My Filter for Evaluating NFT's

  
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You’ve probably seen the internet buzzing about NFT’s.

Non-Fungible Tokens are a feature of Blockchains, they give us the ability to have a unique identifier for digital goods.

The internet’s core feature was replication (all information, replicated freely across the web) but now we can do the opposite, we can create a true “verifiable digital copy of one.”

This digital scarcity allows for a whole slew of new applications and opportunities, and I have no doubt it’s the future.

I’m going to share why even though this is “Art and Attention” I’m holding off from investing any substantial amount in this current wave of speculation – and how I currently view value in this market today.

Art, Memes, and other digital goods can be priced in a 24/7 market online with true ownership and baked in royalty models… so what’s the problem?

The problem is not the technology or the opportunity.

The problem is that we’re very early, and demand is highly speculative.

And because we’re so early, I have not been able to find a reasonable value for 99% of the current market of NFT’s.

If you dive into most of the NFT space, you’re likely to see Digital Art that looks like this selling for anything upwards of 1ETH to 200TH ($1,500-$250,000+)

While the art itself is beautiful – I do not believe that 98% of this digital art will hold long-term value at or above the current prices in ETH.

If you buy these pieces for yourself, and because you love it – then there is no price too small or large, as it only needs to be something you are happy buying.

But if you are buying as an investment or speculation, here is the filter that I would apply to decide if it will retain value over time.

Is it Culturally Relevant? Does it have Utility? Or Both?

Cultural Relevance:

The most useful thing I can currently say from my vantage point is that for NFT’s to have value beyond speculation, I believe they need to be either Culturally Relevant or carry a Utility.

Cultural relevance has always been valued. We buy Beanie Babies, Pokemon Cards, Cars, Shoes, Bags, and any other goods because of their cultural value.

We buy original movie set costumes, collectors edition magazines, and any other item that holds sentimental or shared cultural value.

What NFT’s and the blockchain allow for is for us to price digital goods that have cultural value in an open 24/7 liquid market, with proof of ownership.

It makes sense that this cultural relevance will be priced online and will transform these goods and how they trade.

It makes sense that NBA TopShot is one of the leading platforms in the NFT space.

The NBA is extremely culturally relevant already.

It makes some sense to me that ownership of Memes like Nyan Cat are selling for huge dollar amounts.

https://foundation.app/NyanCat/nyan-cat-219

The speculation on an NFT Art today, is that the *Artist* will have Cultural Relevance tomorrow. You’re betting on them becoming more well known over time, like investing early in Picasso or Dali. As the artist’s cultural relevance grows, so does the price of the art they create.

Fandoms x NFT’s will be a winning formula and unlock for the future.

Utility:

The other aspect of value for these types of tokens is Utility.

Utility means that the ownership of the asset itself gives you some type of extra use-case.

The utility could be access: By owning this token, you get access to special events, to dinner with an NBA player, for rights to hang out in a certain internet chat.

The utility could be a royalty stream – for example getting paid every time a meme you own is remixed and reshared. Stock media falls into this category.

Or that utility could be an in-game function, where the product helps your character in ways more than pure aesthetics.

Utility value can be combined with cultural relevance in all different types of ways.

I totally get the value here, it’s clear that people want these types of opportunities.

We’re very early. NFT’s of tomorrow will look nothing like today.

Mostly what I want to share is that while I am excited and optimistic about the NFT space, I feel we are in the very early phases. If you want to purchase art to support artists because you care, of course, I encourage you to do that.

But if you are thinking this path – either as an artist or a speculator is a shortcut to wealth… I would take some time to think a bit deeper about it.

I’ve read that early Television was just people reading in front of a microphone and camera, just the same as they would do for radio.

So TV 1.0 was essentially just radio but on-screen.

This feels like where we are with NFT’s. Today’s NFT’s is just digital art that is minted.

Its current format hasn’t even begun to explore the amazing opportunities available in the future. So to be clear, I’m very long-term bullish on this market expansion.

I encourage you to spend time playing with these sites, buying something for the sake of learning, and if you’re an artist beginning to mint and sell your own pieces.

All of this will help you gain better clarity and context for the next wave of excitement about NFT’s a few years from now.

If you have any questions or comments, as always, shoot me a note, hit reply, etc. etc.

xx David


P.S. I’ve been excited about the prospects of DAO’s as well, which I believe are in a similar phase.

Hey, what’s up it’s David. I am a partner to Founders building unique brands.

I founded Death to Stock and help organize Jacuzzi Club. etc. etc.