Understand the cycles of hype and value in NFTs

Non-fungible tokens (NFTs) have ushered in a new era of digital collectibles, enabling individuals to express their identity, interests and affiliations through unique digital assets.

As the value of these assets varies with the popularity of interests and fandom, it is critical for collectors to understand the dynamics of ownership, authenticity, and the ever-changing nature of interests.

In the past, we encountered objects that gained great appeal for short periods, which led to shortages and nationwide attention. Tickle-Me-Elmo and Furbies are two examples of this. Even during their hype, it would be hard to imagine that these items would remain popular and valuable forever. A large part of the price increase for these toys on the secondary market was a lack of offers played against the demanding children who wanted them in time for the holidays.

Holistically, there is no fad with NFTs as a technology, just in the same way that I believe plush toys with robotic features will continue to be produced and sold to children who love them. However, a specific NFT or collection is only as valuable as the interest shown by collectors in it. Each type of collection changes in value over time, not always upwards.

To understand how this new world of digital goods works from a collector’s mindset, it is crucial to understand ownership as a means of identity, the need to confirm authenticity, and that interests change over time.

What ownership means to collectors

Collecting and owning physical objects has long been a way for individuals to express their identity, interests and belonging. From sports memorabilia and stamps to autographs and rare editions of books, collectors take pride in curating their collections as a tangible representation of their passions and values. With NFTs, this process of identity formation and self-expression has moved into the digital realm, providing new opportunities for individuals to showcase their interests and connect with like-minded people.

NFTs act as the digital counterpart to traditional collectibles, allowing users to own, trade and display unique digital assets that represent their interests and fandom. Whether it’s digital art, virtual real estate, or tokens representing a beloved musician or sports team, NFTs allow collectors to cultivate their digital identity and showcase their passions to the world.

The value of NFTs as identity-forming objects is closely linked to individuals’ desire to associate themselves with specific interests, societies or cultural phenomena. As the popularity and relevance of certain interests and fandoms vary, so does the value of the NFTs associated with them. This dynamic interaction between identity and value reflects the complex relationship between personal expression, cultural trends and market forces.

Authenticity

Like physical goods, counterfeits occur when any NFT becomes popular.

While the blockchain offered the promise of verifiable authenticity, it made it easier than ever to deceive consumers. In the same way that just because something is online doesn’t mean it’s true, the same goes for the blockchain. If an NFT exists and looks like a real NFT, it simply means that someone uploaded that image to the blockchain, not that it is authentic.

As with all collectibles, the authenticity and provenance of an NFT play a crucial role in determining its value. In the digital realm, provenance refers to the asset’s origin and ownership history, which can help confirm authenticity. Blockchain technology enables the tracking of NFTs through a decentralized and transparent ledger, but collectors should still exercise caution when acquiring new digital assets.

To ensure the authenticity of an NFT, it is important to investigate the artist, project and platform associated with the asset. Reputable platforms and projects often have dedicated communities and social media profiles that can provide information about the NFT’s legitimacy. In addition, the blockchain record can be consulted to verify the asset’s creation, transfer history and ownership.

From a fan’s or collector’s point of view, owning a fake item is a shame, their desire to collect comes from the desire to be a part of something bigger than themselves. From the trader’s point of view, the only thing that matters is the ability to flip a collectible for a profit, even if it’s fake. The collector’s desires provide the value of the market for collectibles, and traders can exploit that to profit by selling or scamming.

Interests change over time

If you didn’t get my original reference to Tickle-Me-Elmo or Furbies, you’ve proven my point. Interests change over time and sought after and collected items like Pogs, Sportscards and more fall in and out of fashion.

What makes something popular is hard to describe and even harder to plan for or control, and the same goes for what makes something fall out of popularity. As new things appear, they distract the attention of those who were previously interested in something else, and over time some collections lose fans from nothing more than fatigue. Know that nothing lasts forever, NFTs are a way of making and tracking, not the brand that people want themselves.

The future of NFTs: excitement and caution

While NFTs provide a unique and engaging way to own, trade and value digital assets, it is important to approach this market with both excitement and caution. Understanding provenance, conducting thorough research, and being aware of hype and depreciation cycles can help collectors and investors make informed decisions.

Although this seems new, it is the same as collectibles have always been. Would you spend your savings on a new popular baseball card?

Ultimately, as our digital identities continue to evolve and intertwine with the physical world, NFTs provide a fascinating glimpse into the future of digital ownership and the complex dynamics that govern value.

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