Structure of this article:
- What is value
- What is the source of value
- The source of value of NFT future
1. The subjectivity of value
Before officially starting, you need to figure out the value itself. The connotation of value itself contains at least two overlapping meanings: usefulness and preciousness. For example, Zhang San believes that the value of a person is the value of the car and house he owns. This sentence contains two value meanings. Here it is clear that the meaning of value discussed in this article is biased towards the latter, namely: value = how valuable the commodity is in the trading market.
The debate on value in economics has a long history. It is difficult to talk positively about the definition of value. We try to start from what value is not.
First, value is not cost. Mixing 100 yuan of oil with 100 yuan of oyster sauce does not get a new product worth 200 yuan. If you define cost as “valuable cost” or “meaningful contribution”, then it is equal to the cycle defining value. This does not explain the value itself.
Secondly, value is not an objective quantity. Different people have different valuations of the same commodity. The so-called “He’s honey, my arsenic” is the truth. People in the desert have a different view of the water than those in the lake. The marginal utility theory actually supports the viewpoint of subjective value. Next, value does not mean practicality, that is, the higher the degree of usefulness, the more valuable it is. The famous “Water and Diamond Paradox” in history tells us that water is very important to people, but the value of diamonds is much higher than water. Finally, value is not synonymous with scarcity. Valuable goods must be scarce. The opposite is not true. There is only one elementary school homework for you and me in the world, which is of little value.
By the way, let’s talk about a small inference of subjective value theory. Suppose someone buys a bottle of Coke for ¥2.5. This is not to say that buyers and sellers believe that the value of ￥2.5 = a bottle of Coke. It is the seller who believes that the value of ￥2.5 is higher than a bottle of Coke, while the buyer is the opposite, which facilitates the transaction, and the result of the transaction increases the income of both people. Therefore, there has never been an equivalent exchange in the world. If two things are of equal value to both sides, why should they be exchanged? What a waste of energy.
2. Value consensus
However, the subjectivity of value seems to be inconsistent with our common sense. We all know how much pork costs a catty and how much pure water costs a bottle under normal circumstances. Even if you are thirsty again, the commissary will usually not sell it to you at a price increase. Here comes another concept, namely value consensus. Everyone has formed a consensus on the value evaluation of each commodity. After this consensus is reached, people not only have a cognition of the value of the commodity to themselves, but also the value of it to other people. Therefore, the market price reflects the value consensus of the group, not the value cognition of an individual.
But how exactly is the value consensus formed? I think there are probably three sources. One is from objective practicality. Since everyone has a consensus on the practicality of a certain product, and people’s evaluation of its value is mainly based on its practicality, then everyone can naturally form a value consensus. Typical commodities are daily consumer goods, food, daily services, etc. The second is from statutory, typically currency. The law stipulates the legal compensation and taxation unit of sovereign currency, which makes people have a consensus on its acceptance. The third is the recognition or resonance of the story, emotion, narrative, and community behind the product. Typically, such as character images, movies, music, artwork, etc., people know that the stories they like are also liked by others. This is the consensus of the community.
3. The value of NFT
From this, we can conclude that the value of NFT can come from three aspects:
Objective practicality: If it represents the rights and interests of tickets, copyrights, digital albums, game props, etc., its value is the value of the actual commodity represented behind it
Statutory: If it represents a digital identity, holding different identities, NFTs can do different businesses on the platform
Emotions and narratives: such as digital art, signatures of best-selling book authors, star debut commemorations, college graduation commemorations, etc.
Most current NFT platforms tend to focus on two small areas, one is digital art, such as visual art; the other is inherent practicality, mainly including copyright and game props. But in fact, the real biggest source of demand and value should be the broader field of emotion and narrative. This is also the broadest and most solid consensus in human society.
This valorization of the consensus on emotion and narrative is not a new thing. Before the advent of the Internet, physical albums, posters, graduation photos, anniversaries, and even ancient family crests, scepters, jade seals, etc. were all the so-called “imaginary community” of the human brain’s physical mapping in the real world. This kind of mapping enables the intangible influence to be transformed into a tangible value carrier, circulating in the physical world, and interacting with the imaginary world.
The emergence of the Internet allows the world to have similar ideas and people with the same emotional cognition can quickly build communities on the Internet. This kind of community is not necessarily a fixed forum. Any social media comment area or even likes can connect a group of people. They have the same cognition, the same value orientation, and recognize the same value in a particular vertical field.
But until the emergence of blockchain and NFT, the value of virtual network construction can be materialized at the lowest cost. This “materialization” is NFT. It is limited, belongs to, and indivisible. It is the physical object of the digital world.
4. Common Misconceptions
Speaking of this, we can finally judge some erroneous perceptions that are now popular one by one. In fact, most of the misunderstanding of NFT comes from the misunderstanding of blockchain or value network. It is basically no problem to replace NFT with Bitcoin in the following part of the problem.
Error: NFT anyone can copy the original image and send it again, so there is no value
Answer: The important thing is not the picture, but the story. It is the story and the emotion that form a consensus. There is no difference in quality between the Kaiguang Yushou sold at the entrance of the temple and the factory tail orders sold on Taobao, but people only consume the former. What everyone pays is what is behind it. Everyone can issue transfer cards, but only those issued by Yang beyond himself are valuable.
Error: NFT pictures must be placed on ipfs, centralized hosting is not acceptable
Answer: Same as above, the picture is not important. The star project CryptoPunks does not even have a link to the picture, only hash. It is certainly better to put relevant resources in decentralized storage, but there is no problem if you don’t put them.
Error: NFT must contain a copyright notice
Answer: There is no value in pirating existing NFTs. Conversely, as long as the community recognizes it, even if it is not an NFT issued by the original copyright owner, there may be a consensus of value.
Mistake: NFT bubble is huge, all scalpers are speculating
Answer: The first half of this sentence is correct. There is obviously a bubble in the NFT market, and the price of NFT is highly operable. But NFT itself is a valuable foundation, and it is not just scalpers who can quarrel. The scalpers have done a better price discovery mechanism, but the final price is determined by collectors who recognize the value of the community.
Mistake: The best platform for NFT is the alliance chain
Answer: There is no point in the alliance chain as NFT, because it does not live long enough. The reason why people are willing to collect NFT is because it possesses the attributes of scarcity and ownership in the era of information internet. The uncertainty and instability of ownership are the most taboo. These two points are precisely the shortcomings of the alliance chain. Imagine that you get a limited NFT for the last concert of your favorite singer on the xx chain. As a result, the chain was closed after two years following the business adjustment of its initiator. How would you feel?
5. The future of NFTs
The future of NFT lies in valuing the consensus of hundreds of millions of communities around the world, and it is advancing at an irresistible pace. Art, games, copyright, etc. are just a small picture of this big future. Soon, influential people, IP parties, organizations will begin to forge and distribute their own NFTs. They are either a signature, or an emoji, or a medal, or a talisman, it will emerge in any form. But it must be highly recognized and valuable by the community. People outside the community may not understand it at all, or even sneer, just like we are now looking at the $69 million Beeple NFT painting.