There are countless other stories based on scarcity that have attracted new people to the cryptocurrency space in the past several months thanks to NFTs and it’s beautiful to see.
NFTs offer a sustainable way for anyone to turn stories into scarce assets
Ethereum-based NFTs allow anyone to easily create value from stories and scarcity. You may remember the Initial Coin Offering (ICO) boom that first attracted the mainstream to Ethereum in 2017. The permissionless nature of Ethereum and an open-standard for launching fungible tokens (ERC-20) allowed engineers and opportunistic business people to raise millions of dollars based on stories and scarcity.
There were some problems with the 2017 ICO wave though. ICOs were public sales based on promises about the future rather than direct sales of concrete products. This means most were clearly unlicensed securities and the regulators responded quickly to stop them. This wasn’t a sustainable way for people to create value from stories and scarcity within the U.S. regulatory framework. ICOs also were not easy to create for the masses— you needed to know how to code (or have access to coders) to make it happen.
NFTs address both these problems. An NFT is a concrete product (a digital good), not a promise about the future. This fact alone makes the NFT boom more sustainable than the ICO boom. Additionally it’s much easier to create an NFT than it is to launch an ICO. You don’t need to code — anyone can use OpenSea’s create tool and mint an NFT for free. Millions of scarce assets based on stories can now bloom on Ethereum as long as people want them. You now may be wondering what makes people want them? If millions of NFTs can bloom why would any NFT hold significant value over time?
René Girard’s theory of mimetic desire suggests that humans are imitative creatures and all human desire is based on the desire of others. Thinking about cryptocurrency and NFTs in this context nails home why stories based on scarcity can have massive value. We want to own what others want to own.
Think about the last large purchase you made. My guess is that you didn’t really need to buy it. More likely than not, it was a decision based on the desire of others. You can tell yourself that you bought your new watch or sneakers because of their quality, but the main reason you think they are quality is because other people do — that’s just how humans are wired.
When bitcoin first launched in 2009, few wanted to own it. It’s effectively the same product now that it was then, the difference is more people desire it now. As more people desire an authentic scarce asset, the value of the asset tends to increase, which makes more people desire it. Bitcoin has benefitted from mimetic desire more so than any asset in history because it is globally accessible and the world is more connected than ever before. Mimetic desire gets more intense the more connected we are.
So how should one think of the long-term value of NFTs in the context of mimetic desire?
You should first realize booms and busts in crypto are unlike anything ever seen before and it’s highly likely we’re currently in an NFT bubble of some sort. A lot of the NFTs that people are creating in this bubble are unlikely to hold long-term value.
We should be especially skeptical of most of the aggressively marketed stories that are capturing the headlines now, particularly the high prices on NFTs that can be easily faked. Unlike Bitcoin, most of these NFTs only have a few buyers (even a high profile project like Cryptopunks has less than 100 buyers daily). So price doesn’t mean as much and mimetic behavior can quickly flip the other way when there is a low number of people that believe in a story.
But I think it’s also reasonable to believe that some NFTs will have massive value in the future. The winners will be the NFTs created by authentic creators which more and more people desire over time because of their story and because of their scarcity. Authentic stories will win. And just like it has for Bitcoin, the mimetic desire will intensify for ownership of those stories.
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Source: https://thecontrol.co/stories-scarcity-and-mimetic-desire-c4a344fa74e1?source=rss——-8—————–cryptocurrency
