NFTs are kinda messed up and here’s why
Economics is about survival. That is the way I see it. Economics is an intellectual venture into how to survive planet earth both as an individual and as a species, using money. Of course, the actual definition of economics is the study of how to allocate scarce resources between unlimited human wants. But it is pretty much the same. To survive, we must satisfy our needs. The means of satisfying those needs however are scarce. They are finite. It is from this scarcity that value is born.
You cannot have everything, so you must create a hierarchy of the things that you want. From this hierarchy, you can choose what is most important to you, and what you can afford to give up. You assign value. This assigned value determines how much you are willing to give up to acquire this thing. This is the price you pay. Money is essentially just a system of streamlining that price or value so that it has maximum applicability.
There are other factors that go into determining price such as the cost of extracting whatever the item is or if it is already in the possession of someone else, what price it would take for that person to give it up. Nevertheless, the value created here is real because the thing is truly scarce. Of course, like everything else under the sun, this system can be exploited and even abused. But the price we pay is often justified by the fact that there is often no easier or immediate alternative to replace this thing or the function of the thing.
NFTs operate on this same concept of value. A thing exists, and if you want it, you have to pay a price to get it. How much you want this thing determines how much you will be willing to pay for it. The problem with NFTs is that these things are not at all scarce. In fact, there is a virtually unlimited number of these things limited only by the amount of memory you have on whatever devices are in your possession. So where does this value come from and why do people pay millions of dollars for things that anybody else could have with two clicks of a button?
First of all, NFTs are not peculiar in this regard. Crypto technology is built on the idea of manufactured scarcity. Crypto coins are numbers in a system and of course, numbers are infinite. Crypto coin value is created by setting an artificial cap on the number of these numbers. Basically manufactured scarcity. For those of you in the know, manufactured scarcity is a technique that is used to drive up prices because per the law of supply, when supply is below demand, prices go up.
Now here is the fucked up thing about NFTs. NFTs take that which is abundant, and make it scarce. A typical example is a jpeg. Most NFTs exist in the form of pictures and in fact, the commercial art world seems to be the most significant profiteer of the NFT rave. Jpegs, however, the common form of NFTs are normally infinite. You can share, reshare and even duplicate the file to your heart’s content. But that is the beauty of technology. Making everything accessible to everybody everywhere. NFTs make this point moot by ensuring that a new class of commodity is created and it is accessible only to a select few. Byebye democratization.
Web3 and its derivatives were supposed to be the great leveller. Finally, the infrastructure that powers the internet would be in the hands of the people who use the internet rather than mega-corporations and rich people. Yet 80% of the entire NFT market value is in the hands of 9% of NFT holders. Maybe NFTs are not a scam, but there is definitely a short end of this stick that you do not want to be caught holding.
