Creating Liquidity from Thin Air.
The Aston Martin and the Barn
This is difficult to wrap your head around and is what people easily reject as a scam.
"You can’t just create a money out of thin air.”
“This picture has no value, I can just right-click to save it myself.”
“People won’t value digital land.”
Allow me to explain something deep about the world and money, with a short story…
The Barn and the Aston Martin
Imagine you buy a plot of land in the wilds of Montana.
On this land, which you now own, you happen to find that there is a broken-down barn on the property, which hasn’t been opened for 50 years.
You open the barn doors, curious to see what you’ll find…
And to your excitement, you discover that underneath a ton of hay and dirt is…
A 1960’s Astin Martin – the same one that James Bond drove in films.
Now, this car is in bad shape, but you just happen to be a former mechanic.
So, you get to work, and you fix up the car. You repair the engine. You spend about $1,000 on some materials, another few thousand on paint…
Suddenly the car is good as new, and it runs perfectly!
You decide to list this car on eBay, and you start getting offers – the bidding starts at $1Million.
Now, here is the punchline: Ask yourself; where did the $1million come from?
Last week, the car was worth $0.
It was illegible to the world.
It was a rusted piece of junk.
The car essentially didn’t exist.
Yet, with $5,000 of materials and a bit of sweat, now there is $1Million in the market for this car.
And the market cap for luxury cars just expanded by $1Million.
So, where did the $1Million come from?
There is no fixed amount of value in the world.
There is no fixed pie.
The pie is an illusion.
Pretend I’m a famous artist, give me an easel and some paint, and enough belief and I can add $1Million to the art market cap just in a days work.
So who did the artist take the money from when they put it up for auction with bidding starting at $1M?
Blockchains make new value legible to the market.
Blockchains give us the tools to price new value in the market.
Blockchains, therefore give us liquidity.
Liquidity is the ability to sell value that has been created.
It’s a pricing mechanism.
And the point is that many more things have a price than we currently price today.
The constraint, of course, is still demand.
Just by pricing something, does not mean there is a buyer for it.
Just because you make an NFT does not mean that it will be highly valuable, even if you set the price high.
A market participant needs to have the necessary capital to convert the hypothetical market cap to the objective market cap.
But what we’re seeing is new opportunities for liquidity…
Liquidity for artists
Liquidity for investors
Liquidity for communities
Liquidity for musicians
So why is an NFT valuable? Or a new form of money?
Because in pricing it, we make it legible to the market.
This creates a new opportunity for liquidity.
And new ways to price and sell value.
XX I’m David Sherry, I coach, invest, and create in the startup/crypto/creator ecosystem.
You can join my Telegram chat for more real-time conversations.