Non-Fungible Tokens (NFTs) are unique digital assets that have recently gained enormous hype from March 2021 with the sale of ‘Beeple’s Everydays: The First 5000 Days’ for 69 million Dollars! This marked a revolution in the digital art world.
NFTs work at a very high level. They are embedded in the Ethereum blockchain. Just like Bitcoin, Ethereum is also a currency but its blockchain algorithm also supports NFTs that make them function differently. NFTs can be anything digital, like a drawing, artwork, or music, but a lot of the current excitement is driven towards using the technology to sell digital art.
When you trade a bitcoin with another bitcoin, you’ll have exactly the same thing because bitcoin is fungible. Whereas one kind of a trading card is non-fungible. If you traded it, you would get something entirely different in return.
Pak, a pseudonymous NFT artist has been in the forefront of digital art and crypto media for more than 20 years sold ‘The Fungible Collection’, also known as ‘Open Edition’ for 16.9 million dollars.
But isn’t it intriguing how these NFTs work and are being traded for millions of dollars? Why would anyone want to pay so much money for a random digital piece of art that can be easily pirated and shared? Well, that’s the confusing part!
Probably status and ownership bragging rights? Ranking individuals in a hierarchy is a fundamental social activity, and patterns humans follow are closely aligned with these social calculations.
People own Bugatti and Rolls Royce for this reason, to create a social identity and standard in the society. What is different about NFTs is that it capitalises by providing digital avenues to owners that portrays their digital identity and status.
Our digital age is transforming our relationship with materiality and materialism. More and more of our everyday commodities are becoming dematerialised, like information, money, meeting places, art, shopping etc. With this advancement, our social status is evolving too, and has changed as a corollary. Ways of acquiring and showing social status is embarking towards what we call “liquid consumption”. This dematerialisation of luxury goods when
coupled with high economic value and the ability to access it with technological advancements, makes NFTs the new status marker.
Linked to this need to display our status is a core concept of signalling. This phenomenon helps people to judge themselves, their in-group (group of people sharing similar interests and attitudes) and others. What better way to show that you are tech savvy, affluent, and an early adopter than to buy digital images right?
Many of them buy NFTs and share them on their social media handles to show off their expensive purchase. Just like when Doge NFT was auctioned for 4 million dollars and it was all over the social media.
This is the proof of signalling power. Signalling is the primary motivation behind people buying luxury goods.
Many other social acts such as voting or switching to electric vehicles are being encouraged by this phenomenon; such as the ‘I voted’ sticker and the green number plate respectively.
As we step into the digital world, NFTs could become the sign of status and luxury by leveraging the phenomenon of signalling. While luxury items play a vital role in social differentiation, NFTs are a unique digital identifier that are embedded in blockchain technology and linked to digital assets, and are revolutionising the way in which we have been identifying social status.
I am sure this question has struck you before: But what about people who take screenshots of this art for free?? Although the two are indistinguishable in their appearance, there is still an ability to determine authentic proof of the ownership through blockchain technology.
While two people can own Bugatti and Rolls Royce, a CrytpoPunk #5822 is nothing but pixelated artwork sold for $23 million.
It’s like a fingerprint – unique, irreproducible, and non-fungible in its truest sense. Hence, the heuristic of scarcity not only satisfies users’ need for uniqueness, but also offers a unique digital identity that owners can boast about.
As much as we love to stand out, we also love to belong to a group. It’s the irony of our species – adhering to the line between being unique and identifying with others, or what social psychologists refer to as: optimally distinct.
Human’s innate need to belong in the society is placed after primitive desires like hunger in Maslow’s hierarchy of needs. Owning and displaying NFT signals membership to that particular NFT or the NFT group that seems to be a movement of like-minded people who are having exclusive experiences that not many people can understand. Identifying and having these common experiences strengthens social bonds between owners and buyers, and this not only enhances their self-concept but also fosters collective self-esteem.
“As the world becomes even more digital, NFTs could become the ultimate signalling, luxury good. What’s better than owning a luxurious coat? A luxurious line of code”
– Matthew Hellon
By now, it is evident that it is not just about the picture or artwork itself. It could have been Lonely Lions, Lucky Lizards, Rich Rhinos or literally any random digital artefact. It is solely about what it means to possess that coveted belonging.
NFTs may seem frivolous and silly on the surface, but deep down, underneath the CryptoPunk and Nyan Cat, are a deep well known human behaviour and an essential learning for driving engagement: “Make people feel important and part of the group, and provide them with novel benefits that tickle and delight.”
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