Chapter 1: Introduction to NFTs

Don’t fret, dear readers; I’m not here to delve into the fundamental concepts of non-fungible tokens (NFTs) that have been discussed extensively. You can find a wealth of information online, with solid summaries available from sources like The Verge and Bonhams. Instead, I aim to shift your perspective on NFTs as we consider their future and their connections to societal trends and human behavior.

By now, it’s nearly impossible to escape the buzz around NFTs. Whether you adore them or despise them, they dominated conversations in 2021. The cultural impact was so profound that it even inspired a satirical episode on South Park:

This dark, surreal satire resonates because it accurately reflects the current market—one fraught with manipulation and excessive speculation.

Chapter 2: The Current State of NFTs

I find myself bewildered by the current fascination and valuation of NFTs. As for the older generations? They often dismiss it as merely a quick path to wealth or a niche for overpriced art pieces. I’ve personally navigated the NFT landscape since 2017 and owned various tokens, including CryptoKitties. I understand the technology, but even as a hypothetical billionaire, I wouldn’t invest that kind of money in these assets.

Photo by Dylan Calluy on Unsplash

Recently, NFT prices have been stabilizing, reflecting broader trends in cryptocurrency and stock markets. This might indicate a shift away from the hype for non-purists. But what does the long-term future hold?

Despite acknowledging the current hype, I remain optimistic about NFTs—not because they might appreciate in value or because blockchain is trendy, but due to the psychology of younger generations, particularly Gen Z and iGen.

Chapter 3: The Psychological Appeal of NFTs

Reason 1: Digital Signaling Among Youth

Young people are increasingly immersed in the digital realm. On average, teens spend over nine hours online daily, while tweens clock in over six hours. Even without the pandemic, this trend towards greater online engagement would have persisted.

Social interactions have shifted, with a significant portion occurring online, especially in gaming and virtual events. Adults, too, are nearly always online, especially those in white-collar professions where digital interaction is essential.

Human beings are inherently social and visual, using various signals to communicate status and social standing. Traditionally, this has included luxury items like Lamborghinis and Rolex watches. Today, however, younger generations are using digital assets—character skins, virtual goods, and collectibles—to convey their worth.

Consider Fortnite, where 69% of users make purchases, spending an average of $85. The trend extends to other platforms like World of Warcraft and League of Legends, where a staggering $54 billion was spent on digital goods in 2020. These purchases serve as status symbols among peers and potential partners.

Every day, you can observe subtle signaling among people engrossed in games on their phones. Their achievements—win streaks, high scores, and badges—reflect their status in the digital world. Video game skins, much like NFTs, represent personalized assets stored in databases managed by corporate entities.

As the number of online users increases, major brands are already creating NFTs to enhance their digital status—imagine having a limited-edition sports car parked in front of your virtual mansion. This reality is unfolding as companies invest in virtual real estate within metaverses, creating digital storefronts for virtual goods.

Reason 2: The Drive for Customization and Status

NFTs provide a new avenue for signaling user status through their uniqueness and scarcity. Unlike social media metrics that can be artificially inflated through bots, the high price of an NFT is a genuine indicator of value.

Due to their programmable nature, NFTs can evolve, offering dynamic experiences to holders. For instance, NFT ticket holders may gain access to special discounts or events, and NFT art can change as it reaches specific milestones. Certain NFTs may even bestow unique abilities or governance rights to users, promoting a decentralized model.

In our current Web2 landscape, social metrics dominate; however, Web3 introduces economic metrics such as the buying/selling of NFTs and the earning of social tokens—all traceable on public blockchains.

Consider the metaverses like Meta, Decentraland, and Sandbox. Who are their primary users? It’s unlikely that older generations will adopt these platforms, but younger individuals, who appreciate the innovation and customization possibilities, will lead the charge.

Chapter 4: The Future of NFTs

We’re not on the verge of an immediate transformation where grandparents are minting NFTs of their old photo albums. Just as some cling to outdated technologies like AOL, others will remain loyal to traditional centralized platforms. That’s perfectly acceptable.

The essence of cryptocurrency isn’t about obliterating centralized systems but providing alternative trust mechanisms. We often tout democracy and freedom, yet paradoxically surrender our personal data to powerful media corporations. In the forthcoming Facebook/Meta metaverse, Mark Zuckerberg will wield significant control.

NFTs and cryptocurrencies, anchored in public blockchains, will likely remain niche for years, embodying the true spirit of permissionless innovation. For those willing to embrace risk and explore decentralization, the realms of crypto and NFTs are poised to evolve continuously. Wouldn’t it be thrilling to witness this transformation firsthand?

If you found this exploration engaging, feel free to connect with me on Medium and check out my publication, Armchair Musings, for more insights into personal finance, early retirement, and philosophical reflections.