NFTs Are a Grift - For Now
But they (hopefully) won't always be
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Disclaimer: this is not financial advice & I’m not an expert.
The NFT market reached peaked mania when this NFT sold for a shocking…
*checks notes*
$4 million dollars!
Yes, this lazy, goofy little doodle is more valuable than my entire net worth. 🥲
But it raises the question… why?
Why do people want to own a token representing random pictures?
Speculation. It was always about speculation. The idea that another suck will try to buy it for even more money at some later time.
Remember the guy that bought Jack Dorsey’s “first tweet NFT” a few months back for $48 million? When he tried selling it, the highest bid he got was a whopping… $280. Yes, really. He actually thought someone else would buy it for that price.
Those are just 2 silly little examples. But rest assured, just about the entire NFT market is like this. None of them will have real utility beyond “joining a community” or whatever else.
NFT Speculation Mania
NFTs were ripe for the most speculative mania in all of web3. And just about every single project has gone to zero or will eventually. Does that mean NFTs don’t have a future online?
This is where we need to distinguish the trend from the fad.
Trends vs Fads
Trends are revolutionary changes to systems that create new or different incentive structures.
Trends create new systems — there’s a new system or incentive structure that changes real-world behavior.
Trends can be tools — tools enable others to build on top of the existing technology. Electricity enabled inventors to make other tools better.
Trends don’t just impact the people directly involved, but potentially… everyone.
Think about the internet as a trend. Access to any and all information at the tip of your fingers. The ability to communicate with nearly anyone on Earth.
The internet created entire new industries, and fixed many older ones. It is the biggest trend of our lifetimes.
Web3 is a trend as well. It has the potential to revolutionize software in a way few can imagine. If you’re reading this, you likely understand how powerful these changes can be.
So, what is the difference between a trend and a fad?
Fads are explosions of enthusiasm. They don’t change systems or incentive structures. A fad’s success or failure doesn’t impact anyone outside those directly involved with it.
Nearly all fads share these 2 elements:
Social acceptance — people are memetic & copy those around them. It’s like an intellectual contagion. A single person spreads a fad to dozens of others. As more people believe in the fad, the easier it becomes to believe. It gains legitimacy through widespread approval.
Speculation — people invest in the hopes of making more money. They hope they’re going to turn $100 into a million. This makes fads comparable to gambling.
Everyone loves talking about the Tulip mania. But a better example is the Pokémon card craze.
Pokémon cards started selling for hundreds and even thousands of dollars! Most people correctly identified this as a fad. And similarly to NFTs, it was driven by rampant speculation. Nobody really cared about these goofy trading cards for children. It was always about making a quick buck.
Are NFTs a Trend or a Fad?
NFTs as a technology are a trend without a doubt. A smaller trend following the web3 movement. And largely for all the reasons NFT bros talk about.
Digital ownership of digital goods
Financialization of everything
Fractionalized ownership
So, NFTs are likely going to be a key part of the future. But most NFT projects today probably won’t.
Trends have this tendency to foster fads within them that piggyback off the legitimate momentum.
The dotcom boom illustrates this point perfectly. Investors began recognizing the internet as the future. They saw the potential it was going to have on the world. But instead of investing in only legitimate companies, they threw money at anything that looked like it had a shot at becoming big.
Then came the crash.
We have the benefit of living in the future, where the general thesis was proved correct. The internet did change the world. But that didn’t make any of those internet companies successful.
NFTs are comparable to the dotcom boom in that sense.
NFTs likely will change the world. They change systems & incentive structures in a way that is undeniable. But all these random 10k pfp projects? Well, they’re those random internet companies that existed during the dotcom boom.
Some of them have interesting ideas. But the technology isn’t mature enough to put most of these ideas into practice.
What is the Future of NFTs?
I’m not going to lie to you… nobody can predict the future of NFTs. And anyone who says they can is lying to you.
Do you know how many people accurately predicted the future of the internet during the dotcom boom & bust? Basically nobody. And those who did were the ones building the companies of the future.
The future of NFTs could look totally different than they do today. Maybe digital ownership turns out to be a relatively minor thing in the long run? Maybe NFTs become less about speculation and more about something else that nobody has even thought of yet?
It’s impossible to say.
The only thing we can say for certain is that 10k NFT pfp projects or whatever else won’t be part of the future.
The fad projects will die. But the NFT trend will continue.
