Quite recently, in the early summer of 2021, the media were actively talking about how the NFT market was stagnating. They believed that very soon all these projects would lose any value to the market.
They believed that once the hype blew over, the value of NFT-projects will be about zero, and investors who considered this channel of work as an opportunity to make a profit in the long term will go broke.
Hmmm… But a month passed, and the market still does not collapse!
Moreover, a month or so later, something hilarious happened. NFT came back with a deafening roar. In just 24 hours, NFT trading volume reached $106 million from just two trading venues: OpenSea and Axie Infinity.
According to DappRadar, in the last 30 days, the volume of the top ten NFT markets was $1.86 billion.
You can tell right away that the NFT market has collapsed and we’re all broke, right? [Sarcasm mode on]
So why is the NFT market still promising and growing?
That question was recently answered by Eugene Wei, a former product leader at Amazon, Hulu, Flipboard, and Oculus, one of the best tech writers on the Internet.
Virtually everything he writes becomes canon, and the Status-as-a-Service concept he first described in February 2019 may be his biggest contribution.
If you reduce his article of more than 12,000 words to one simple sentence, it is that NFT is a new way of communicating, a kind of social network that forms around the values of the new world.
His article is based on two points:
- People are status-seeking monkeys [sounds like a punk-rock band];
- People are looking for the most efficient way to maximize their social capital.
These are indisputable claims. However, Wei argues that we do not analyze social media in terms of status or social capital. It’s easier to analyze money. Money implies numbers and some direct data for analysis.
NFT blurs the lines between social and financial capital, while, as the media point out, buying a JPEG for thousands or millions of dollars seems quite irrational.
People who reject NFT are making the same mistake that Way said they made when analyzing social media: they are missing the importance of social capital.
Therefore, it turns out that the ultimate value of NFT and the classic social network are identical.
He says that new social networks are similar in four ways to initial coin offerings (ICOs), and that’s an awesome comparison that seems incredibly accurate.
Let’s take Bitcoin and Twitter as an example.
— Bitcoin releases Bitcoin (BTC). Twitter “releases” subscribers;
— Miners get BTC for securing the network. Twitter users get followers for witty, funny, and badass 140/280-character tweets;
— Mining BTC is more complicated now than it was before. It’s only going to get harder until the last BTC. In the early days of Twitter, people subscribed to trivial tweets about food, but now they have become more sophisticated and demanding.
Just 15 years ago, there was no Bitcoin or Twitter. But today, both are quite powerful tools.
These networks have gone from nothing to something big, by incentivizing early users and making it harder to mine new tokens.
All 4 points need to be understood, but the most valuable is the idea of confirming work in status games.
If 1 million followers were given for every Twitter signup, there would be no value or social capital in that million followers.
The deficit of followers makes them valuable.
The power of NFTs is that they turn digital assets into scarcity assets. Doesn’t that remind you of anything?
Deficit makes digital assets valuable, like exotic cars, art pieces, or rare stamps.
Above you see a graph with three axes defining any social network: social capital, entertainment, utility. Let’s put the NFT market on this chart.
NFT is social capital for those who have been in the game a long time. It is “Investment as Status.”
There are only 10,000 cryptopunks and apes, and in this limited-edition collection there are more valuable, and therefore more status pieces. If you get one, it often becomes your avatar on Twitter, Discord, or Telegram. And that actually means something.
It means you’ve either been around long enough, or you’re rich, or both.
And yes, there’s nothing new about using expensive things to increase social capital. It’s the same as an expensive car, watch, yacht, bag, or any other expensive item. Except that NFT is more accessible and understandable to the public.
NFT also has utility as an investment. It can be a right of access to private Discord groups or even something that can be hung on a digital wall. NFTs often go up in value, and if you buy an asset today for a couple of hundred dollars, you can sell it for tens of thousands tomorrow. Some [sure you found out which ones] NFTs give you access to a yacht club, some just give you entry to a closed community. Anyway, NFT-projects give holders access to some unique events and new experiences.
Most successful social networks have a high score on the entertainment axis. TikTok is probably more of an entertainment network than a social network. The same is true of YouTube. People scroll through the Twitter feed for hours every day without any interaction, purely as passive entertainment.
NFT has an entertainment component, too. Besides having fun watching the trading process, some people are starting to create their own characters or pictures. For example, 1MillionNFTs has developed the entertainment component to the limit, and you can pixelate any image and add any accompanying description, title, URL to it.
Many NFT titans believe that in the future any major cultural event will be immortalized as an NFT. It turns out that NFTs provide social capital, utility, and entertainment. That is, they meet all the principles of a sustainable social structure.
But there is no one NFT, Inc. site that can be compared to a classic social network. Roughly speaking, every member of the community carries their own social network in the pocket. We are not tied to any single platform. This is the next stage of social communication.
You can earn social capital in one place, own it without platform risk, and carry it with you all over the Internet. The same goes for NFTs, which are in no way concerned with which platforms rise and fall.
The NFT is a part of the Great Online Game, and therefore the rules and features are always evolving and expanding.
Powerful things happen when you combine money, status, and community. Therefore, the NFT market will collapse only when people have no need for status, social capital and entertainment.