NFT auction prices signal a blockchain bubble

NFT mania is starting to look a lot like a virtual assets bubble. From the memes, to architectural renderings, to metaverse land grabs, non-fungible tokens tied to a wide range of digital assets are garnering wildly speculative auction prices and manufacturing a sense of scarcity and value.

What the NFT? NFTs function as deeds or exclusive rights to ownership over digital assets. Value is created in the scarcity of the digital token. So while anyone might be able to download the image or GIF associated with a given NFT, the value is created in the record of the transaction, tracing provenance between issuer and buyer. Since we first wrote about NFTs at the beginning of March, the explainers have proliferated (unfortunately).

The mania: Who needs tulips when there are digital assets to detach from intrinsic value?

  • Jack Dorsey's first tweet sold for exactly $2,915,835.47 this weekend.
  • Christie’s auction for Beeple’s composite collage garnered $69.3 million.
  • Musicians like Kings of Leon and 3lau are dropping tokenized releases.
  • Brands from Charmin to Taco Bell are getting in on collectibles.
  • Quartz tried saving journalism by selling an article for $1,800.

Blockchain hype: NFT's provenance and chains of ownership are resolved on the blockchain, or the distributed ledger architecture. Despite becoming increasingly strategic to enterprises over the last three years, a 2020 Deloitte survey of blockchain-knowledgeable global executives found that 54% think blockchain is overhyped, up from 39% two years prior. The speculative NFT prices may be riding on that bitcoin/blockchain hype cycle.

NFT, WTF? The words “just setting up my twttr” still live freely available for all to see. The new owner of Jack Dorsey’s inaugural tweet essentially bought an autographed file that links to the metadata of the tweet itself. If that doesn't melt your brain, well, you probably have too much money lying around—in which case, John Cleese has an NFT bridge he’d like to sell you.