Digital assets are inevitable

Happy Sunday.

I didn’t intend to add another post to the growing list of ones about the metaverse, but it’s worth sharing this great article about NFTs. Quick warning: I’s a two-hour read so it takes a good chunk of commitment to finish it. I think it’s worth it.

The idea to share it comes from my friend’s group chat. One of the members, an avid gamer, doesn’t think highly of NFTs. And when I went to a party recently where a few of the others in the chat were at, I received a few “I don’t have much of an opinion because I don’t know enough about them” responses.

I get it. These things are niche and frankly, if you thnk they are scams, I don’t blame you. The media hasn’t done a great job sharing the underlying investment theses behind NFTs and have chosen to focus on (currently) true issues like impact on climate change – that however, won’t even be applicable after the move to proof-of-stake goes live this year.

On the other hand, what people don’t hear about is the multi-layer rationale for why NFTs do exist. There’s the first level, represented by fads, profile pictures, generative hype, etc. I think that’s where most haters are. They see people making and losing money off the back of not just intangible value, but off the back of real scams.

Then there’s the second level: Understanding where supply, demand, and where value comes from. This is the stage where NFTs become closer to art and where Sotheby’s and Christie’s is selling Beeple works for millions of dollars and pricing their auctions in ETH.

The third level is where real-world value (for people like me) starts. I’ve written about the investment thesis behind blockchain gaming as an on-ramp for skeptics including our group chat-participant, gamer friend above. Alternatively, there’s Royal for music lovers. I’m not a BAYC afficionado but tokenholders receive access to eventspaces only for ape owners. We’re currently somewhere between level 2 and level 3 at the moment.

And finally, the fourth level starts to be where NFTs embody physical assets. Think about the tokenization of a bike. As I use in examples with friends, it could represent ownership of said physical bike. Get your bike stolen? The thief is not going to have the corresponding token that goes along with it and will have a harder time selling your bike on the market to honest people.

I didn’t intend to add this piece to the growing list of ones about digital assets around the corner, but typing it all together does feel like at this point it’s almost inevitable we’re going to live amidst a world where the line between physical assets and digital assets blur. Not in a real world meatspace way, but at least in terms of value and what ownership of each represent. Call it the early stages of the metaverse but as a society we’re already there. ‘Keeping Up with the Joneses’ and flex culture on Instagram is only the beginnning and there’s no going back.

Should you have the time, I do encourage you to read the article and let me know what you think.

Have a great week.