Hopefully, my future dissertation will be about ”Tools for Value Creation and Price Negotiation on the Blockchain-Based Marketplace”, which roughly translates as ”Why are some NFTs so expensive?”. I started my exploration of NFTs back in December 2017, after the first blockchain-based game CryptoKitties made such a spectacular splash in the media. I did not own any cryptocurrencies when I started playing CryptoKitties. The price of Ether was on the rise back then, and I made quite a lot of unnecessary investments without knowing how the market operates. In total, I have spent about 300 Euro on Ether to get my hands on the game, which is the bare minimum to be able to play it for any continuous period of time. My current collection of CryptoKitties is probably worth this money or even a bit more (just the ’spare change’ in my crypto wallet amounts to USD250 as of today). However, selling my ’kitties’ would be a bad decision. The main problem is the transaction fees, which are the main obstacle for blockchain adoption in games and art.
To put it simply: a non-fungible token, or NFT, is a unique reference to a particular record in a distributed database (blockchain), which keeps the information about every token, every buyer/seller and every transaction in the system (but not outside of the system). Each act of buying, creating (’minting’), selling and even gifting the referenced object is accompanied by a substantial fee, usually much higher than the usual fee for a bank transfer. Some people still believe that the use of blockchain brings down transaction fees, but in reality, it works the other way around. Some blockchains cover transaction fees for some users, but this also means that a particular group of stakeholders, product owners, or simply very wealthy users, is at least partially in control of the platform and all transactions on it. This defeats the initial idea of decentralization; besides, is it fair that the wealthiest few has more power than everybody else? We already have it in the real world, and we don’t need it on blockchain.
Where did I get the idea to write a dissertation on NFTs? I was doing game studies for my second Bachelor’s in Vilnius, and blockchain games were a novel territory to explore. I played CryptoKitties for a year and thoroughly documented the process. These observations formed the basis of my student research, which earned me the Master’s degree in Sociology in 2019 in Lithuania. Unfortunately, a foreign Master’s diploma is not even valid in the totalitarian state of my citizenship (which is sadly non-EEA). So I had to apply it elsewhere, and this probably saved my life in the long run. Initially written in Russian, my Master’s thesis was reworked into my first academic publication in English with my future PhD supervisors and published in Games & Culture. Before that, I could not even imagine that I can write an academic article in English and publish it in the West, in a credible journal, – and yet, it happened! I am very grateful for the chance to become a researcher in a free country, and I already have a couple of articles ready to be published in 2021, with a little help from my lovely academic friends.
The initial topic of my dissertation seemed quite exotic in December 2019, when the decision about my acceptance as a PhD student was made. I hope that the new surge of interest in NFTs will increase my chances to proceed with my research and get tangible proofs about how NFTs actually work.
What do you need to know about NFTs today?
1) You don’t legally own anything on a public blockchain. ”Not your keys – not your Bitcoin”, as traders say.
2) NFTs do not have any ’fundamental’ value. They are just records in a database, and a poorly organized one.
3) NFTs are not as immutable as it is advertised. You may lose them, they may be stolen or just disappear if the project is canceled or moves to a different blockchain. The initial reference will remain on blockchain forever (in most cases), but the object itself might just as well be gone.
4) The market of NFTs is driven by speculation. You can still make profit if you are a very good trader or entrepreneur, but wouldn’t it be smarter to invest your talent into a more sustainable business?
5) Another huge factor is how much money you have at the start (in my case, I had literally none, with nothing to lose). Same as with any trading or gambling activity, never invest more money than you can afford to lose. This is the game of chance, not the game of skill.
6) Most NFTs are less than worthless because you also need to pay the fees. Only a small percentage of them acquires enough value to serve as long time investment – and you’ll never know which ones.
7) The carbon footprint of public blockchains such as Ethereum is simply unforgivable.
They say, blockchain is like the early Internet – and it has been like that for the last 10 years. Some of us still remember that the early Internet was an extremely slow-paced, very shady, sometimes hostile, and generally plutocratic space. Quite a lot of good projects came out of it eventually, but the utopian ideas of early web enthusiasts have been mostly discarded or forgotten. And now we see the same story happening with blockchain.
PhD student in Communication Studies
School of Marketing and Communication