Nit: fungible does not mean divisible, it means interchangeable (as in, a dollar bill or a digital payment token is conceptually an functionally identical to every other dollar bill / payment token in the world). NFTs are non-fungible because every one of them serves a different purpose (certifies a different virtual good). Or that's the narrative, anyway – nothing actually stops you from creating an NFT for an image that already has another NFT, so the "certification factor" of NFTs is actually somewhat extrinsic: what you are really buying is an entry on the Bored Ape website.
Aug 9, 2022·edited Aug 9, 2022Liked by Tomas Pueyo
My answers qualify me as one who does not understand art and NFTs. But I have a story.
On February 27, 2022, I was performing in a comedy competition. After Russia's invasion of Ukraine on February 24, I slightly modified the ending of my standup set to show solidarity with Ukraine. As an afterthought I wanted to get a Ukrainian flag for my performance, but at that time they were not easily available yet. On the other hand here in D.C., there were many protests and some people carried flags. I saw a guy with a flag on Connecticut Ave., came up to him, and talked to him in Russian (I don't remember the Ukrainian language which I studied many years ago but never used). I asked to buy his flag. He was almost offended, he said it was his flag and he showed some dark spots which he said were a dried blood of his friends who were fighting in Donbas after 2014. I explained that I wanted to have a flag for a public performance and told him the lines I was going to use.
The guy changed his mind and he gave me the flag. He told me to take it and refused to accept any money. I said that I wanted to pay to support him in his cause. He said that there are places that need my money more than he does. I said that I'll give him the money and he can use it as best he knows. He agreed. I emptied my wallet of all my paper currency, which was over $90.
I have the flag. Today, Ukrainian flags are easily available and relatively inexpensive. But MY flag has a story behind it. And dried blood.
Victoria
P.S. When I unexpectedly pulled out the flag at the end of my standup set I received an ovation. In the end, I took the 2nd place out of 14 performers.
Thank you Tomas. This piece helps me understand why I find NFT art repulsive: what better example than the BAYC. Excess wealth excessively concentrated is always wasted. Given the many ways our community and the earth itself needs our care and attention, these expressions of wealth are the opposite of beauty.
You might overlook the fact that most NFTs buyers are seeing NFTs first as investment assets, and then, tangentially, as art or luxury items. Luxury items are the opposite: they are first seen as, well, crazy ass expensive items that provide some value (watches, bags, suits..), and then with time they can reveal themselves as great investments (but not always). I'd argue luxury items early adopters went in because they loved the product. Not because they thought they could make a quick buck on it. Meanwhile, early NFT adopters went in because they saw the value of the NFT rise, (often by wash trading), not because they loved the product (you'd be hard pressed to let us think they had an instant crush on an ugly ape jpg)
So if NFTs are first and foremost investment assets, the question might be : are NFTs good investments? I won't tackle this fully here, but clearly the way those celebs are showing off their bored apes seem more linked to an intention of propping up the values of those NFTs (with potential direct financial incentives given to them by BAYC, a common practice that you didn't mention) than an actual desire to let you in in a tremendous, little know investment opportunity. This fact alone should ring some alarm bells to the more common investors.
On the same line, your very own attempt to conflate NFT with art or luxury items looks more like a tentative to prop up the value of those NFT as investments, since they have no intrinsic value. In essence the whole logic behind is "buy this nft, then its value will increase, which will then make it become a luxury item, which will prove it's a great investment". Pure whishful thinking logic. Again I don't think it goes that way for luxury or art items. First the product appeal, then the investment opportunity.
I see your point and it’s valid. Let me rephrase it though:
NFTs, luxury, and art all have a component of personal enjoyment and investment. What might differ is how much each one has.
I think the article explains why, at least for art, the personal enjoyment is actually not that great, since the intrinsic value is not that big.
As for luxury, I don’t think most of the value is intrinsic either. Luxury’s main point is showing off somebody’s wealth. The fact that a Rolex or Ferrari are more acceptable than an NFT is just a social convention. These change.
Este es otro de esos artículos que me hacen pensar que ves nuestro mundo terrestre desde una perspectiva real, clara y distinta; tal como si la vieras desde Venus o Marte por ejemplo. Me ha encantado y me he reido sobre todo con el episodio de los diamantes. Los humanos seguimos siendo como niños que presumen del coche de su papá pero tú, Tomás, lo describes a la perfección y me hace sentir menos rara por sentir ridículo este montaje humano de presunción continua. Gracias¡¡
Me alegro mucho, Marisa! Así lo veo: niños, resultado de los genes y de su evolución. Los detalles son tan complejos que nos suelen impedir ver la estructura, que es sencilla al fin y al cabo.
"In summary, aside from scarcity, it’s very hard to predict what type of social consensus on extrinsic value will emerge, but odds increase when a work of art belongs to history, has some shock value, has strong storytelling, is backed by some authority figure, and clearly allows buyers to express themselves."
As it happens, this is also largely what explains viral memes on the internet!
True! I would add some things and take others out (Eg authority backing or belonging to history are less necessary for virality, whereas morbidity is great for virals but less so for art I’d assume)
Luxury goods market in US is around $50B, NFT market seems to be around $10B. This article paints a major bear case for NFTs; if they completely displace luxury goods they only grow 5x from here?
Both numbers were US based after a bit of googling. Did not include art but sure that can be added though according to your argument not all of it, it would only be the Sotheby’s/Christie’s veblen goods side. The liquidity part of your response I don’t get; sure in most markets increased liquidity grows it, but your essay walked through scarcity as a primary driver of Veblen good value creation so that’s a weird response. If it was easier to trade Hermes bags, would that market dramatically increase in size? Don’t think so, as with Veblen goods you are buying to hold, not trade. Non Veblen goods uses of NFTs might be a larger market but if we take your argument as focused on Veblen goods, it genuinely paints to me a picture of a pretty small market massively overhyped.
On Veblen, I think in general there are good and bad scarcities. Some luxury can play off of the hard effort access. Most will play on money needed.
But I think you're probably right that the luxury / art future of NFTs is more bounded than maximalists think. I think the future of NFTs is different. I explain it in today's article. Have you read it?
Nit: fungible does not mean divisible, it means interchangeable (as in, a dollar bill or a digital payment token is conceptually an functionally identical to every other dollar bill / payment token in the world). NFTs are non-fungible because every one of them serves a different purpose (certifies a different virtual good). Or that's the narrative, anyway – nothing actually stops you from creating an NFT for an image that already has another NFT, so the "certification factor" of NFTs is actually somewhat extrinsic: what you are really buying is an entry on the Bored Ape website.
Thanks! You're right. Will correct in the article.
My answers qualify me as one who does not understand art and NFTs. But I have a story.
On February 27, 2022, I was performing in a comedy competition. After Russia's invasion of Ukraine on February 24, I slightly modified the ending of my standup set to show solidarity with Ukraine. As an afterthought I wanted to get a Ukrainian flag for my performance, but at that time they were not easily available yet. On the other hand here in D.C., there were many protests and some people carried flags. I saw a guy with a flag on Connecticut Ave., came up to him, and talked to him in Russian (I don't remember the Ukrainian language which I studied many years ago but never used). I asked to buy his flag. He was almost offended, he said it was his flag and he showed some dark spots which he said were a dried blood of his friends who were fighting in Donbas after 2014. I explained that I wanted to have a flag for a public performance and told him the lines I was going to use.
The guy changed his mind and he gave me the flag. He told me to take it and refused to accept any money. I said that I wanted to pay to support him in his cause. He said that there are places that need my money more than he does. I said that I'll give him the money and he can use it as best he knows. He agreed. I emptied my wallet of all my paper currency, which was over $90.
I have the flag. Today, Ukrainian flags are easily available and relatively inexpensive. But MY flag has a story behind it. And dried blood.
Victoria
P.S. When I unexpectedly pulled out the flag at the end of my standup set I received an ovation. In the end, I took the 2nd place out of 14 performers.
I think you totally get NFTs Victoria
Super cool story. Thanks for sharing
Thank you Tomas. This piece helps me understand why I find NFT art repulsive: what better example than the BAYC. Excess wealth excessively concentrated is always wasted. Given the many ways our community and the earth itself needs our care and attention, these expressions of wealth are the opposite of beauty.
As much as art and luxury.
You might overlook the fact that most NFTs buyers are seeing NFTs first as investment assets, and then, tangentially, as art or luxury items. Luxury items are the opposite: they are first seen as, well, crazy ass expensive items that provide some value (watches, bags, suits..), and then with time they can reveal themselves as great investments (but not always). I'd argue luxury items early adopters went in because they loved the product. Not because they thought they could make a quick buck on it. Meanwhile, early NFT adopters went in because they saw the value of the NFT rise, (often by wash trading), not because they loved the product (you'd be hard pressed to let us think they had an instant crush on an ugly ape jpg)
So if NFTs are first and foremost investment assets, the question might be : are NFTs good investments? I won't tackle this fully here, but clearly the way those celebs are showing off their bored apes seem more linked to an intention of propping up the values of those NFTs (with potential direct financial incentives given to them by BAYC, a common practice that you didn't mention) than an actual desire to let you in in a tremendous, little know investment opportunity. This fact alone should ring some alarm bells to the more common investors.
On the same line, your very own attempt to conflate NFT with art or luxury items looks more like a tentative to prop up the value of those NFT as investments, since they have no intrinsic value. In essence the whole logic behind is "buy this nft, then its value will increase, which will then make it become a luxury item, which will prove it's a great investment". Pure whishful thinking logic. Again I don't think it goes that way for luxury or art items. First the product appeal, then the investment opportunity.
I see your point and it’s valid. Let me rephrase it though:
NFTs, luxury, and art all have a component of personal enjoyment and investment. What might differ is how much each one has.
I think the article explains why, at least for art, the personal enjoyment is actually not that great, since the intrinsic value is not that big.
As for luxury, I don’t think most of the value is intrinsic either. Luxury’s main point is showing off somebody’s wealth. The fact that a Rolex or Ferrari are more acceptable than an NFT is just a social convention. These change.
Este es otro de esos artículos que me hacen pensar que ves nuestro mundo terrestre desde una perspectiva real, clara y distinta; tal como si la vieras desde Venus o Marte por ejemplo. Me ha encantado y me he reido sobre todo con el episodio de los diamantes. Los humanos seguimos siendo como niños que presumen del coche de su papá pero tú, Tomás, lo describes a la perfección y me hace sentir menos rara por sentir ridículo este montaje humano de presunción continua. Gracias¡¡
Me alegro mucho, Marisa! Así lo veo: niños, resultado de los genes y de su evolución. Los detalles son tan complejos que nos suelen impedir ver la estructura, que es sencilla al fin y al cabo.
"In summary, aside from scarcity, it’s very hard to predict what type of social consensus on extrinsic value will emerge, but odds increase when a work of art belongs to history, has some shock value, has strong storytelling, is backed by some authority figure, and clearly allows buyers to express themselves."
As it happens, this is also largely what explains viral memes on the internet!
True! I would add some things and take others out (Eg authority backing or belonging to history are less necessary for virality, whereas morbidity is great for virals but less so for art I’d assume)
> "discrete"
Owch. Discreet, if you please.
I didn’t know! Corrected, thanks!
It all makes sense if you keep thinking 'money laundering'.
It is indeed a use case.
Like luxury and art.
dd
Luxury goods market in US is around $50B, NFT market seems to be around $10B. This article paints a major bear case for NFTs; if they completely displace luxury goods they only grow 5x from here?
Are you comparing global NFT markets with US markets?
Also, just luxury and not art?
Also, if you’re making a market substantially more liquid and with less friction, it tends to increase.
Finally, there are other use cases for NFTs.
All in all, I wouldn’t think NFTs are capped at 5x
Both numbers were US based after a bit of googling. Did not include art but sure that can be added though according to your argument not all of it, it would only be the Sotheby’s/Christie’s veblen goods side. The liquidity part of your response I don’t get; sure in most markets increased liquidity grows it, but your essay walked through scarcity as a primary driver of Veblen good value creation so that’s a weird response. If it was easier to trade Hermes bags, would that market dramatically increase in size? Don’t think so, as with Veblen goods you are buying to hold, not trade. Non Veblen goods uses of NFTs might be a larger market but if we take your argument as focused on Veblen goods, it genuinely paints to me a picture of a pretty small market massively overhyped.
Good points!
On Veblen, I think in general there are good and bad scarcities. Some luxury can play off of the hard effort access. Most will play on money needed.
But I think you're probably right that the luxury / art future of NFTs is more bounded than maximalists think. I think the future of NFTs is different. I explain it in today's article. Have you read it?
https://unchartedterritories.tomaspueyo.com/p/the-future-of-nfts