Quantstamp Labs
April 19, 2021
April 20, 2021

The recent explosion in interest of NFTs by predominantly new adopters of blockchain begs the question, why? What value beyond price drives new users? There have been many opinion pieces asking these same questions. How can a “rare digital picture of a cat” hold value if you can copy then save the underlying jpeg-file? Or even why would something unique have value in an illiquid market? 

Essentially the argument is that intrinsic value is fundamentally irrational, NFT markets are irrational because they don’t have wildy accepted use-value. They are non-fungible, they, generally speaking, require sufficient user action to determine the initial price—much less continued price action when market liquidity is not guaranteed. 

Center image of a Charizard Pokémon card

The argument that a uniquely coded MoonCat is not functionally different from a JPEG of the same cat—or another MoonCat with equally rare traits—is valid. Its “unique” quality has no use-value in the real world. A picture would suffice for any reasonable digital use it may have. Thus the value of MoonCat NFTs are irrational in nature because they don’t have any reasonable use. This is a correct assertion. But this is not taking into account the very real inarguable value that the macro-social landscape has agreed:

So it comes back to the idea that a rare item is only one axis to judge value. Its timestamp, and cultural significance in Ethereum history add to the base value. 

Most people apply emotionally-based intrinsic value on things regardless. Though rarity can have a play, a new Charizard Pokemon card will still fetch a good price simply because Pokemon is a beloved cultural phenomenon. Fans have collectively decided that Charizards hold more legitimacy and thus monetary value than other cards.

It’s important to accept that not everyone sees value in monetary terms. Art on your wall may just be some reproduction painting of the Mona Lisa to fill space, but many others want an original piece that they will likely never sell. They have a different system culturally by which they derive value—generally, most people make emotional decisions rather than rational—in contrast to profit maximizing. 

In fact, the Mona Lisa only has monetary value through its cultural legitimacy and constant reproduction; its popularity is enough for someone to put a price on the original. Its intrinsic value extends far beyond itself because of its history and cultural significance. It is in the very fabric of cultural life for many people, largely western audiences. This mechanic can be applied to music. If someone sells their song as an NFT, the owner of the song is actually incentivized to both give away copies and market the song’s playing in the hope that it catches on in legitimacy within a cultural fabric. 

Differentiating factors that drive cultural furver around NFTs are very likely going to be meta-data or meta-associative in nature. Like people buying a house once owned by a celebrity, this parasocial relationship will eventually extend to historical address ownership of an asset, like homes with historical past owners. Paris Hilton has an Instagram to show off her NFT art and Marc Cuban has a simple web platform for others to show off their NFT art. The fact is, culture will likely value an NFT well if it is widely known that a particular NFT was once owned by Snoop Dog. 

What if that NFT happens to be an NBA Top Shot moment purchased because it reflects that celebrity’s court-side attendance to the game, watching the game-winning slam dunk? This idea of “owning a moment” reflects a monetary value, on-chain, valued by its meta-associations and culturally intrinsic significance. Its value is relative to the group of people interested in it and reflected externally via price, in a universal way that many audiences can interpret, only adding to its legitimacy.

Known artists typically cultivate fanbases. If an artist can cultivate enough fervent fans, they will often buy, collect and trade works amongst each other—referred to as the 1000 true fans theory. Zora’s platform is designed to specifically address this and provide tools for artists to further cultivate their community of fans. At the same time, they are incentivized to provide value for their fans, not necessarily being monetary in nature. This community acts as a market for the artist’s brand, incentivizing them to grow both the community and their brand. The game theory here is that mainstream culture changes over time and the bet is on an artist’s staying power in an internet space that is generally global and diverse.

Eventually some of this value can be reflected in a traditionally rational form like an index of its base value. An index is helpful as it can be used externally by a wider audience showing basic fluctuations in price and thus markers of legitimacy. Just like, for example, the value of a DAO governance token that is also reflected in its price in fungible form for use in DeFi. There are technical factors that can lever a price up or down, like supply or liquidity, but ultimately the social value—whether marketed or not—is tied to the density of its participant network of the index. More culturally-intrinsic value by a community = more incentive = more participation = more use value via the index.

Because art NFTs are generally intrinsic, there are opportunities for community-designs to include curation roles. Naturally over time, ancillary activities such as reviews, influencers and “tastemakers” will help to transmute a dynamic environment of “illiquid art” to rational on-chain value, pushing mainstream adoption of rare digital goods.

So why do NFTs have value? Because by design they mirror human’s inherent nature to assign personal value to things on a network many people can access. It’s a medium that generally non-math people understand.

If on-chain “markers” of historical moments and cultural legitimacy are future drivers of accessible sources of “useful value”, via NFTs—on a network with money-like properties, specifically Ethereum—then the future will be far less siloed, far more accessible and more dynamically connected. A world outside of existing socio-economic frameworks, globally.

Quantstamp 实验室




独一编码的MoonCat与同一只猫的JPEG文件--或另一只具有同样罕见特征的MoonCat--在功能上并无不同,这种说法是成立的。它的"独特"质量在现实世界中没有使用价值。一张图片就足以满足其任何合理的数字用途。因此,MoonCat NFTs的价值在本质上是不合理的,因为它们没有任何合理的用途。这是个正确的论断。但这并没有考虑到宏观社会格局已经认同的非常真实的无可争议的价值。





围绕非自由贸易区推动文化皮毛的差异化因素,很可能会是元数据或元关联性的。就像人们购买曾经拥有名人的房子一样,这种寄生关系最终会延伸到历史地址的资产所有权,比如有历史过去主人的房子。帕丽斯-希尔顿(Paris Hilton)有一个Instagram来展示她的NFT艺术,马克-库班(Marc Cuban)也有一个简单的网络平台让其他人展示他们的NFT艺术。事实上,如果广为人知的是某个NFT曾经是Snoop Dog的所有权,那么文化将有可能很好地重视一个NFT。 

如果那个NFT恰好是NBA的Top Shot时刻,因为它反映了该名人在球场边参加比赛,观看制胜扣篮而购买的呢?这种"拥有一个瞬间"的观念,反映的是一种货币价值,在链上,以其元关联和文化上的内在意义为价值。它的价值是相对于对它感兴趣的群体而言的,并通过价格从外部反映出来,以一种普遍性的方式,让很多受众都能解读,只会增加它的合法性。






紧跟Quantstamp ,了解最新的行业趋势↪So_1F6E1↩。
注册我们的时事通讯 ↪So_1F4EC↩。
November 11, 2020

Quantstamp Community Update - October 2020

‍Audit of Ethereum 2.0 client Teku, blockchain insurance, Open DeFi, virtual events, and more media coverage... here’s what happened at Quantstamp in October.‍

November 5, 2020

Why Bitcoin is Capturing Enterprise Attention

MicroStrategy made headlines this summer as the first publicly-traded company to buy Bitcoin as part of its capital allocation strategy. Since then, other companies have followed suit. Learn how current economic conditions and the unique properties of Bitcoin have driven these decisions.

October 28, 2020

Formally Verifying Hedera Hashgraph's Stablecoin Framework

Quantstamp created and formally verified a specification for Hedera Hashgraph stablecoins. This simplifies the process of creating safe stablecoins and also makes easier for partners to safely integrate them.

October 27, 2020

Quantstamp Completes Audit of 2nd ETH 2.0 Implementation

Quantstamp has now completed its audit of Teku, the Ethereum 2.0 client developed by ConsenSys. Quantstamp also audited Prysm by Prysmatic Labs.