Relevant, Useful & Beautiful
Our resident curmudgeon and chief legal officer Taylor Hall recently passed along this article that reported that “the vast majority of NFTs are now worthless” with the commentary “Did NOT see that coming.” Of course, I can’t let Taylor take a victory lap here without also bringing up the fact that at one point he was knee-deep in NBA Top Shot.
“Knee-deep,” though, is not as deep into NFTs as a lady we met in New York was, who made the case that because NFTs were the only things in the world that were truly non-fungible and unique that their value was inherent and that everything in the future would be “on chain.” I hope she didn’t quit her day job.
The stats, though, are nuts:
95% of NFTs are worth zero.
23 million people hold worthless NFTs.
79% of NFTs never even got sold due to the massive supply/demand imbalance.
The report concludes “In order to…have lasting value, NFTs need to be either historically relevant, true art or provide genuine utility.”
The point here is not to dunk on NFTs or the people who bought them, though it’s obvious in hindsight that all of the signs of a bubble (suspension of disbelief, rising prices, FOMO, inexperienced market participants, etc.) were there. Rather, it’s to point out that that framework is a pretty good way to think about the value of anything. For something to be truly valuable, it has to be relevant, useful, or beautiful, and ideally more than one or all three.
Your house? Relevant because it gives you somewhere to call home. Useful because it keeps you safe and warm. And I hope you find it beautiful. Clearly valuable.
Money? Relevant to all of your transactions with others and useful because it buys the things you need. And there’s a reason numismatics is a thing. People have taken time to make something as valuable as money beautiful too.
Stocks, you might argue, are none of those things, but stocks are derivatives of beauty, utility, and relevance. A share of Apple, for example, represents that an iPhone is all three of those things to its users.
This is all to say that NFTs aren’t inherently valuable or not. Nothing manmade is, unless it’s well-made, thoughtfully, and with a purpose.
– By Tim Hanson