We’ve all seen the headlines - from Sotheby’s and Christie’s putting on sale digital pictures called CryptoPunks or Fidenzas, to swarms of twitter users changing their profile pictures to penguins and apes. We’ve also all heard the almost-immediate sarcasm, skepticism, and at times scorn, that come with most mentions of NFTs - from those who write-off the whole thing as the latest pump-and-dump scheme, to others who can’t fathom a digital picture of a monkey being worth anything other than $0.
I understand most of the initial pushback regarding NFTs and find it legitimate, especially as there’s a noisy layer of external factors mixing together and adding complexity. Most skepticism seems to fall into two main buckets:
A digital photo cannot be worth anything other than $0!
This argument typically branches into I) owning a jpeg is pointless (“why would anyone care to own an online picture”) partly due to II) NFTs are easily replicable (“you can just right click save”) and III) a jpeg itself lacks a use or function (“what’s the purpose of an online picture”)
I can possibly see it having some kind of value, but it can’t be worth X!
I think debating the points above requires going into things like what art is or is not, why using blockchains for different things makes sense or doesn’t, and how a potpourri of macro and micro trends brings about heavy speculation - which are all super interesting topics but all beyond the point of this piece for now (though I’d love to chat!).
From a social, psychological and cultural standpoint, there is an evident underlying part of the movement that imo has shown the next step of a huge mindset shift in the way we think of our identities. This shift is among the factors powering NFTs but also starting to influence more and more of our society - and it’s one that I think will be worth thinking about and at least trying to understand.
So below, I try my best to explain what I see at play, and how digging a bit deeper and then extending it more broadly can give us great hints into understanding where our world may be going.
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The IRL world comes with an infinite number of customs, norms and assumptions that we all consciously or subconsciously opt into, and take for granted each day. We are so used to these that they seem obvious, straightforward and inevitable.
For example, when someone wants to ask someone else to ‘pair’ with them for life, they will often gift them an expensive rock attached to a ring, which the person then places on their finger in a signal of commitment and love.
Some people will emit sounds, combine these with other sounds, and share them with everyone else, for people to listen, dance to, critique or appreciate.
You get the point. Most of these customs naturally started IRL, and have shaped “normality” as we know it - creating new industries, millions of jobs, and entire new ways for people to experience life.
Inevitably, also our identities have originally been (mostly) tied to our IRL self. Most people spend many hours each week taking care of their IRL appearance, shopping for IRL clothing, looking up pictures of their dream IRL home, etc. Most of people’s ambitions and dreams revolve around IRL goals and achievements.
And for a big part of our lives, the real world is the only reality we’ve known.
But as we spend more time online, it is only normal for people to start feeling the need to have an online identity, alongside their IRL one. And the way the internet has evolved means there are now many places online where we can (or want to) be present in. Based on our communities and audience in each, we may or may not want want to display the same identity or part of our identity in each reality (eg. having separate “Snapchat” vs “Work email” identities) but there are definitely different online realities in which we exist - where we could discover and join new communities that we start to feel part of, where we could make new friends, where different rules apply as to what’s admirable, or cool, or wrong.
Up to now, we’ve seen Version 1 of this Identity Shift happening – with online identities simply being a migration of IRL ones. Take social networks like Instagram, for example, where people attempt to create their online identity by quite literally importing pictures of their IRL identity into the digital world. I may not have seen a friend for years, but she or he can get a sense for my IRL identity by scrolling through my Instagram feed and Stories highlights, where I show activities I enjoy, orgs I support, restaurants I always go to and friends I always hang out with.
And as these online realities begin to structure and network themselves into being more and more real, they inevitably start carrying a larger weight in people’s experience of life. Social media influencers, in my view, are an interesting example of this - where people’s ability to create an online identity for themselves resulted in their IRL experience of reality dramatically changing. All of a sudden, many people are not only focused on their IRL identity, but also carefully crafting, maintaining and building their online existence as well, realizing the extent this could influence the former.
And here is where Version 2 comes in. Version 2 enables us to go well beyond just importing our IRL identity online. From a creation standpoint, it allows us to create entirely new identities for ourselves. And from a focus standpoint, it comes with people caring and focusing about their online identity first (or at least equally to their IRL one). Whether we call it the ‘Metaverse’ or The Oasis, or whichever name you want to give to an equally-important online world, NFTs are an attempt at creating something whose signalling starts there.
As Jarrod’s tweet put out:
or from an identity standpoint:
Version 1: be IRL things, online
Version 2: be online things
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Ignore for a minute whether you agree that a digital picture has any monetary value, or value at all. What’s at the core of the movement, is that the process that usually only applies to the real world, is now happening online. I may choose to spend $10k on a Birkin bag IRL, because I like how it makes me feel when I wear it, I appreciate the craftsmanship, or think I may be able to sell it in 3 years for $11k. The same exact evaluation is now applied to something that is, in its first form, purely online. And that’s what I think is important.
Yes, I may print my Bored Ape on a t-shirt and wear it around to signal IRL too, but at its core, I will be caring about something that is online-first, IRL will come second. I will be thinking about the sense of belongingness to the community I feel with the members of the Discord channel; I will be thinking about being able to change my Twitter pfp and signal my achievement. Just like Version 1, this is a fundamental paradigm shift.
And for those who think all of this is terribly romanticized and that, actually, the average holder will have re-listed and offloaded their Ape and cashed out on their ETH before I even get a change to finish typing this sentence - I dare ask you to look through the noise :) Sure, in this market, loads of (most?) buyers are speculators and many are into the business of flipping NFTs to make a quick buck. But for every Bored Ape and Krazy Koala making the headlines, there are many thousands of artists creating digital art, and many thousands of buyers buying and holding just as they would do for the painting they have in their home.
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Let’s go back to the real world for a minute. A first edition of Chaucer’s Canterbury Tales, printed in 1477, was sold in 1998 for $7.6M. “But there’s so many copies of that book, who would ever pay $7M for it when it costs $10 at Barnes and Nobles?”, I hear the naysayers point out. “Oh and wait, I could probably also find a pdf version of the book online and print it – LOL what a loser the buyer must be.”
And if book collectors seem too niche-y or distant, we can take one step closer and compare like-for-like. In May 1990, one of my favorite paintings, “Bal du moulin de la Galette”, was sold for $78M, joining the ranks as the second highest sale of the time.
Why is there so much more cognitive dissonance at the idea of one spending large amounts of money on a jpeg, than for the examples above? So many interesting reasons.
First, the most obvious, the category and asset class of traditional art has been around for centuries, and we are all used to it. Anything that is new will naturally take time for people to understand.
Second, the two examples are physical, IRL objects that we feel we can grasp, quantify and make sense of. It’s normal for me to care about my IRL identity. Although I may not agree with it or wish for the same, I can understand why others would want IRL items too. To some extent, it feels there’s intrinsic value to them by just being in solid form. I could break them down into their most basic form and I’d still be left with something concrete and solid – which I know is worth something.
The real world seems ‘real’ and straightforward, and we’re used to making sense of it. Others have opted into the social agreement that says we should expect the price of things to stay relatively stable and fixed (leaving inflation aside) – that in exchange for producing economic output, for example, people should receive back enough currency for them to be able to afford food and (ideally) shelter, and so the price of each of these components is somewhat pegged to our social agreement of how society should work.
Third, and here is where the Identity Shift comes into play, it’s not immediately clear to most why one would care to signal online-first. I may not wish for the same, but I can somehow understand why someone could spend $20M on a Picasso in order to be able to hang it up in their home - yet why on earth would one care to spend the same amount on something they can basically just hold online? What can you even do with it?
Here is where our understanding of identity and of the increased importance of the online world comes to play, and where movements like that underlying NFTs are emerging with a new mindset – while we have traditionally cared and focused on signalling and building an identity IRL, as we move online we’ll care to do the same online-first. We will start to care about things that only exist online, and that we’ll only, in a second moment, import into the IRL world as some kind of memorabilia.
The way we signal will be dramatically transformed as we move online. It won’t be enough for me to spend money on a prestigious work of art, to only have Architectural Digest, or the 2030 equivalent, snap some pictures of it to post on the paper and digital version of their magazine. Translating my IRL identity to online won’t be enough anymore.
As technology expands our possibilities and new ways of experiencing ‘online’ emerge, we will eventually be spending large amounts of time in realities that are not IRL – with new ways of living, different identities, new societies and cities, different ideas of beauty or physical standards, and objects that don’t even exist in the IRL world. It’s fascinating to think of all the shifts this will come with it, but one of the underlying assumption will inevitably be that our concept of identity, and how we signal it, will fundamentally transform.
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