“Monetary value is reflection of mindshare” — https://mobile.twitter.com/ash_bhimasani
Price is an objective expression of subjective preferences of the buyer and the seller. If prices are subjective, they can be anything. Yet, can we reason about them?
We propose that NFT prices are narrative-driven, that these narratives can be very personal, but also shared, and while the number of possible narratives is infinite, the number of shared ones is necessarily low. In this document we attempt to enumerate various shared narratives we’ve spotted in the wild. The thesis is that the more narratives an NFT belongs to, and the better it fits them, the more expensive the NFT is likely to be.
As a way of contrast, here is an example of a personal narrative: pink-haired PFPs. Such narratives are amazing and important, but they are the long tail of demand. They mean there will always be some buyers, but they’re not what is driving prices up.
Below is the (work in progress) list of shared narratives, with some examples for each. You will notice that some are post-hoc, and may seem tautological. But that is fine. If one has paid a lot for a jpeg based on fear of missing out, they then have to come up with a justification. The justification becomes the narrative.
- Absolute age
This refers to how early the NFT collection was minted. The older the better.
Examples:
- Crypto Punks (the oldest collection, by absolute age)
- Relative age
When the collection belongs to a category (there are many similar collections), it pays to be the earliest / first-of, irrespective of absolute age. First collection that does this or that.
Examples:
- Crypto Punks (the oldest profile picture collection)
- Dedicated to an identity group
A collection can find value by being dedicated to a group of people, defined by some characteristic (sex, ethnicity, occupation, hobby…). The narrative is that it is dedicated to, celebrative of, etc.
Examples:
- World of Women (first collection dedicated to women)
- Crypto Chicks (collection for women in crypto)
- Establishing an art style
This is a post-hoc narrative. Collections that are seeing their art massively copied are thereby proving they have memetic potential and staying power.
Examples:
- Doodles (a simple, but memorable and massively copied style)
- Ground breaking technology
Similar to establishing an art style, an NFT collection can be innovative on a technical level, for example by inventing a new way to generate art from data, or store art on chain.
Examples:
- Terraforms (fully on chain art)
- Convincing roadmap and credible team
Evidently, many NFT collections are in fact fundraising for a business. In such cases the market can value the NFTs in the collection highly if it believes 1) that the team is capable enough to execute and 2) that the team will find a mechanism to share profits with the NFT holders. Like any other business, but with added uncertainty about the payout mechanism.
Examples:
- Any team building a game
- Famous artist
If an already famous artist produces a collection, it will have value because of the artist’s fame.
Examples:
- Ownership history
If an NFT has been owned by a succession of interesting people, its ownership history can be the dominant part of its narrative.
Examples:
- None at the moment
- Strong meme
If the collection is built around a meme or a joke, and it’s one that resonates with many people.
Examples:
- Useful for virtue signalling
A collection can have value because owning an item from the collection signals virtue. Examples:
- Useful for sophistication signalling
A collection can have value because owning an item from the collection signals sophistication.
Examples:
- Art Blocks (and generative art in general)
- Useful for signalling wealth
A collection where items are very expensive can derive value from the fact that rich people will buy it to show off wealth.
Examples:
- Was already famous once
A collection can derive value from the fact that it was already present in the collective imagination once, so it has a foothold, and it is plausible that it will be able to stay there or regain position if it loses it temporarily. It is plausible to think that “slots” in the collective imagination are limited, there there is a certain (very low) number of collections most people in the space (or most people in general) can be aware of, and that once a slot is won by a collection it will have inertia to stay there. See this tweet thread for an elaboration of this view.
Examples:
- Pudgy Penguins (they were written about in the mainstream media)
- On chain permanence
A collection can derive value from the fact that the artwork is stored completely on chain, which is technologically challenging, expensive, and rare. Typically, the more complex the art, the harder it was to put it on chain, the bigger the flex.
Examples:
- Terraforms (fully on chain art)