NFTs are, to put it as simply as possible, “art on the blockchain.” Again, trying not to muddy the waters here, basically people mint a single or limited edition amount of some digitized work-of-art (this is totally subjective) and then put it on-sale. That’s pretty much it.
There’s a lot to be said for this, from both the supporters and the skeptics, but I fall resolutely in neither camp. Why not? Because, like other collectables and art markets, the value is subjective and will undoubtedly go through massive swings in valuations.
Like Art, But Better. Wait. No, no. Just Like Art.
While it’s easy to explore the illiquid NFT market, look at odd, massive transactions, point to them, and scream “This is obvious money laundering!” I urge you to take the time to explore the physical art market. It’s basically made up of buying and selling by large institutions and billionaire whales, used for money laundering and tax evasion, and is almost exclusively useful for those already wealthy.
That’s what NFTs are, but with a blockchain/smart contract.
But like art, while mainly being used contemporaneously by wealthy people to store value, pump prices easily, and move money discreetly, there are legitimate usecases for all of this.
Here’s the perspective from a skeptic who wants to see people in creative fields get paid appropriately and hopes NFTs could help:
- seeing a lot of artists dive into this and get paid significant amounts of money for their work — most of them are established artists, but this influx of seemingly-absurd valuations is optimistic for other, less well-known artists in the future.
- concepts like NBA Top Shots have caught fire and the attention of collectors and professional gamblers — two of the most important sectors for an asset like this. So, this is good for other corporations/sports/video games/card games that may be inclined to jump on the NFT bandwagon.
- I’ve personally seen skeptical people become believers overnight — and while I might find that a bit cringe, it’s nice to see money go to the right people/causes (in this case artists I may support).
Calling Out a Bubble Means Little, Particularly in Known Illiquid Markets Without a Mechanism to Short
So you think NFTs are in a bubble? That they’re near worthless and destined for zero, all of them? Maybe, like me, you find some concepts particularly abhorrent:
Cool story, bro. How can I make money on your objections?
“Well… you can’t. The only way to make money on my prediction of an NFT market-wide collapse is to avoid most of the NFT market and use your money for something else,” a skeptic may proclaim.
Sounds, forgive me for the bluntness here, stupid and boring, especially to collectors and professional gamblers. If you want to convince people who wager everything on assets and odds all the time, money talks.
I’ll never collect baseball cards or expensive fine art. It’s not something I care about. But I can empathize with that desire and understand the value, whether I agree or not.
What I’m trying to say is, on a basic societal level, I understand both the dark market and actual market value for NFTs because it so visibly mirrors the broader art market. Don’t get confused and think that means “we aren’t in a bubble!” or “so number can’t go down?” That’s simply false.
I see that a skeptical view like mine isn’t exactly valuable to people flipping digitized basketball cards. That doesn’t bother me, and I’d assume my feelings couldn’t matter less to people 1000Xing their net worth overnight on a random digitized lottery ticket.
Stay skeptical, friends.