I’ve noticed that many of the conversations I have about NFTs, or Digital Property, tend to center around the argument that NFTs are a “A solution looking for a problem” or that those who buy NFTs “actually don’t own anything but a receipt”. These are common arguments that have their own problems, but it’s not where I think the discussion should be focused. There’s something else going on with the rise of digital property which seems to be ignored. It has more to do with innate human drives which have existed for thousands of years. They are overreaching concepts that transcend the metaverse. They are Collecting, Ownership, and Rarity as it relates to art and collectibles. Why do we do it, and why do people feel like collecting digital things gives them the same satisfaction as collecting “real” things?
Ownership gives one a sense of control over something. Ownership can often translate directly to power, if an owner owns real estate, or in the worst case scenario, people. An owner can do with their property as they please. They can buy a Maserati and paint it pink, or they can buy a piece of land and build a commune on it. Ownership is therefore often associated with the owner having a sense of freedom, or autonomy. The more you own, the more options you can have. Another aspect of ownership involves how one curates their identity. The possessions which one amasses throughout a lifetime can be seen as an extension of that persons identity, and how they see themselves, and present themselves to society. The objects we choose to keep can be important to ourselves , regardless of whether or not anyone else cares about them.
Alternatively, how we adorn our bodies with our property also signals to society how we want to be seen. What is the purpose of paying 20,000 dollars for a Chanel bag? And who is the audience for the performance of wearing this bag in public? Is it the random people on the street, people on Instagram, or both? I think there’s a good chance that the Instagram photo of Paris with a Chanel bag reaches far more people, and therefore the signal is far more powerful. In this case the digital curation of her identity has more at stake in the picture with the Chanel, than a real Paris walking down the street with it.
Digital property in its early iterations, involved buying and selling useful tools which were used in video games. In 2007 Ebay banned the sale of all digital items from games on their site due to “due to the legal complexity associated with these types of items.” The site did not ban the sales of items from Second Life, because at the time it was not regarded as a game. Nonetheless, without any corporate fanfare encouraging it, people sought out the purchase of digital items long before NFTs ever existed. Owning digital property was almost immediately accepted by a wide variety of people as having value (not in monetary terms, but personal value to the person buying it. Fortnite famously makes nearly 100% of their profits from the sale of digital “licenses” which don’t give ownership to the person who buys them, but allows them to use within the game. This has proven to be extremely profitable, and often those who have purchased these skins don’t even fully grasp that what they’re buying a form of digital property.
Collecting is strange phenomenon that Psychologists have investigated from a variety of angles. Often times a child’s first collection involve stuffed animals which are given to them from a young age. These objects convey a sense of security, as the child has ownership and control over the object. This is a very innate drive. Other collections may have to do with gaining more history about a certain subject of interest, and owning these items. In the case of some massive collections, such as museums, there is a civic pride in collecting and sharing these things with the public, so they can also enjoy the objects which have literally been put on pedestals. Collections can also be a direct line to some form of nostalgia. One of the results of the lockdowns, was that a lot of people started collecting things from their childhood. This caused everything from He-Man figures to Easy Bake Ovens to go up in value.
In the case of He-Man, the objects themselves serve as a time machine back to the past and the nostalgia the owner associates with the item. We haven’t seen too much nostalgia come into the digital world, simply because digital property as a concept is still fairly new, and much of the early digital property, such as in World of Warcraft, can no longer be used within the game. However, imagine for a moment if in 1986 everyone who had a NES could have also made a custom Mario. I guarantee you that many people’s hearts would get an ache from playing with their old digital avatars, just as they get the same feeling from playing or looking at their old toys.
But much of this involves the romantic side of property ownership. The nostalgic, and those who want to signal to society who they are as a person. Another simply involves those who want to make money off the sale of these items to all of us romantics. These could be antique dealers, or auction houses, or even an ebay flipper. They don’t hold the nostalgic love for the items but serve as an intermediary between the item and the person because they want to make money.
The Geneva Freeport may buy and sell more artwork than any other place in the world. Here some of the world’s most valuable paintings are stored in climate controlled conditions inside special enclosures. The paintings never see the light of day, however they are bought and sold and hold their value over time. In this regard, these assets are as stable and profitable as a home, or an index fund. Generally with the transactions done in these freeports, the art never even changes hands. The ownership changes, but the item sits in the same place. The owner has proof they own the object, and a picture of it, but they don’t actually have the piece ever in their possession. In this regard, what they are buying is almost completely abstract. Digital property can at least be displayed in virtual environments or on social media, whereas those who buy objects and keep them in storage see them only as investments which are never exhibited in their homes or for the public.
The value of art and collectibles has often been tied to the rarity of the items. With NFT projects we are given a strict limit of how many of these things will be produced. While these numbers are not often listed with most collectibles, they are often discovered by the community which is interested in them. For instance, the most valuable baseball card is a Honus Wagner. The one in the image below recently sold for 6.6 million dollars. The materials its made of are not unique. It’s just made of paper and ink. And the player is not one which is well known for his athletic prowess, however the card itself holds tremendous value because of the aforementioned reasons, but more importantly, because there’s only 60 of them. The rarity of the item drives the price. The less there are of a desirable item, the more it becomes worth. This is nothing new. And while I’m sure many shrieked about the how much people are paying for baseball cards, their value still held firm, because the desire to own them never wavered.
With digital property, the only thing which has changed in the last few decades, is the medium which is being collected. Because it is not tactile, this causes many people to bristle at the idea of owning something “that’s not real”. However I’ve also demonstrated that through the sales of freeports, owning something that says you own something has sufficed for quite some time. As the virtual worlds collide with “real life” we’ll only see a rise in digital collectibles. This doesn’t mean that Bored Apes will be worth a hundred million dollars in five years, I have no way of judging where the value of these items will lead, however it does mean that the acceptance of owning digital collectibles will only become more commonplace. Just ask any 8 year old who plays Roblox, and they’ll make the most impassioned case for their favorite digital properties which they own.