November 1st, 2021 | What Are Non-Fungible Tokens and What Do They Tell Us About The Today's Job Market?
What Are Non-Fungible Tokens (NFTs) And What Do They Have To Do With The Job Market?
What are non-fungible tokens, also known as NFTs, and what do they tell us about the condition of today’s job market? Although NFTs exist for a few years now, they came into the spotlight earlier this year. What does “NFT” even mean and why it got the attention of (young) audiences around the globe?
According to decrypt.co, “non-fungible tokens (NFTs) are cryptographically unique tokens linked to digital content, such as artwork and music.” Uniqueness means that, unlike, for example, units of money or simple utilities, these assets are not interchangeable. For instance “Mona Lisa” is a unique asset and cannot be swapped with another painting without a loss in value to its owner – while a given 5-dollar bill can be swapped with any other (non-forged!) 5-dollar bill.
Cryptographic tokens mean digital assets that exist on a decentralized ledger, in essence, on a blockchain. In practice, not assets but rather, the access keys to the assets are engraved into the blockchain. For as long as you possess these keys, you are the formal owner of the asset. Selling means passing your keys on to someone else while the whole network witnesses the transaction. What kind of assets can you possess? Well, NFTs initially made a career as a way of tokenizing art and unique objects traded between gamers, but in theory, they might represent the ownership of any off-chain object, from a car to a house.
The Beginnings of the NFT Frenzy: The CryptoKitties
As mentioned before, NFTs are not as new as an invention. Back in 2017, CryptoKitties – collectibles implemented on Ethereum blockchain – have become one of the first popular collections of NFTs. They raised in popularity so quickly, that in December 2017, they took over 12% of the Ethereum network’s hashing power and clogged the whole network!
What was so appealing about CryptoKitties? Well, every kitty was assigned a few distinctive features, such as the color of the fur, the pattern on the fur, or the type of the tail. Interestingly, two CryptoKitties could breed a new kitty according to a stochastic mechanism governed by genetics of sorts. Namely, the distinctive features of kitties were coming in a number of variations with certain probabilities. If lucky enough, you might breed a rare combination of features, which would guarantee a high value of the kitty on the free market. At the same time, as a rule of thumb, early generations of kitties were believed to be more valuable than late generations. Overall, in just a few days time, the whole new market for breeding and trading kitties was born.
Why did CryptoKitties become so popular? Well, some of the reasons are obvious: all cats are cute. Furthermore, the thrill associated with waiting for the outcome of crossing kitties can be extremely exciting. Will I hit the jackpot this time and get a unicorn-rare kitty?
With time the popularity of CryptoKitties declined, partially because of the fact that the kitties’ supply is potentially unlimited. The prices went down and haven’t recovered since, however, CryptoKitties have remained popular among cat- and blockchain fans.
Why Did NFTs Make Such a Spectacular Career Now In 2021?
Why have NFTs become such a big deal now in 2021, after a few years of silence? Well, there are a few reasons. Firstly, the overall adoption of blockchain progressed since then, and blockchain-based projects are now accepted. In particular, blockchain was accepted by modern artists, from visual arts to music. Reputable art marketplaces such as the famous Christie’s Auction House now list digital art, including non-fungible tokens, in their auctions. Famously, a bundle of CryptoPunks was sold for 17 million at Christie’s in May this year. Such success stories legitimize digital assets in the eyes of public opinion and boost the interest from both art buyers and artists in the space.
How Are NFT Collections Made?
NFT collections usually consist of 1,000-10,000 uniques pieces, and, with the exception of a few collections created by hand by artists (such as Crypto Hobos), they are generated automatically using graphics-mixing software. The idea is that you take a character with a few features, such as the type of hat, the type of facial expression, the type of t-shirt, and the type of background (4 features).
You make, say, 10 variants of each feature with different frequencies, for instance, yellow t-shirt only happens in 1% of all cases, while red t-shirt appears in 20% of all characters. Then, since 10 to the power of 4 equals 10,000, mixing these graphics gives you 10,000 uniques combinations. And since variants have a different frequency, some of the outcome pieces are rarer and thus more desired than others.
Such a mixing software can be found in open source, for example in the HashLips libraries on GitHub, which means that anyone with basic programming skills can create a new NFT collection. No wonder that new collections come out every single day!
A new collection needs to be deployed on a blockchain, where every NFT in the collection is assigned a unique, tamper-proof identifier. The process of deploying an NFT on the blockchain is commonly referred to as “minting.” Usually, the minting process is blind, meaning that the buyer doesn’t know whether their NFT has any rare features before collecting the piece.
Currently, the most popular blockchains for the NFT creators are Ethereum and Solana. The upcoming new collections can be observed via the Rarity Tools website. The secondary market is even more popular. You can buy second-hand NFTs for example from the Opensea platform. “Flipping NFTs” has become a sort of profession in a career path or professional development (or, a favorite sport) to thousands of young people.
On The Skyrocketing Prices of NFT Collections
It cannot go without notice that some of the NFT collections have reached unprecedented prices. The aforementioned CryptoPunks by Larva Labs is an exclusive collection of 10,000 pieces of unique pixelated art inspired by the cyberpunk culture and Daft Punk music. Although the punks were given away for free back in June 2017, as of today, you need to spare at least half a million dollars to land a piece. Yet another popular collection of NFTs is the Bored Ape Yacht Club. Released in May 2021, the pieces from this collection now sell at $130,000-$170,000 a piece. In fact, there are hundreds of collections trading for thousands of dollars a piece, which you can find and purchase at the Opensea marketplace.
What are the reasons for this surge in the pricing of digital assets? Why are some of the collections worth tens of thousand dollars a piece, while others get overlooked by the blockchain community and trade for pennies?
Well, in traditional, old-school art, the value of artwork is usually assessed by experts. Of course, the beauty and value of some famous pieces, such as van Gogh’s “The Potato Eaters,” have been a subject to a pul debate over the centuries. However, in most cases, the experts reach a consensus on whether the given piece is valuable, regardless of the taste.
On The Value of Communities
In the blockchain community, the value of art is assessed differently. When exploring the Opensea database, you can easily notice that the pricing has little to do with the amount of effort put into creating the token, or its looks. It is because while purchasing an NFT, you don’t buy the digital asset per se. In fact, you buy access to the exclusive community of the token holders. And, given that these tokens cannot be bred like CryptoKitties, that’s the real value behind the token.
For instance, CryptoPunks is a community that runs its own Discord server. This server can be joined by anyone, yet, one of the channels is reserved for the verified owners of CryptoPunks to chat with each other. This exclusive right to speak with other verified owners is what built the prestige of the collection.
The Bored Ape Yacht Club gives its members other perks such as the “Bathroom” – an online room where the ape owners can collectively draw on an online board. You might think, “Why would the right to draw together with a bunch of rich kids whom you don’t even know by name be worth $200k?” Apparently, to many people, it is what makes the community different and valuable.
One of the reasons why these communities became so popular, is also their modest origins. Both CryptoPunks and Bored Apes were originally either given away from free or sold at affordable prices (for example, the Bored Apes were traded at $300 a piece which wasn’t much more than the transaction fees on the Ethereum blockchain at a time.) This creates an impression that the whole project is non-profit, and that everyone was welcome to join from the very beginning – it’s just that not everyone took the opportunity early enough.
Of course, the involvement of celebrities played a role as well. Among the verified CryptoPunk owners, one may find Jay-Z, Snoop Dogg, Serena Williams, Jason Derulo, or Steve Aoki. Marshmello and Stephen Curry chose to join the Bored Ape Yacht Club. Who wouldn’t like to join their idols in an exclusive club listing a few thousand members? What the NFTs have become, is effectively tickets to closed circles building their internal, unique cultures: their own habits, memes, and jargon. Their own tribes.
What Can I Gain From This Knowledge?
You might be asking yourself, “What is in it for me?” What do NFTs have in common with professional development, career path or the job market as such?
If you are into blockchain industry, the NFT movement might help you better understand how this market grows and fluctuates. The blockchain industry is not made of conference presentations performed by pretty people in suits and cocktail dresses. Namely, it is made of thousands of Discord and Telegram communities growing their own tribes, or even, their own planets. And, the doors to these communities are wide open – once you take an evening to join and listen to the conversation, you will stop wondering how meme coins are born, or why one NFT is worth a million times more than another one that looks similar.
Well, you might benefit even if you are not into blockchain as such. Today, the value of many assets is determined by the strength of the associated community rather than by their direct features. It works the same way when it comes to choosing houses, cars, or jobs.
And many new types of assets are different in nature from what they seem to be. They might look like pieces of art, cars, houses, or other items while in fact, they are tickets to a closed community of people who represent a similar lifestyle and/or values. Therefore, before making any investment decisions, one might ask, “What is the associated community? How strong is it?” If the members feel a strong bond, and the number of seats is limited, you can expect that your assets, or rather, your ticket, will appreciate in value.
Shall I Join The NFT Movement or Create My Own NFTs?
Well, everything comes to the end at some point. The prices of CryptoKitties went down since 2017. Thus, one can expect that at some point, the prices of NFTs popular today will also go down. Many users swap NFTs, and that’s one of the reasons why the prices appreciate with time. At some point, this bubble must eventually pop – which will probably happen right at the time when the whole market crashes.
Furthermore, hoping that your NFT will sell at a high price is also futile – it is as likely as winning the jackpot in a lottery. You can create an NFT for educational purposes, however, you need to assume that you won’t earn from it. The best you can do is to become a more vigilant observer of communities in your life, both on- and offline, and better identify values and scarcity in these communities. And when you master this art, then you can be sure that sooner or later, a CryptoPunk of the next generation will land in your hands.
So, What Does The NFT Frenzy Tell Us About The Society and the Job Market?
Firstly, the way of valuing NFTs demonstrates clearly that communities and hiveminds rule the internet (and the society!) today. Namely, it is not particular features of the projects – such as the design of the NFTs – that are valued, but rather, it’s the exclusivity and the vibe in the associated community. And as such, the value is fluid and can change quickly. It also demonstrates that a “community builder” or a “community booster” is one of the top professions of the future or most attractive career path.
Secondly, NFTs give people the chance to get into the sweet spot where they are members of a community, but at the same time, there are also unique (as NFTs are, by definition, unique). That’s also what consumers love – they want to be a special fish in the pond, not just yet another fish. That’s also the key to winning consumers’ hearts today: customization of products and services.
Thirdly, when you enter the online groups around NFT collections, you can that members are helpful to each other, polite, and enthusiastic. You might think that hate does not exist at all! And why is that? Well, being an active and supportive member of the community can be rewarded by getting whitelisted for minting NFTs from a new collection before everyone else, or by obtaining a free NFT. You just give people a little financial incentive to be kind, and they become the kindest people in the world!
Lastly, the success of NFTs suggests that there is a future in the digital products and services in general – from NFTs, through metaverse, to fully online schools, training programs, and telemedicine. The perception of the internet has now changed. Namely, now, young people treat digital life as real life. They treat friends from the NFT communities as their “real-life” friends and even set businesses together. They would rather talk to someone from another corner of the world who understands them than with someone living next door. This trend also strongly suggests that in the near future, the whole white-collar job market and professional development will shift towards the Internet: almost all employees will work online. And they will be happy.
Please cite as:
Bielczyk, N. (2021, November, 1st). What Are Non-Fungible Tokens and What Do They Tell Us About The Today’s Job Market? Retrieved from https://ontologyofvalue.com/what-are-non-fungible-tokens-and-what-do-they-tell-us-about-the-todays-job-market/
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