It appears that having an observable phenomenon labeled after you is the ultimate kind of acknowledgment for an economist. In the instance of Adam Smith, he is known for his notion of a hidden force guiding the market, even if it is never seen but always sensed.
Torsten Veblen, a lesser-known economist, discovered a situation in which the price flexibility of demand was tested by some sorts of commodities whose demand, and thus cost, increased as they became more desired. These became known as Veblen goods, which are a type of commodity whose price rises as demand rises.
A Rolex watch, which seemingly has fewer capabilities than a possibly life-saving Apple Watch, falls into this class and appreciates in value based on its rarity.
Non-fungible tokens, or NFTs, are the world's first digital Veblen goods, even though they may need conventional economists, digital numismatists, and collectors of history's rarer items to abandon skepticism. The artist Mike Winkelmann (aka Beeple), whose digital work Everydays: The First 5000 Days sold for $69 million, has confirmed that NFTs are penetrating the previously unreachable realm of fine art and auction houses.
Only in the first quarter of 2021, NFTs represented a burgeoning market valuation of over $2 billion and increasing. NFTs are also bringing blockchain back to its original ideal of democratization and digital rarity, spawning new multibillion-dollar industries such as E-sports, video gaming, and attractive digital commodities or in-app purchases.
In the digital age, content producers have long faced a creeping socializing of their creativity and intellectual property, as well as privatization of profit, typically at the hands of exorbitant publishers, manufacturers, or auction sites. These parameters are being changed by the fast-changing NFT sector.
As though originality and its worth have a half-life, the content creation sector often just pays royalties once, or on a sliding scale if you are fortunate. Because trademarks or copyright violations are hard to enforce on the web, copyright trolls and patent hoarding have emerged as two of the internet's plagues.
NFTs, like other features of blockchain systems, take advantage of blockchains' inherent capacity to solve the accountancy world's most perplexing problem: duplicate counting. In the same manner that the real Mona Lisa (La Joconde) may only be contemplatively shown in one museum at a time.
NFTs bring the notion of digital rarity to collectibles, allowing anybody, from sports fans to digital philatelists, to participate in the digital scarcity market. NBA Top Shot, which is powered by Dapper Labs and has over a million users, harkens back to the days when sports fans swapped stat-filled cards of their favorite players.
While the marketplace may be exuberant, analogies to the greed-fueled internet funny money ICO bubble overlook the deeper strong undercurrent of what NFTs signify. They indicate a change in power relations from a consumer economy to a creator economy.
For instance, traditionally overlooked black artists, whose work has a loyal fan base as widespread as blockchain itself have produced and marketed NFTs. Digital rarity is the essence. NFTs live digitally on a blockchain, and their owner or creator may grant permission to anyone to choose which lens the outside world sees, from a single person to the whole internet.
This has to do with how an NFT is saved. They can reside in offline cold storage wallets, the equal of a vault, or so-called hot, internet-connected wallets for anyone to see and possibly flee with, much like all other valuable digital assets, from bitcoin to digital currencies used for payments.