The Weekly Take
A major criticism levelled against NFTs is that they rely on artificial scarcity. Since digital images can be costlessly reproduced, it is argued, what purpose does it serve to limit the number of people who can “own” a digital object?
Ignoring for one second the fact that the legal landscape around the reproduction and distribution of digital images is already heavily restricted through intellectual property law, the concept of an authentic print of an easily reproduced medium being valuable to collectors is not new. For example, cardboard Pokémon cards have no real barrier to print more and yet rare cards routinely sell for five and six figures. Prints of art depend heavily on things like the presence of a signature or age or edition size that have nothing to do with the art itself.
Beyond the peculiarities of collector taste for scarcity, NFTs also serve as a method to connect collectors and artists together. The public nature of blockchains allows artists to see (and potentially reward) their collector base without having to maintain their own list of who owns what. Beyond that, collector communities can arise in a decentralized manner without the need for any coordination from a central party. There is an element of proof-of-collector where ownership of an NFT signals buy-in to the community around the collectible or the art.
Finally, NFTs are beginning to become the means with which intellectual and commercial property rights can be distributed to holders. The most successful version of this has been the Bored Ape Yacht Club ecosystem which assigns full commercial rights to holders of their NFTs. From this, a writer’s collective, a band, and a restaurant (among other things) have all been formed without requiring the permission of the original IP holder Yuga Labs to go forward.
Digital goods have existed for as long as the internet. And yet before NFTs, the incentives for consumers to collect digital work were almost non-existent. The music industry was almost destroyed by digital file sharing. Digital artists largely had to sell their work on commission for tiny sums or work in house creating assets for their employers. And the few objects that did command high prices like Minecraft capes or Counterstrike skins were restricted to be used within carefully controlled environments. NFTs have simply adapted old techniques for artists and collectible makers to produce the scarcity and control that collectors value.
Yuga Labs announced the auction for their Otherside metaverse land will take place on Saturday April 30th. Only those who participated in their KYC request will be able to participate. Land can only be purchased in the $ape ecosystem token which has seen significant appreciation in recent days. Promises to be a wild day in NFTs.
In more metaverse news, Sandbox looks to raise $400 million (at a more than $4 billion valuation) in its next round of fundraising. Metaverse valuations have seen significant declines in 2022 after reaching highs at the end of 2021. With more free-to-use metaverses like Webaverse (who we will be talking with next Monday on Twitter spaces) and 6529’s Open Metaverse, the continued pressure from more established players like Meta and Epic Games, and upstarts like Yuga Labs’ Otherside it will be interesting to watch how the original pay-to-own metaverses like Decentraland and Sandbox maintain their lead.
What To Look For
May 2nd - May 6th, daily at 3pm EST:
Metanomics’ first sweeps week where we dive head first into the world of NFT gaming. Starting next Monday, we interview a new guest each week building the web3 evolution of gaming.
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The author may be an investor in one or more of the companies, investment products, or NFT projects mentioned in this article.