Evaluating NFTs sounds simple, but it is actually one of the most challenging things – it contains many intangible aspects such as culture and aesthetics. Doing this job well requires a combination of deep vertical knowledge, experience, and keen intuition. I personally think that in the future Metaverse (where everything is NFT), NFT evaluation will be an influential new work. They will be the digital counterparts of today’s real estate appraisers or art appraisers. I admire teams like Upshot for their unique approach to pricing, although my point is that a purely data-driven approach is not enough.
We know that all valuation metrics are a meme. Monetary value is not physics: as such, it cannot be quantified with certainty in a truly objective way, unlike today’s air temperature (32 degrees Celsius, Singapore is sweltering) or the speed of a car. As humans, we attach value to what we think is important, or what we think others think is important. If enough people believe it, it will become a reality.
Think about it:
Bitcoin Stock-to-Flow model? Meme
Stock price-earnings ratio? Meme
Interestingly, memes are also our means of spreading our culture. NFTs represent digital culture. Reasoning along this line, I believe NFTs are a bridge between culture and monetary value.
Culture is the most important thing when thinking about NFTs. We as a community decide what is culturally valuable and what is not, voting 24/7 with our Metamask wallet and twitter. But what is culture? I’m not a sociologist, so in a very simple way:
Culture is broad and includes the common experiences, perceptions and beliefs of a society. Culture is powerful because it infuses us with a sense of purpose and collective identity. Some sociologists divide culture into material culture and immaterial culture. Material culture is the tangible items that arise from, and are shaped by, immaterial culture such as beliefs and values.
In this way, we can think of NFTs as a digital, material representation of a set of values and beliefs that can drive a strong cultural narrative. Narrative appeals to people who resonate with it.
Some simple examples of cultural narratives represented by NFTs (in my personal opinion):
CryptoPunks : Wealthy and knowledgeable early adopters
XCOPY art : Underground, OG crypto culture
Art Blocks Curated : Sophisticated Contemporary Art Appreciators
There are 4 main factors at play around culture:
1) Brand value
2) Historical value
3) Imitation value
4) Conspicuous value
These are not the only factors that influence culture. However, these are important factors that can drive a strong fundamental narrative that deserves further thought.
What brand does NFT stand for? Often, it’s inextricably linked to the creator’s brand—the artist or organization. So let’s take a look at the question first and come to a conclusion.
The cultural value of the work of famous artists (like Damien Hirst, Tyler Hobbs) is far greater than that of new artists – because the artist’s brand is given to the work of art. Therefore, the prices of their works are naturally much higher.
A great artist’s brand is so strong that even a “mild” association with the artwork is enough to greatly increase its value.Known for his “hands-off approach”, Damien Hirst has a team of studio assistants who draw/make actual artwork for him while following his artistic philosophy. He might add some dots or his signature at the end. Signed works are considered “Hirst” and cost many times more than unsigned works. In the web3 world, the equivalent of any NFT smart contract created by “Hirst Deployment” in the future will automatically represent his brand and be instantly sought after.
Damien Hirst’s “currency” — a series of 10,000 NFTs worth $20,000 each at current prices. Spoiler: He didn’t draw all the dots himself.
The reflection here is that contemporary digital artists will grow their personal brand organically if they continue to produce great work, infused with the right dose of performance skills. This in turn leads to a higher cultural value for all their works as a whole and increases demand. Collecting the work of a talented growing artist and holding on to it for the long term as its cultural value accumulates can be a great investment idea. Just ask anyone who has been buying and collecting X_COPY and Hackatao pieces since 2017 – they are worth millions today. We’re all looking for a Picasso in the age of crypto art, and that’s only to be found in hindsight.
On the one hand, established commercial brands and organizations (such as Disney, McDonald’s, Budweiser) have begun to get involved in NFTs. This is easy to judge because NFTs rely on existing brands. Disney is fun and dreamy, McDonald’s is fast/cheap and these will be reflected in their NFTs too.
Does anyone know about McRib NFTs?
On the other hand, brand value can start from scratch and grow/evolve organically. This is especially common in cryptocurrency-native projects. In this context, emerging brands are very closely tied to the community and what they stand for.
Six months ago, four anonymous people started the Bored Ape Yacht Club. Today, it has grown into a web3 representation of street culture and has been compared to Supreme, a 27-year-old, multi-billion dollar brand. They have members-only limited edition items that are sought after and worn with pride. In fact, the big news this week is that they just teased a collaboration with Adidas.
The Boring Ape on Rolling Stone’s Digital Cover
BAYC’s hoodie so you can easily recognize other fellow apes outside the Metaverse
In the context of NFTs, history has two components:
Timestamp: How long ago was the NFT minted/created?
Today, it is clear that the market places a premium on NFTs with older block age. This is partly due to the Lindy effect and partly due to scarcity. NFTs in 2017 were considered more valuable because there were so few NFTs back then. There are NFT “archaeologists” (like Adam McBride) who scour thousands of smart contracts years ago to unearth forgotten projects. It’s a nice job, at least you won’t get sand in your pants like a true archaeologist.
A good example is the CryptoArte project, a series of 9895 generative artworks based on the Ethereum blockchain. It was first cast in 2018 and finished in 2021. CryptoArte NFT minted in 2018 has a floor price of 3E per piece today, which is 20 times the price compared to the most recent minted price in 2021 (0.14E) and controlling for relative rarity.
CryptoArte #9252: Each square represents a block on the Ethereum blockchain, from block numbers 5329152 to 532972.
Is the NFT the first of its kind, or does it represent a historic event?
Cryptocurrency is a young, high-growth industry, only over a decade old. We are still in its early stages. Many things that contribute to the development of cryptocurrencies today and in the near future will be considered important and scarce historical artifacts in 5, 10, 20 years from now. Similar to museum artifacts, they are sought after by wealthy, sophisticated collectors. Well-known collector Vincent Van Dough aptly said on Twitter about one of his purchases:
At the risk of angering many collectors, I’d say Autoglyphs looks pretty rudimentary. If you tell your Muggle friend he’s going to pay 6 figures to get this JPEG, he’ll think you’re crazy. Their high value (225E/$1M at the time of writing) comes entirely from what they are considered to be the first artistic NFTs to be generated entirely on-chain, and thus a prized possession for wealthy crypto history collectors.
Kabosu, a Shiba Inu who has unexpectedly become arguably the most famous meme in the world – Doge’s story is fascinating and worth reading. She represents 10 years of meme culture – nonsensical, illogical and hilarious. The original NFT minted by her Japanese owner is now worth hundreds of millions of dollars. It was bought by PleasrDAO and split into $DOG tokens so thousands of people could own a part of this cultural icon.
Mimicking desire is a fundamental part of human nature. Our desires are not internal, they come from seeing the needs of others. This breeds our own desires. My friends all have Rolexes, so I want a Rolex too. As Arthur Hayes puts it, the process is reflexive. Once we own something, our insecurities can lead us to declare to the world how good it is, leading to self-fulfilling prophecies.
A lot of traditional advertising taps into this instinct (unfortunately, we can’t turn it off) and therefore features celebrities or influencers peddling products. One of the most successful examples is the legendary collaboration between Michael Jordan and Nike. Billions of dollars worth of Air Jordans have been sold to MJ fans.
Since the beginning of this year, more and more mainstream celebrities have joined the NFT bandwagon and publicly adopted NFTs as their social media profile photos. Rappers seem to be leaning towards CryptoPunks (Jay-Z, Snoop Dogg), while sports stars are leaning towards more edgy options (Stephen Curry -> Bored Ape, Shaq -> Creatures). Every time a “star brings goods”, there will be a wave of NFT rush buying, which may come from both speculators and fans.
It is often insightful to see who the main NFT owners are (ENS with human identifiable wallet addresses makes it easier to deduce this) and whether they have a sizable downstream group of admirers. There is something to learn.
Left: The Boring Ape. Right: Stephen Curry, NBA legend. Source: Hypebeast
I’m considering whether to include it in the “Culture” category, but I think it deserves a place here.
This week, a good friend and former classmate of mine in banking sent me a screenshot of CryptoPunk #3583 with a black blindfold saying, “400k buy this…I can’t figure it out”. I explained to him that this is the new way of showing off numbers, and having it shows you’re a successful person. Plus, Chinese billionaires are buying them. He understood right away.
Showing off is how we as humans signal social interaction—similar to the fancy feathers of a peacock and the mating call of a cat. That’s why we splurge $50 on a Rolex only to squint at the clock face when we can tell the time more easily with a $50 Casio watch. Outside of the Metaverse, owning a Rolex is the equivalent of telling the world that you’ve made it (sort of) and have extra energy and wealth to work with.
Arthur Hayes (see again) defines conspicuous goods as:
1) Essentially worthless
3) Confer membership in exclusive clubs
As we enter the post-pandemic era, NFTs have the potential to become the ultimate conspicuous symbol, in a world where a large part of our life is spent online, and more and more. If I were wearing my Rolex everywhere in a month, maybe a hundred people would be “lucky” to see this chronograph piece of art. This is not very efficient.
Suppose I own a CryptoPunk. I can now show off to 1,000s of people, including distant friends and long-lost relatives, who see my social profiles, but I never talk to them directly. Now I can even show it off in my sleep. It’s a socially acceptable, non-obnoxious way to show how rich I am that I can afford to drop $500,000 on a pixelated image (about $1,000 per pixel). It’s a better show off because anyone can look up the price of punks online and instantly know how much they’re worth, whereas it’s much harder to find the price of a particular Rolex.
Today, CryptoPunks, Bored Apes and Fidenzas have the highest display value in the NFT world. Depending on how much they own, owners suggest they have a net worth of at least 7-8 figures. Often more than just wealth – with Fidenzas, you are also demonstrating good taste and artistic appreciation.
Cultural narratives are very powerful. I propose a way to think more about culture so that we can better identify NFTs with high or growing cultural value.
Cultural value = brand value + historical significance + imitation desire + wealth display value (+ others).
But remember, at the end of the day, all valuations are just a meme.
A Summary for Savvy Investors/Collectors/Creators
Brand Value Metrics
1) Quantity and quality of twitter followers of major brand accounts
2) Affirmations from experts and elites in the field (e.g. tweet mentions).
3) The strength of the original brand (if it is a mainstream brand)
4) Total number of brand partners
5) News Mentions
6) Google Trends: level of interest over time
Historical Value Indicator
1) Existence time since minting date
2) Is it first-of-its-kind or related to a major event/milestone?
imitation value indicator
1) How many celebrities/influencers are active owners of NFTs? What is their estimated influence?
2) Do we expect other celebrities to buy these things in the near future?
3) The number of sole owners (the more “real” people, the greater the effect of the desire to imitate).
Show off wealth value indicator
1) Is the item scarce?
2) Will holding this item give me access to an exclusive community?
3) Is the item otherwise useless? (eg ether stone)
the last point
There has been a lot of debate about whether it is ethical to right-click to save an NFT. Some have questioned how NFTs are likely to retain value if they are so easily “stealed” and we should prevent that. My point is that this is actually good for NFTs – the more people can see, appreciate, and be inspired by art, the more cultural value it will generate to its cryptographically proven owners.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/delphi-digital-researcher-culture-is-a-meme-nft-too/
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