Introduction
The 2020 COVID-19 pandemic launched an unprecedented wave of interest in online platforms and virtual reality. With the spread of the pandemic, many families and individuals avoided travel and public areas, opting to stay indoors at their own will or the will of their government. During this time of isolation and cabin fever, many turned toward virtual reality and the newly-created metaverse to escape the mundanity of staying indoors. It was also during this time when Non-fungible Tokens, commonly known as NFTs began gaining popularity. Since their introduction, the market for NFTs has grown significantly, and blockchain and virtual reality technology has become more advanced. Are investments in NFTs really worth it for the average person? In this discussion, I will acknowledge the usefulness and future potential of NFTs, as well as discuss the difficulties presented to the average person by NFTs and the metaverse.
Early Beginnings
When Facebook turned into Meta in 2021, many people were confused about what this meant for Facebook as a company. However, the name change was Facebook’s first step in recognizing and advancing VR technology and the potential found in virtual social communities. The metaverse is a platform based in virtual reality where users can interact with their friends and join communities based on their interests. Although VR and the Metaverse is becoming more mainstream, the technology is still in an early phase of development, and there is much work to be done in landscaping the metaverse. The important thing to recognize is the emphasis on joining communities based on interest. The Metaverse is filled with niche communities, which can make it hard for new members to navigate the realm of the metaverse. Going down “rabbit-holes” led Oklahoma State Unversity graduates Drs. Quinn and Jonathon Button to the world of NFTs. In their Lecture “NFTs: More than Digital Art,” they explain NFTs in simple terms, as well as emphasize the importance of ownership and authenticity. Through the use of blockchain technology, NTF ownership can be traced all the way back to its origin, making it very difficult to create fake NFTs. This also makes it easy for seasoned users to spot counterfeit NFTs, adding to their security. There are many benefits to blockchain technology that will be discussed later on, but the important concept to understand is that NFTs hold value in the metaverse due to their exclusivity, validity, and security.
Security and Blockchain
One valuable aspect of the way NFTs are bought and sold is the record of transactions kept on blockchain technology. Blockchains are not necessarily new to the internet. Sites like Bitcoin, Merkle Tree, and other online ledger systems were introduced in the mid 2000s. Blockchains are available to the public, and anyone can see what is recorded in the blockchain so long as they have an account with the site. In addition to this, blockchains are encrypted on both ends, and the keys to create an account on a blockchain are extremely lengthy, making them virtually impossible to hack or guess. This is beneficial for the use of NFTs because their transaction history can be followed through the blockchain – allowing users to verify ownership and authenticate the NFT itself. Dr. Quinn likened this system to the popular show “Antique Roadshow,” in which sellers present receipts of authenticity to increase the value of their item. The use of blockchain technology is actually very straight forward and undoubtedly aids in the sustained-value of NFTs.
Hype or Hoax?
One of the trickiest aspects of entering the NFT and cryptocurrency market is its volatility. Much of the value of an NFT and Bitcoin is simply how much it is hyped up outside of its marketing. Websites like Twitter and other forms of instant social networking have affected the Bitcoin market in the past. Famous investors like Elon Musk have even been accused of manipulating the price of Bitcoin just by tweeting whether or not they think it is viable that day. The problem with NFTs and cryptocurrency market is that is it very difficult to keep stable, with so many users buying and selling on it each day. One day the price of Bitcoin can be soaring, only for it to plummet 2 days later. This constant flux scares many people away from ever trying to pursue their interest in cryptocurrency and NFTs. However, NFTs are handled slightly differently than cryptocurrency. Here is a helpful analogy in understanding NFTs and their appeal: Hermes is a popular luxury clothing and accessory brand that has been making handbags and other clothing items for many years. One of their iconic bags, called the Birkin Bag, cannot be bought from a store. A customer will need to make many purchases from their local Hermes store before their sales associate can offer them the opportunity to buy a Birkin Bag (for thousands of dollars). NFTs are similar in this regard. The amount of hype generated around an NFT as well as how many are sold adds to its value. The exclusivity of the NFT as well as how valuable it is considered by collectors is what makes it so desirable to own. However, with the increase in the number of NFTs produced by artists in the last 2 years, it can be very difficult for new users to pick out valuable NFTs from invaluable ones. This is one of the major problems that new users face when getting started in purchasing NFTs. Essentially, only collectors familiar with valuble NFTs would be able to distinguish between those which are valuable and not. Dr. Jonathan Button advised that individuals do their own thorough research into NFTs and which are valuable before ever purchasing one. In addition to this, the NFTs which are considered most valuable can cost thousands of dollars (just like an exclusive handbag). This steep price is a very daunting ask for new users to spend on a digital token that offers no physical use or real-world value. Even if the NFT becomes redeemable for real-world items, the value of an NFT is mainly seen in the secondary market. Secondary and re-sell markets are just as volatile as cryptomarkets, and makes the initial action of purchasing an NFT even more frightening to those who are new to the game.
Classism and NFTs
One interesting problem that could arise with NFTs is the introduction of virtual class systems, which in turn, could affect the real-world class system. As stated above, valuable NFTs can cost users thousands of dollars (unless given through promotions at events, etc.). The means those who are not already wealthy to enter the world of NFTs and make a fortune is extremely risky. Its pretty common knowledge that someone should not invest their life savings into a market as unreliable as crypto and NFTs. Although NFTs are available to anyone, it is still very difficult for lower class citizens to purchase the technology to even access the metaverse – much less spend thousands on NFTs that may or may not get you access to a virtual concert one day. Not only would those who cannot afford NFTs be left out of sepcific events and opportunities, but those who cannot afford the technology required at access the metaverse and NFTs are at an even stronger disadvantage. If the metaverse and NFTs were to become as mainstream as other forms of modern communication such as email, zoom, discord, and others, many who cannot afford the luxury of even accessing the metaverse may suffer real life consequences. This would perpetuate the difficulties of overcoming the current class-system, which is designed to keep those in poverty at entry-level jobs and other non-salaried positions.
Works Cited
Button, Quinn, and Jonathon Button. “NFTs: More than Digital Art.” Inside OSU, Oklahoma State University, 7 Mar. 2022, https://channels.insideosu.com/media/1_aoetzu8a.
Sheldon, Robert. “A Timeline and History of Blockchain Technology.” WhatIs.com, TechTarget, 9 Aug. 2021, https://www.techtarget.com/whatis/feature/A-timeline-and-history-of-blockchain-technology.
