Apparently, Some People Think All NFTs are Digital Art Collections

In late September, dappGambl—a site that analyzes Web 3 and cryptocurrency gambling platforms—released a report that found the value of NFT digital art collections has bottomed out. The report found that these once high-flying collections were trading at a value of around $80 million in July 2023, about 3 percent of its August 2022 peak.

Not surprisingly, the report went viral, propelled in part by the hordes of observers who were always skeptical, if not downright cynical, about digital art as a sound investment. I was among them. When I saw the juvenile, talentless art—notably from the Bored Apes Yacht Club—and the sums being spent on the NFTs that gave the buyer exclusive rights to the art, I wondered what they could have been thinking.

Despite the accuracy of the report, though, I was troubled by the way the authors, the media, and those who spread the story characterized it. They did not specify NFT digital art collections. They just said, “NFTs are worthless.”

Digital art collections are just one of many uses to which NFTs have been (and can be) put. To suggest that all NFTs are now worthless is simply, objectively inaccurate. I said so in a post on Bluesky. The blowback was immediate. I didn’t know what I was talking about, I was told. Informed people knew better, I was told. I must have been an NFT investor in denial, I was told.

This post is for them but also for anyone who might be wondering about the “NFTs Are Now Worthless” headline that has been raging across social channels.

Not All NFTs Are Digital Art Collections

The report notes that “69,795 out of 73,257 NFT collections have a market cap of 0 Ether, leaving 95% of those holding NFT collections -– or 23 million people -– with worthless investments,” according to the Guardian’s coverage .

The word “collection” is the key to the confusion the headlines are causing. An NFT collection is a digital art collection comprised of a limited number of NFTs created by an artist or group of artists (like the Bored Apes Yacht Club). NFTs at large, however, are in no way limited to digital art, gathered in collections or otherwise.

NFTs, as most people now understand, are non-fungible tokens. Let’s break that down, starting with tokens. A token is a thing that serves as a tangible representation of something else. It can be a voucher exchangeable for goods or services, for example. A 10-dollar bill is a good example of a token. The paper and ink used to print a ten-dollar bill are not worth 10 dollars. It is a token that represents 10 dollars you can use to buy 10 dollars worth of goods or services.

That 10-dollar bill is a fungible token. I can give you one from my wallet in exchange for one from your wallet—or a five and five ones, or a five, four ones, and four quarters from your pocket—and we both will still have the same value we started with. A non-fungible token, on the other hand, is unique. Your driver’s license is (for all practical purposes) a non-fungible token. It does not grant you the authority to drive a vehicle in and of itself. That authority resides with the state that issued the license and the record it maintains. They sent you the token—the license—that represents that authority. When you get pulled over for speeding, you show the token to the officer, who recognizes it as the representation of the authority granted to you by the state. The deed to your house is another non-fungible token. There’s only one, and it serves as a tangible representation of the ownership of your house.

The Web 3 Connection

NFTs are the same, with one distinction: They are recorded on a blockchain. Other than that, a token that represents your ownership of a piece of digital art is pretty much the same thing as a token that represents your ownership of your condo. And in fact, real estate property is now being recorded by some on the blockchain. That is, their deeds are NFTs.

Most reporting on NFTs has been confined to the ridiculous valuations of digital art and the vast amounts of money people—from Justin Beiber to that guy you know from work—invested with the expectation of earning high returns. I never bought into that concept, and I joined the choruses of “I told you so’s” when I read about the plummeting value of NFT digital art collections.

There are two things to consider, though, when analyzing the suggestion that NFTs are worthless. One is that not all NFTs are digital art collections. The other is that there is more than one way to define “value.”

Take the real estate example I just shared. Some people—including TechCrunch founder Michael Arrington—have bought and sold real estate using NFTs. That means, simply, that instead of a traditional deed, their deed is recorded on a blockchain. Has the value of their real estate plummeted along with digital art collections? Of course not. Real estate values are tied to long-standing conditions, such as interest rates, economic conditions, changes to government policies (like zoning and taxes), and a host of others. The fact that the title to the home is recorded on a blockchain is not among them. The value of real estate NFTs is not tied to the value of digital art collection NFTs.

NFT Use Cases

Other non-art uses of NFTs include (but are by no means limited to) things like…

• Tickets—Your purchase of a ticket for a designated seat in a stadium for a game is recorded on a blockchain and displayed for entry on your smartphone’s wallet). Even the NFL replaced ticket stubs with commemorative NFTs. The advantage of selling NFT-based tickets—the value—is a better experience for fans and transparency around how many tickets are available and what they cost. Scalpers, outrageous Ticketmaster fees, and other issues dragging on the event industry are addressed with NFT tickets. Also, the value of your ticket to a game or concert does not rise or fall just because NFT art collections have lost value.
• Music—Musicians are connecting directly with their fans by selling digital music files. No fan expects the value of a music file to increase—nobody buys music as an investment—but it does serve as a way for the artist to ensure their rights to the music aren’t violated. Artists can also provide extras with the music, such as a coupon for merchandise or early access to concert ticket sales. Musician Tony Fountain explained the benefits in a Rolling Stone article . “Deadmau5, Grimes, 3Lau, Jacques Greene, Tory Lanez and Kings of Leon are all getting in on a slice of the NFT action,” according to a MusicTech article . ” most jaw-dropping figure comes from 3Lau’s recent sale, in which he accumulated $11.3 million from an NFT auction.” Fans buy the NFTs to have lifetime access to the music and to ensure the proceeds all go to the artist and not a record label, as well as to get any additional goodies the artist offers with the NFT.
• Loyalty Programs—Starbucks offers its fans membership in Odyssey , an NFT-based loyalty program. “How it works is customers login with their Starbucks Rewards account and participate in challenges to earn “NFTs” called Journey Stamps,” writes Tyler Nee in a Medium post .

NFTs also have utility in gaming, digital identity, and even social influence. POAPs are NFTs that prove you attended a specific event, such as a conference; the likes of Adidas and Estee Lauder have employed them.? NFTs can even be used to store medical records and clinical data. I haven’t even scratched the surface of the applications to which NFT can be put. In almost none of these use cases is the value in their potential to return more than was spent on them, but that does not diminish their value.

Value Can Be Non-Monetary

This leads us to the second consideration: the definition of “value.” At its core, “value” is the regard in which something is held. While that can translate into how much money we collectively decide we are willing to pay for that thing, it is by no means limited to that. There is, for example, aesthetic value. While I had zero interest in investing in a Bored Ape Yacht Club digital art collection, I am very interested in buying an NFT that gives me ownership of digital art from one of the Caribbean artists available at Expressions.com . I have no expectation that this art will appreciate in value. But I would like to hang it on my wall using a high-end digital frame. By spending money on the NFT, I am not making an investment, but I am supporting an artist who might otherwise never be able to earn a living from their talent. By offering their art for sale through their website, Expressions.com is exposing the world to artists who might otherwise work in abject obscurity. (I recently wrote a post specifically about Expressions.com .)

At the company where I work, we are pursuing a strategic plan designed to differentiate us from our competition by delivering twice the value. That does not mean we will build large, complex structures for half of what our competitors would charge. The details of the plan have been crafted to drive us toward defining what that value is. It could be strong bonds of trust with clients who know we will deliver on time and on budget and that we won’t pitch our work based on unrealistic schedules and budgets just to get the job; we’ll tell it like it is. Certainly, clients find value in that kind of relationship.

I queried ChatGPT on the ways value might be defined. Here’s what the AI chatbot shared with me that does (or could) be relevant in the world of NFTs:

Value can be conveyed in a multitude of ways beyond just money. Here are some of the different ways:

• Skill and Expertise: Mastery in a specific domain can be a reflection of the value it holds for an individual or society. This is often why people pay a premium for expert advice or craftsmanship.
• Social and Cultural Capital: Relationships, networks, reputation, and social standing can also convey value in many societies.
• Knowledge and Information: The transfer or sharing of valuable knowledge or information, such as trade secrets, proprietary processes, or even educational content.
• Physical Goods: Tangible items like gold, precious metals, gemstones, and real estate have been used historically and currently to represent value.
• Emotional and Sentimental Value: Items or experiences that have personal meaning but may not necessarily have monetary value, like heirlooms or memories.
• Digital and Cryptographic Assets: Cryptocurrencies, tokens, and digital collectibles (like NFTs) represent a new kind of value medium in the digital age.
• Acknowledgment and Praise: Recognizing someone’s efforts through awards, certificates, titles, or just verbal appreciation.
• Rights and Privileges: In many cultures and societies, certain rights and privileges are considered valuable, like the right to vote, access to exclusive clubs or spaces, or licenses to operate in certain domains.
• Natural Resources: Commodities like oil, water, fertile land, and minerals can convey value, both economically and strategically.
• Experiences: Engaging in unique or enriching experiences, such as traveling, attending concerts, or partaking in certain activities, is seen as valuable to many.
• Art and Creative Works: Paintings, sculptures, music, and literature have intrinsic value both culturally and monetarily.
• Scarcity: Things that are rare or hard to come by often hold value due to their scarcity.

None of this is new information; it’s freely available all over the web. But as some people continue to insist that the bottoming-out of NFT digital art collections means all NFTs are worthless, it bears repeating: That’s just nonsense.

The banner image was created in Midjourney.