SHILL Issue 72

Spanish galleon, hauling goods across the Atlantic.
In any case, the thriving ecosystem of NFT’s has shown
that humanity’s history of trading isn’t solely based
upon functional necessities — trading provides other
outlets for us as socially-driven creatures. Now more
than ever, our livelihoods are dependent upon financial
success, and mastering the art of trading has slowly
become a viable manner of achieving this goal.
But there’s more to trading than purely financial success.
We see time and time again that humans are
inherently irrational actors, and this is nowhere more
apparent than in NFT trading — people will bag-hold
things to 0, mint projects they know aren’t long-term
plays, and continue to get burned buying tops. There’s
no ‘value’ to these plays, so why do we see it so often?
In my view, it’s more than just bad trading — it’s that
other factors are at play than just profit motives.
What this long-winded intro has built up to is the idea
that NFT traders looking for ‘value’ will find it not in the
object itself, but what it represents.
On the whole, people aren’t trading because they’re
adept at finding value — they’re buying what they like,
or what they think other will like, or just on no thesis
at all. When a project says it wants to ‘create value’
for its holders, it doesn’t really know what that looks
like, and neither do its holders. Like a final derivative
of derivative trading, when you have assets without
any concrete value, it’s impossible to understand them
through conventional value props, which is kinda what
we’ve been doing this whole time, with phrases such
as “passive income” or ideas such as “TA for NFT’s”.
They represent social sentiment crystallized into a digital
asset, and social sentiment is fickle, fleeting, and a
cruel mistress.
There’s only two outcomes to NFT trading: (a) buying it
to hold it ourselves forever, or (b) purchasing with the
intent to trade it to somebody else for a higher price.
With outcome (a), being the final owner makes you a
collector, not a trader, and with outcome (b), you’re
gambling that the asset will be worth more to somebody else
than it was to you.
Outcome B is why people think that NFT’s are a ponzi scheme,
because at some point there’s no way to continue to find people
who are willing to pay higher and higher prices for the asset.
The real magic happens, however, when you can merge
traders with collectors and find a balance between both parties,
and that (!!) is the sweet spot for price appreciation. The
most successful projects have all elicited a collector’s mindset
from their communities and from outsiders.
Collectibility is, in my opinion, the greatest weapon that any
NFT project has to have in its arsenal for continued success.
Why have humans bought shiny metals to wear on our bodies
since the dawn of time? Because of the social and communal
shared experience of these assets. Why do people spend
thousands of dollars on sneakers, or on upgrading their cars,
or anything else that doesn’t have a practical reason for survival?
Because of the social and communal shared experience
of these assets. Why are people buying digital tokens
on the blockchain that you can right-click save? Because of
the social and communal shared experience of these assets.
NFT projects can peg their token to various currencies, can
deliver all sorts of utility to their holders to use, can do all
sorts of meet-ups and host events, but if their tokens aren’t
desired collectibles, then the uphill battle of relevancy has
already been lost. If you’re an NFT project or an NFT trader,
you should be framing a purchase through the lens of collectibility
— is this collectible to me? are other people collecting
these? How will these age as a digital collectible, and why
would someone buy these from me in the future?
If these questions can’t be answered by any project in our
ecosystem, then we should expect to see a massive decline
in the volume of NFT sales and the ecosystem will probably
collapse. As long as there are people still wanting to add to
their collections of digital tokens, we’ll be able to find an equilibrium
and a growth path that will lead to sustainability of
the ecosystem, whatever that may look like in the future.
In my eyes, the technology of the blockchain has unprecedented
use-case and should find itself at the forefront of technological
development across all aspects of society. NFT’s will
exist as digital collectibles of this revolutionary tech, like how
people remodel and drive old cars from the 50s and 60s,
how libraries display first-edition texts of Shakespeare and
how museums host Egyptian treasures. I buy these digital
collectibles because I want to own a piece of this history, and
I enjoy interacting daily with like-minded people as I explore
this new-found hobby of mine. I’ll continue to buy things that
make me happy, and I’ll trade some of them as I find new
owners for them, and hopefully I’ll make a profit along the
way. I’ll definitely find some that are set up as an investible
asset, and I’ll use those to preserve my capital and grow my
ability to collect digital assets in the future.
All of us in this ecosystem are able to participate in all of
these different narratives in such a unique and meaningful
way, and that’s the true value to me.