Marker
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Marker

No Mercy No Malice

The Real Potential of NFTs

Amidst the scams and bubbles, credible scarcity and authenticity will unlock real value in digital markets

Scarcity and Authenticity

NFTs offer digital commerce something the Internet lacks: scarcity and authenticity. A scarcity mentality is built into us at an instinctual level. Our cravings for sugar and fat (historically scarce) have resulted in an obesity crisis, because our instincts haven’t kept pace with industrial food production. Authenticity’s virtues are practical (we like to know where our food comes from and who we can sue if it makes us sick) and philosophical (if we buy music, is some of the money going to the artist who made it?).

Art

The world beyond crypto-obsessives started paying attention to NFTs a year ago, when digital artist Beeple sold an NFT mosaic of his daily digital images, Everydays, at Christie’s for $69 million. No asset class depends more on scarcity and authenticity than art. The Mona Lisa’s value relies on our belief that there’s only one (scarce); plus, we know it was created by da Vinci (authentic).

Bored Ape

Bored Ape Yacht Club — a series of JPEGs of monkeys wearing different outfits — is no more or less risible than any other trend. There are 10,000 of them, each unique, and they’re collectively valued at $3 billion. The floor price for one is $311,000. The company behind les singes ennuyés, Yuga Labs, has consolidated its position as the dominant force in NFT-based collectible bubbles, buying up the NFT brands CryptoPunks (bored dudes) and Meebits (bored avatars) and raising $450 million at a $4 billion valuation.

Brands

For brands, scarcity and authenticity is everything. Chanel can sell sunglasses for $500 because they’re scarce and they’re Chanel. In exchange, the customer gets to say “I’m aspirational” without saying “I’m aspirational.” But branding goes beyond signaling wealth. Doc Marten boots say something, and Wrangler and Levi’s say something else. Oatly is not milk, but it is a statement about who you are.

Belongings

Every morning I put on a Panerai watch to signal my masculinity and success. I haven’t wound it in 10 years. Online I have something even more scarce: A Twitter blue check. The blue check is a digital Panerai (sort of): scarce and authentic, it signals that if you mate with me your kids are more likely to survive than if you couple with someone missing the blue check.

Money Changes Everything

I’m a capitalist and generally think that functioning markets improve lives. Bringing credible scarcity and authenticity to digital markets is a net positive — but the key word there is “net.” The flood of interest in NFTs has predictably resulted in scams and exploits. The market has cooled off recently, with the top corresponding pretty closely to former First Lady Melania Trump’s NFT scam. (She bought her own NFT through shell accounts to create false signals re the value.) When I interviewed Mark Cuban (owner of the Dallas Mavericks), he raised concerns about sports team NFTs injecting a money-making incentive between the fans and the team, replacing the emotional bond they feel with the team and players with the anxiety of a Robin Hood day trader sweating a position.

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Scott Galloway

Prof Marketing, NYU Stern • Host, CNN+ • Pivot, Prof G Podcasts • Bestselling author, The Four, The Algebra of Happiness, Post Corona • profgalloway.com