalik wept” Secret Origin Story and a likely factor in driving demand.
Gone With the Wind‘s Bad Boy Rhett Butler (like Bad Girl Scarlett O’Hara) has haunted the popular imagination for decades. Meanwhile, we demote the virtuous Ashley Wilkes (and Melanie Hamilton) to the status of supporting players.
Breaking Bad entered the Guinness Book of World Records as the highest-rated TV series of all time.
Popular culture has become dominated by stories of antiheroes: Walter White, Don Draper, Barksdale, Frank Underwood, Tony Soprano. Meanwhile, “culture eats strategy for breakfast.”
The late 20th and early 21st century prevailing cultural ethos has leaned toward antiheroes in preference to heroes. As Dr. H. Eric Bender wrote in Psychology Today,
“Antiheroes liberate us. They reject societal constraints and expectations imposed upon us. Antiheroes give our grievances a voice. They make us feel like something right is being done, even if it is legally wrong. Antiheroes do things we’re afraid to do. They are who they are and they do as they want — without apology.”
And yet antiheroes are renegade, or at least maverick, heroes. They are not villains. They are not sadistic. They are not Mr. Burns.
In the swashbuckling culture of the crypto metaverse it is no surprise that collectors are powerfully drawn to antiheroic themes. As Brady Dale wrote at Coindesk:
The big wins in crypto are going to come from the punks, the hippies, the malcontents and the contrarians. What I’m saying is: In this very bullish season, don’t be enraptured by the suits.
We see the allure of the suits here at CoinDesk in a very direct way. For a few years, we saw an onslaught of corporate blockchain accelerators and pilot projects that were never about … well, anything. It was obvious “innovation theater,” but toward what end? Who knows?
I appreciate the allure. The whole argument to be “grown-up” seems very convincing. Yes, the future of blockchains is probably enterprise something something … it sounded truthy.
Now the suits are back and it looks like this time they are here for real. Instead of “blockchain not bitcoin” it seems like we have hit an inflection point where a lot of the rich guys hold a little BTC and maybe some ETH.
So is it all “game over” once Goldman or Morgan Stanley opens up a crypto division?
Game, set and match. Satoshi has won! Sooo … Wall Street can take it from here, right?
Just today, Visa announced a demo project using an Ethereum stablecoin. So this is all … settled?
That’s not where I’d place my bets.
I would suggest continuing to look at what the tinkerers are up to.
Holy SHIB, Batman! Dale perfectly states the creed of the crypto bros,
the NFT-collecting whales.
It reflects how they made their opulent fortunes. It is likely how you will (if you do) make yours.
“Follow the weirdos.”
Bizarre Beauty?
Ever wonder why the crypto bros are drawn to collect bizarre, rather than conventional, beauty?
The more “classical” digital artists, such as Mike Winkelmann (“Beeple”) and Michah Dowbak (“Mad Dog Jones”), demonstrate superior technique (and perhaps more sophisticated artistic vision) than that of Profile Pictures (PFPs).
The most prominent, and valuable, of their works trend toward the bizarre, or at least surreal, rather than the conventionally pretty.
Beeple and Mad Dog are more 1982-vintage Ridley Scott than Sandro Botticelli. Consider Beeple’s tour de force, Everydays, and Mad Dog Jones’s Replicator as exemplary of the genre.
Emphasis on noir, surreal or Dadaist characteristics doesn’t make works any less desirable. Consider the eminence of artists from Marcel Duchamp to Jean-Michel Basquiat.
As for the PFPs, from the CryptoPunks to the Bored Apes Yacht Club to, fast forward, the time of this composition, the Kaiju Kingz one discovers roughly pixilated or sumptuously cartooned subjects. These present an unconventional, yes bizarre, style imbued with a high concept aesthetic.
This caters to the bohemian tastes of the crypto bros, inciting demand. And at least an over-the-shoulder acknowledgment to NFT-obsessed virtuoso Jim Dee for his Why Yes, Generative Art IS Actually Art! Please Stop Criticizing It!
“These are serious, often incredible works of digital art!
It’s easy to forget that, although some of these images may be computer-generated 10,000 apes or cats or aliens or whatever, some digital artist (or team of artists) had to create those characters in the first place. And not only that, they had to work out the ways in which all of the traits and variations will come together once a computer gets hold of everything.
…
I think many dismiss the effort here as minimal when, in reality, it takes a serious level of detailed planning, just like any
artist would traditionally do on a serious art project. And that goes for everything from the most pixelated punks to the most photo-realistic cats.”
Celebrity?
In ancient Greece, the scribes and the bards exalted the titans, such as Prometheus and Phoebe, the Olympian gods, such as Zeus and Hera, the mythic heroes, such as Achilles and Odysseus, bringing attendant fame.
The Greeks had several words for “word,” from which we can learn:
- Logos, immanent divine reason;
- Mythos, the mythic;
- Epos, the epic; and
- Rheimos, the historic.
Let us learn from the classics.
The Olympian gods commanded the greatest veneration or at least adulation. We may consider them the first leading celebrities, immortalized in the NFTs of their era, marvelous statues now residing in our greatest museums.
A somewhat comparable “social hierarchy” may be detected in Calvinism, the theology upon which American culture was founded. It posited a God’s elect, predestined to Heaven, and preterite, predestined to Hell.
America’s first founders, the Puritans, obsessively searched for marks of election, such as wealth and social prestige. The prevailing culture, to this day, still assigns the successful – hello Jeff Bezos, Elon Musk, Richard Branson! – a more celestial social status than that afforded to
us Earthbound mortals.
One can discern a comparable pattern in today’s mainstream popular culture. Over there, in the universe next door, reside celebrities such as the “divine” Kardashians, largely celebrated for being celebrated rather than for any significant accomplishment.
Kardashian-adjacent Kylie Jenner (270M Instagram followers!) sold a majority stake in her cosmetics line for $600M at a $1.2B
valuation, drawing the following observation:
“On Quora, fans call out the prices of the products versus the actual quality, with one user pointing out, ‘A lot of the time you are paying for the brand and celebrity endorsement – rather than for any particular quality in the product.’
Another seconded, ‘her products are expensive mainly because they have her name on them.’
Yet another user added about the Kardashians and Jenners, ‘They have no motivation to sell inexpensive products at a low price when their followers/fans will pay ANYTHING for something that bears their name.’”
Thereupon Kim Kardashian sold a 20% interest in her line of cosmetics to Coty at a $1B valuation. That valuation was certainly buttressed by Kim’s 30 million social media followers.
Fame hath its privileges.
A comparable dynamic exists within crypto culture.
The ~2 million Instagram followers of Mike Winkelmann surely were one of the several factors in the success of the auction of his Everydays. Per The
Verge:
“’He showed us this collage, and that was my eureka moment when I knew this was going to be extremely important,” Noah Davis, a specialist in post-war and contemporary art at Christie’s, told The Verge. “It was just so monumental and so indicative of what NFTs can do.’
“A few factors explain why Beeple’s work has become so valuable. For one, he’s developed a large fan base, with around 2.5 million followers across social channels. And he’s famously prolific: as part of a project called ‘Everydays,’ Winkelmann creates and publishes a new digital
artwork every day. The project is now in its 14th year.
“At the same time, NFTs have blown up over the past month and — for the moment, at least — are being seen by many as the way digital art will be acquired and traded going forward. For collectors who believe that’s true, the escalating prices are nothing compared to what NFTs will be worth down the road, when the rest of the world has caught onto their value.
“Christie’s is also a legitimizing force for both Winkelmann’s art and NFTs as a technology. The 255-year-old auction house has sold some of the most famous paintings in history, from the only known portrait of Shakespeare created during his lifetime to the last-discovered painting by Leonardo da Vinci.
“Combine that with Winkelmann already being at the forefront of NFT sales, and today’s auction was destined to set records.
“’I do view this as the next chapter of art history,” Winkelmann said. “Now there is a way to collect digital art.’”
It is human nature to wish to be seated at the cool kids’ lunch table. Owning something created by a celebrity, whether a $29 lip kit or a $69M NFT, creates connection.
Connection drives demand.
On the supply side, let us note in passing, that lip kits have an unlimited
supply. There is only one owner of the Everydays.
Community?
There is a strong human urge to belong. This also drives demand.
Many years ago, at Forbes, I wrote a column in which I alluded to the unraveling of the social fabric of western civilization from a very personal perspective:
We have seen, over the past century, the dissolution of the tight-knit village structure. My great-grandparents grew up in close-knit villages (in Poland, Germany, and Croatia) in which all were closely connected from birth with the entire village.
This was followed by the dissolution of the tight-knit clan structure. My Old World-born grandparents, in New York City, lived within a clan in which they socialized, almost exclusively, among matriarchs and patriarchs, parents, children, aunts, uncles, cousins and siblings.
This in turn was followed by the dissolution of the tight-knit extended family structure. My parents closely socialized with their family members and spent every Thanksgiving with my mother’s sisters, their husbands, and their children. Both of my grandmothers died in the home of one of their children.
That was followed by the dissolution of the tight-knit nuclear family structure. I grew up in a nuclear family: father, mother, brother. My own children, of divorce, grew up in what used to be called a “broken home,” beloved yet shuttling between their father’s and mother’s homes.
The hunger to belong, the hunger for community, is deeply rooted in the human psyche. It goes back millennia, into unrecorded deep prehistory. This hunger surely is one of the drivers of billions of people into the Facebook social network and, perhaps, following on into the metaverse.
The hunger for connection is one of the psychically chthonic forces that can drive demand for NFTs.
Per CNBC’s analysis of why NFT trading volume has hit the double-digit billions:
“Owning NFTs also offers a form of social status in the crypto community, just like a Rolex or a Lamborghini does in “real life,” notable NFT collector Gmoney previously told CNBC. Make It. Like most people in the crypto community, he is known only by his online alias and prefers to remain anonymous.
“When someone buys a Rolex in the real world, they don’t spend the thousands of dollars because of the watch’s utility value.
A simple $5 watch could perform the same utility. It is to ‘flex’ their
status,” Gmoney said. “With an NFT, by posting it as my avatar on Twitter and Discord, I can quickly ‘flex’ with a picture.”
“This ‘flex’ can give an investor access to and acceptance in the crypto community, which is “the single most valuable aspect of NFTs,” Cooper Turley, a widely known crypto and NFT investor, previously said. ‘Without a community, NFTs have no value. My NFT investment thesis is based solely around the strength of an existing community, or the potential for one to emerge.’
As the communities surrounding NFTs have grown, NFT projects are becoming more like brands, DappRadar points out. “Renowned
celebrities like Snoop Dogg, Shaquille O’Neal and Steve Aoki are amongst the latest members to join exclusive communities, further strengthening the socialoutlook of the NFT space,” the report said.
As Gmoney puts it, “wanting to be part of something and wanting to be part of a group is natural.”
The Verge headlines its August analysis with the question Who’ll
Make the Next Million Dollar NFT and hints at the answer in the subhed: “Generative profile picture NFTs are all the rage, but creators say it’s not just about the money.”
“Projects like Cool Cats have become all the rage in the NFT space in the past few months, driven by the success of ludicrously valuable collections like CryptoPunks, some of which have sold for millions of dollars each.
…
“The biggest, at the moment, is apes. Bored Ape Yacht Club, which launched in April, includes 10,000 apes with a punk vibe, dressed in trucker hats, stud earrings, and mischievous grins. At launch, apes were sold for the equivalent of $186 a pop. Now, the cheapest ape costs more than $80,000, and several have sold for more than $300,000 each at today’s exchange rate.
“We were thinking, we have this club, this dive bar, what kind of people do we imagine would go into this bar? Who do we want? What kind of club would we ourselves want to be a part of?”
‘But nearly everyone who spoke with The Verge about their involvement in launching or buying these NFT series said the monetary component was just one part of the story, and often not even their primary interest. …
“The projects’ real selling point is supposed to be some combination of great art and access to a great community. …
“Several project founders said that focusing on money first and leaving community behind was a recipe for disaster. ‘That’s a loser’s game,” Gargamel says. “That’s how you create an unsustainable pump” — a
temporary price surge that eventually crashes — “and we’re trying to build this long-term.’
“BAYC, in particular, is interested in expanding what it means to be a member of their club. ‘Your ape is your Amex black card,” Gargamel said. It gets you NFT cred online, but maybe it can also get you into exclusive presales and events, like a recent meetup in LA.”
“Cred online.”
Membership in an elite, exclusive, community is assuredly a powerful demand driver.
The Verge was an early but not the first or only to note the disparity. For instance, Felix Josemon writing at Medium last April, in Created
NFT, but 0 sale? You are not alone. Brutal Reality of Foundation, OpenSea & Rarible, also emphasized community, or at least relationship between creators and collectors:
Foundation.App is one of the [most] famous NFT platform[s]. This as of writing have close to 25,000+ artists and creators on their waiting list, being ready to list their NFTs to the world. Hoping someone would own their NFTs. …
But let me tell you the brutal and ground reality!
Only about 36% or less are being sold!
My estimate would be it would be even under 20% or even far less.
So what happens to the 80% of the NFTs listed? It will die as no one ever notice.
Getting an invite to Foundation is hard. Foundation selects top 50 every week using Community upvote from among 25,000 each week.(PS: I run an invite train which might speed things up via peer invites, you can read more here)
But the harsh reality is that getting a sale on Foundation is super
hard!. Like super super hard based on the real data above.
Same goes to every other NFT Platforms out there, it would more or less
the same percentage.
We have discussed the problem so far? What’s the solution?
…
It’s all about the Relationships
Yes. If you have a great relationship with your potential collectors, you are more likely to make a sale. Even if you have millions of followers, only about 1 or 2 would be ultimately bidding on your project. This could be due to various reasons, could be the lack of knowledge, awareness and so on.
Having 1:1 true relationship with your potential buyer is a key.
Taking that thought to scale, consider how Kevin Kelly taught us in his now cult classic 1,000 True Fans how a community of followers is a demand driver.
Li Jin, writing more recently for Andreessen Horowitz (for noob readers, the leading VC in the blockchain sector) amends Kelly to argue that in the ‘passion economy,’ in which NFTs are instrumental, even 100 true fans can comfortably sustain an artist.
This may be something of an exaggeration. Yet one takes the point.
One of the most interesting minds pioneering NFTs is Morgan Beller. Beller, now a partner at NFX, along with the creative team she joined, recounts the inside story of the engaging and successful NFT project Stoner Cats:
Morgan:
“Storytelling is a fundamental part of being human. Today, monolithic gatekeepers (networks & big studios, at the moment) decide which stories get told and disseminated to the masses. We see it every day in legacy institutional media.
“But let’s say you have a really great story that deserves to see the light of day, and it can’t make it through these gates for a variety of reasons: “potentially controversial” is usually at the top.
“But we didn’t want to dumb it down or soften it up. We want to tell stories that resonate with audiences, not gatekeepers.
“So, one way to do this is to crowdfund that content directly from the consumers who want it. Consumers who want to see and hear stories that otherwise wouldn’t be produced. Consumers who want to share in some of that creative control (and deservedly so) and belong to something.
…
“Mack [Flavelle, per Morgan, founder of a company handling
the technology and community of Stoner Cats. Previously, the creative behind NBA Top Shots and CryptoKitties]:”
“We wanted to pave the way for fan-driven, creator-friendly content. We believe that content creators and fans should be able to connect and trade art directly without all the bureaucratic bullshit.”
“With blockchain technology we believe there’s a whole new way for fans to engage directly with the content they want to watch and be a part of the content creation process.”
…
Morgan:
“I think we generally have this philosophy of and, and, and. So you’re getting a piece of art, and you’re getting community, and you’re getting access to watch the show, and you get to interact with the creators, and…
Mack:
“So NFT is the framework by which not just content, but communities can blossom, is a really neat thing about what we’re doing, if we manage to do it right.”
And, yes, a blossoming community, done right, can be a serious demand driver.
My own assessment is that in the newly discovered universe of the NFTs the ability to create community, restoring a “classical republican – representative democracy” social order, is one of the most radical, most admirable and most valuable, aspects conjured.
It provides the blockchain with the killer app that so many, such as Marc Andreessen, have long sensed yet which remained elusive until 2021.
As Mr. Flavelle observed in his colloquy with Ms. Beller: “The most dangerous thing on earth is Facebook. There is nothing more dangerous than a network of people without constraints.”
Although I am more positively disposed toward Facebook (and its successor, Meta), this observation is consistent with the dim view of democracy held by most of the founders of the United States (and authors of the Constitution). They feared what others have called “mob rule.”
As James Madison, chief architect of the Constitution, wrote in Federalist 10: “Democracies have ever been spectacles of turbulence and contention; have ever been found incompatible with personal security, or the rights of property; and have in general been as short in their lives, as they have been violent in their deaths.”
Thus, America’s founders instituted (small r) republicanism,
representative democracy. Their avowed purpose? Providing popular
representation together with humane constraints.
Edmund Burke may seem far afield from NFTs. That said, his
statement of the ethos now being revived by aspiring founders of the metaverse such as Beller, Flavelle and others lucidly illuminates the value that NFTs offer. In his speech before the electors of Bristol Burke stated:
“Certainly, gentlemen, it ought to be the happiness and glory of a representative to live in the strictest union, the closest correspondence, and the most unreserved communication with his constituents.
Their wishes ought to have great weight with him; their opinion, high respect; their business, unremitted attention. It is his duty to sacrifice his repose, his pleasures, his satisfactions, to theirs; and above all, ever, and in all cases, to prefer their interest to his own.
But his unbiassed opinion, his mature judgment, his enlightened conscience, he ought not to sacrifice to you, to any man, or to any set of men living. These he does not derive from your pleasure; no, nor from the law and the constitution. They are a trust from Providence, for the abuse of which he is deeply answerable. Your representative owes you, not his industry only, but his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.”
There is a compellingly obvious value in creating an appropriately constrained network. It is something of which to be conscious in selecting an optimal consensus algorithm, something which my miglior fabbro co-author and I explored at some length in our book, Redefining the Future of the Economy: Governance Blocks and Economic Architecture.
The demand for both community with the constraints of the sort
to which Flavelle alludes, averting mob rule while replacing controversy-averse sclerotic gatekeepers is powerful. The discovery process is under way. Bravo!
And let’s consider the impact that Lobus is set to bring about. As recently described by Nicole Laporte at Fast Company: Move over, Bored Apes:
This $7 billion art platform is going all in on NFTs: The
artists’ equity-management platform Lobus is starting a Cultural Innovation Lab to help artists own more of their work through the blockchain:
“Artists are still beholden to this model where they’re effectively making 30 cents on the dollar and no residual participation in the secondary market,’ [Lobus co-founder Sarah Wendell] Sherrill says incredulously.
“Now, four years after launching Lobus, which allows artists to self-manage their assets and essentially be their own bank—the platform manages $7 billion in assets—are doing their part to change this and, in effect, help artists connect even more directly to consumers.
“How? Through nonfungible tokens (NFTs), which Sherrill declares are ‘the greatest unlock on ownership that art has seen in its history.’
…
“Sherrill adds that Troy Carter, an investor in Lobus and the cofounder
and CEO of music-tech company Q&A, has been a ‘wildly important voice” in helping Lobus see how “the power structures of talent and creativity’ in the art world ‘have been totally misaligned and inverted with where the money sat.’
“Smith says, ‘We really have to think of an NFT as a new medium,’ one that has a myriad of opportunities.
….
“The art world hasn’t had a mechanism to really open it up to that audience before.”
…
“’Adopting a blockchain and starting to attach artists’ ownership to what we know as royalty and resell rights, those sorts of things can create a healthier art market and still allow the types of traders, buyers, and collectors to operate in all that—but have the artists at the center of it.’”
There always will be a valuable role for gifted arbiters of taste and promoters of artworks such as gallerists. Yet collectors are likely to find a closer connection to the creator himself or herself the more desirable. By fomenting a direct connection, NFTs, properly configured, can enhance demand and, thus, value.
Beyond the ABC2s
And now, the Big Reveal, of one added and invaluable ingredient, let’s loop
back to the Secret Origin Story, “And Vitalik Wept.” Then let’s touch on a
seemingly-just-in-in passing, yet perhaps purposeful, comment by Ms. Beller:
“Storytelling is a fundamental part of being human.”
Now let us view the NFT Secret Origin Story, “And Vitalik Wept,” and Beller’s tribute to storytelling through the lens of a classic book on persuasion by Samuel P. Newman. He, in 1827, codified persuasion technique: A Practical
System of Rhetoric.
It teaches that there are four modes of discourse.
Three weak. One strong.
The weak, to which many boffins, nerds and neurodivergents are much attached, are description, exposition and argument. Flavelle astutely also observed: “We want to change how content is created and how crypto interacts with Muggles. (A friendly word to remind us — crypto people — that we still need to do a better job at communicating with the rest of the world, the noncrypto people.)”
How to do a better job communicating?
Use the strong mode:
Narrative
(In passing let me allude to my own discovery of a second strong mode, declaration, about which I shall now desist from further addressing as beyond the scope of this essay.)
The most potent connective tissue holding a community together is that of a powerful shared story. Potent and valuable.
A powerful story delivers a Network Effect on steroids.
Few recall what’s written (descriptively) in the Code of Hammurabi. Yet
most of us, thousands of years later, can recall at least the broad
outlines of the narratives of the Trojan War, as recounted in the Iliad, and
the arduous return home to Ithaka by Odysseus, as recounted in the
Odyssey.
Epic!
Few outside the Orthodox Jewish community can tell you what’s in the (expositive) book of Leviticus.
Most people, however, can recount the dramatic stories of Adam and Eve, Cain and Abel, Noah and the Ark … among other dramatic narratives in western culture’s “Genesis block.”
Further on in the Hebrew scriptures, we find the indelible stories of Moses, David, and others. These stories have sustained us Hebrews as a people while many an empire rose and fell, and many other peoples descended into obscurity … and disappeared.
Stories can have great power. And … people wish to participate in the story. That drives demand.
Just imagine the demand for the NFT of the fruit of the tree of
knowledge of good and evil …were such an NFT to exist.
Stories on NFTs? Priceless.
This dynamic, very much including the work of the Stoner Cats team,
has not gone unnoticed. As Ben Arnon lucidly explored at Cointelegraph,
in We haven’t even begun to tap into the potential of NFTs:
“What excites me, even more, is NFTs as storytelling vehicles, where the NFTs are powered by deep gamification strategies and community layers and become critical components of a multi-platform, transmedia storytelling experience.
…
“As the industry matures, people will become more sophisticated in how they think about NFTs and the ultimate value NFTs deliver for fans and IP owners alike. The utility will become increasingly important as fans and consumers seek to better understand the “so what” factor behind NFTs. So what that I own this NFT. . .what can it do for me? What benefits does it bring to my life? What value do I gain by owning this
NFT and how long will this value last?
“The industry will continue to take major strides forward as key innovators in the space turn our focus to community, game mechanics and narrative storytelling to drive real value and utility from the NFTs we bring to market.”
Conclusion
Thus, in assessing the potential demand for an NFT, an imperfect art yet better than none, let the candid world take to heart the ABC2s here set forth:
Antihero Attitude.
Bizarre Beauty.
Celebrity and Community.
And add thereto what I commend shall be henceforth known as Beller’s Law: “Storytelling is a fundamental part of being human.”
Discerning the quality of the narrative, and metanarrative, perhaps as embedded in the metadata, can be a powerful way to assess potential demand, and thus value. This will help guide creators, collectors and cultural critics in creating, collecting and commenting upon the best candidates for an NFT bonanza.
Learn your NFT ABC2s. Master the discernment of narrative and metanarrative.
As this universe definitively enters the metaverse may at least one of your NFTs prove as valuable as the Mona Lisa!
© 2021 Ralph Benko
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Decrypt the NFT Market: Connection Drives Economic Demand – A Meta-Analysis and Reflection
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