There are two kinds of people in this world: those who understand how non-fungible tokens (NFTs) work and will share it with anyone who listens, and those who awkwardly pretend that they do. Regardless of which category you belong to, NFT remains a popular buzzword today. Chosen as Collins Dictionary’s Word of the Year in 2021, they are nifty, intriguing, and contribute to an incomprehensible trend that has made these assets “virtual” status symbols.
What are NFTs?
According to Investopedia, NFTs are “cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other”. NFT collections are purchased and sold using cryptocurrency via online marketplaces (like OpenSea) and one can buy a range of things from digital drawings, memes, GIFs, to even tweets. These unique tokens can also be linked to physical assets like artwork, yachts, as well as provide their holders entry into elite clubs, events, etc. Simply put, an NFT allows the buyer to have ownership over an original (the artist may still hold copyright and commercial rights) while others can only show off their prints/copies.
To understand NFTs better, the concept of fungibility also comes into the picture. Fungible items like paper currency for instance can be interchanged with others of its kind. One cannot discriminate between two hundred rupee notes for they hold the same value and either note can be chosen. The idea of NFT is to thus create items that are unlike others — they are one-of-a-kind. They can be easily distinguished as special/limited edition and this is what drives up their demand.
Evolution of Status Symbols
History shows that status symbols as stamps of one’s wealth included bizarre objects, being region-specific at times. The Maya and Inca civilizations, for example, were found to have shaped their infants’ skulls to make them appear distinct from other social classes. Other status symbols included American jeans, pineapples, and even the color purple.
NFTs as Status Symbols
Recently, the first NFT museum was launched in Seattle. Such museums and NFT exhibitions (like the one held recently in Kochi, India) ensure that people can actively be a part of NFT consumption and trade. Representing real-life objects, these digital assets too are now being projected as status symbols. Their value is determined completely by the market (positional goods) and has gone up to sky-high amounts. The “imposed” scarcity here is what contributes to NFTs’ craze, coupled with bragging rights.
Let’s take the case of the Bored Ape Yacht Club (BAYC), one of the known examples of PFP (profile picture project). 2021 saw a rise in the number of Twitter accounts with cartoon apes in the profile picture areas. The apes sported bright glasses, funky caps, and represented a new pop trend. They were created and sold by the BAYC website. Within weeks, users started buying these avatars at baffling rates, with popular celebrity icons posting pictures that gave a sneak peek into the private club. From the initial price of $200, each token was now worth over $450,000.
It is to be noted that anybody could simply screenshot the cartoon and put it on their profile. Yet, these NFTs offered something more which made them the ultimate status symbol. BAYC apes came with a golden basket of benefits that were socially valued. The community aspect furthered its value with the BAYC community consisting of celebrity personalities. Once a member, an individual got access to exclusive merch, events, digital graffiti boards, Discord servers, and much more.
As shown in Thorstein Veblen’s Conspicuous Consumption Theory, the leisure class members, especially the new ones, are attracted to lavish spending on high-status goods. In this sense, NFTs are categorized as “digital Veblen goods”. More expensive the product, the higher its appeal. The items bought by themselves are not assets and their value depends entirely on prevailing societal trends. This is why people are prone to buying licensed clips of NBA games’ highlights at as high as 1 million dollars as NFTs even though the entire game is available online for free. It is the cachet that counts.
Status symbols here involve signaling costs yet must also be acquired not to merely flaunt their privilege but also to serve a purpose. An affluent person’s intentional ownership of status symbols is not effective on its own and requires to be supplemented with actual utility. Moreover, a publication in 2021 reported how cosmopolitan brands often used this idea to sell luxury cars like Tesla and Ferrari, for they justified the hefty expenditure with additional features, cleverly hiding the purchase from being marked as intentional buying of status symbols.
NFTs as status symbols somewhat uphold these criteria. While they do indicate connections with certain high-status groups, in terms of utility, they do not hold much value and are also displayed intentionally instead of naturally. While those buying NFTs justify the expenditure based on the ‘art’ aspect, others project it as an investment to be flipped later. In this sense, some have deemed them as “limited” status symbols too.
While the first NFT was launched in 2014, it only became mainstream in 2017. Fast forward to 2021, once an artist’s (Beeple) art was auctioned for a whopping Rs. 502 crore, people realized that NFT sales were limitless. Keeping up with the frenzy, Twitter has been working on a verification feature for NFTs, creating a platform for people to show off these assets. While the excitement of buying a digital ape might look like a fad, such tools will boost the authenticity of NFT status symbols.
Looking at the Indian Picture
For a country where social status holds utmost significance, NFT status symbols are an anomaly. As per reports, the NFT market is worth only $40 billion and remains largely untapped. While PFP still works, major NFT items like clips, artwork, music are not very popular partially due to the ‘jugaad’ aspect. Why should one pay millions for a music piece which can be easily copied and bought online? With top India-centric marketplaces like BollyCoin selling NFTs of Bollywood movies and icons and such stars launching their digital collections, the trend seems to be entirely driven by the Indian population’s Bollywood obsession. With rampant creators and a small collector community, the supply-demand structure is lopsided and the idea of such assets indicating social status is yet to take off primarily due to uncertainties regarding cryptocurrency and crypto-related tech.
Future of NFTs
The digital world is becoming more and more like the real-world and many trends coincide. As status symbols go online, attitudes are changing. NFTs show how the intersection of technology and art can have unexpected outcomes for society. While the uber-rich show curious spending tendencies, genuine innovation is surely required in the field to sustain its viability and reduce environmental emissions. Will the NFTs revolutionise our culture or will they become a case of the emperor’s new clothes? Only time will tell.
Written By: Sara Swain