Why Do People Collect NFTs?

31 Aug 2021

Contrary to popular belief, NFTs aren’t just expensive JPEGs. Have you seen The Matrix? You know how Neo enters a virtual world of exploding subway stations and serene martial arts dojos, but behind the façade is a green scaffolding of 1’s and 0s? NFTs are kinda like that. The digital asset – whether it’s a colorful photograph, a piece of writing, or a virtual parcel of land in a video game – is fastened to a boring string of letters and numbers. That code, that data – that token minted on a universal contract called the blockchain – is the NFT.

[I’m gonna skip ahead a few steps here and assume your head is partially wrapped around the concept of NFTs. If not, you can read my essay from February on The Next Internet.]

Although NFTs have been around for years, it wasn’t until 2021 that they became topical. There are countless theories as to why this is happening and I’m fascinated by the social psychology around this movement. Sometimes, I think NFTs and the metaverse are filling the cultural void that the Trump presidency left behind. Twitter is evidence of that. This time last year, the social app was a deluge of the former President’s tweets and the polarized reactions around them. Today, Twitter is an NFT workshop, where crypto whales, budding artists, and tech bros are working on the puzzle together. I used to wonder how much productivity was lost because of the distractions of disinformation and the ensuing chaos. Witnessing rapid NFT innovation over mere months and how disruptive the technology has been to institutions and industries, I cringe at how far we were set behind by trash news.

There’s a larger essay here for another day, but I also think there’s a religious fervor around NFTs that is not unlike cult behavior. The world feels unstable and unpredictable and humans are searching for solid ground. There is a pursuit of singular Truth amidst distrust in the media and the state, the mystery of social algorithms, and even in the sense that your own friends have become brands, marketing deceit. In the metaverse – the spiritual realm – the blockchain would perhaps be represented as the Truth – the God figure. Twenty years ago, the rebuttal to God was, “I’ll believe it when I see it.” Today, nobody actually sees the physical money they own, whether fiat in a bank or crypto on Coinbase. The pandemic awakened us to the fact that much of our relationships and understanding of the world is virtual. I mean, we’ve all spent the last year and a half fighting a war against a wraithlike virus. NFTs made it very easy to assign value to invisible things.

People collect NFTs for various reasons because NFTs exist for various reasons.

At the start of the year, 1-of-1 original art was very popular with NFT collectors. This makes sense. Part of the artist’s role has always been to make complicated ideas digestible for the layman to understand. They take abstract notions of the world and distill them down to beautiful visuals. Artists see movements before they happen (This is also why they’re adept at gentrifying neighborhoods!). NFT artists helped to onboard large swaths of art collectors – from blue-chip auction buyers to casual shoppers looking to support the independent scene.

The most famous NFT artist in this genre is Beeple, but other talent quickly rose to the top of the leaderboard. Names like ThankYouX, Fewocious, Pak, and FVCKRENDER. Emerging artists like Sean Williams, Nicole Ruggiero, Latasha and Sophie Sturdevant. Photographers like Dave Krugman, Jeff Nicholas, and J.N. Silva. And the new NFT venues like Super Rare, Foundation, and Zora were there to act as galleries of sorts.

Currently, much of the NFT froth has shifted to collectibles (also known as avatar or PFP projects) and subsequently, secondary, re-sale marketplaces like OpenSea. CryptoPunks by LarvaLabs were not only the first NFTs in 2017, but the first collectibles. The creators uploaded 10,000 unique combinations of 8-bit-style punk rock faces. These are tiny, pixelated characters that carry traits like purple hats or red noses. LarvaLabs doled these images of Punks out for free while retaining a percentage of future sales. For the first few years, nobody cared much and traded them like sports cards. And then the point tipped with NFTs. Millions of people around the world are now trying to claim one of these 10,000 punks. Trying to get into the hottest nightclub in town. This is classic supply-and-demand, like any limited-edition release of a sneaker, toaster oven, or house in a neighborhood with a good school. As of this essay, the cheapest CryptoPunk for sale (of all 10,000) is $369,901 USD. The most expensive CryptoPunk sold in March for $ $7.58M.

At the beginning of the summer, as the hype around the 1-of-1 NFT art market cooled down alongside crypto, inciting much of “NFTs are dead” talk online, a collectibles project called Bored Ape Yacht Club released to the metaverse. There have been a bajillion collectible sets derived from the Punks – every adjective-animal you can imagine. 10,000, computer generated cats, koalas, geckos, even poops (A recent favorite of mine is called 0n1 Force – anime styled profiles). But, BAYC did a great job with the art, storytelling, community, and especially their roadmap. Their NFTs of bored apes blew out at launch for a few hundred bucks each. Today, the cheapest Ape on the secondary market could garner $166k. The most expensive Ape for sale just flipped for $1,681,370.74. In a matter of months, much of the Apes community has experienced transformative wealth (This past weekend, BAYC dropped Mutant Apes, making $90M in an hour).

The reason why NFT collectibles are called avatar projects is because the people who buy them like to feature their unique NFT as their profile picture. As much as the current NFT trend is spurred by flipping and making a quick buck, there is also a tribal aspect to this that is lightly reminiscent of political and social affiliations from the past several years. This time, however, the tribes are gathering and bonding in Discord servers, with the undercurrent of the conversation churning around their NFTs’ market value. You may recall something like this during the stonks uprising that played out simultaneously with the storming of the Capitol in January. While insurrectionists were waving American flags and Don’t Tread on Me snakes, stonks millionaires were doing their best to claim GameStop and AMC as their online clans. You can see why, through NFTs, it’s a lot easier to rally behind an icon of a of a pizza-eating monkey or a trippy duck over a corporate mall chain logo. In fact, NFTs are essentially fun stocks that you can see, trade, and identify with.

There are also people like me who collect NFTs because we are big believers in the metaverse. I won’t repeat points made in my last essay, but if our realities are going increasingly digital, then it makes sense to have ownership of more digital goods. These assets not only make our life’s experiences better, but buying them also supports emerging artists and brands in ways that weren’t possible before due to gatekeepers, lopsided systems, and lack of access.

Last week, we deployed 25,000 NFTs called Adam Bomb Squad. Adam Bomb Squad (ABS) consists of combinations of different Adam, Badam, and Madam Bombs and backgrounds of custom patterns we’ve designed over 18 years. First and foremost, the NFTs act as membership cards to the most exclusive wing of The Hundreds. Perks include early access to popular clothing releases and special drops just for ABS holders. There will be events – both virtual and physical – for the Squad. Our future roadmap points to finding new ways to change the relationship between brands and consumers, where – through the utility of NFTs – the clothing wearers in the physical world can share in the upside of the brand’s success.

Secondarily, ABS is a history lesson in the brand. We have almost two decades of stories to share, of thoughtfulness and talent invested into these works of art. Therefore, we are offering something different with our collectibles. The artwork depicted in each ABS NFT was not rendered by a computer. This is not a generative project where the same character is layered with Mr. Potato Head decorations. Illustrations were hand-drawn, watercolors were painted, patterns were assembled by human designers making unique bombs. Furthermore, all 25,000 NFTs were curated and considered by both Ben and I (Founders of The Hundreds) as well as our core team. This being our first NFT project of this magnitude, we wanted our fingerprint on these and I hope that translates in the overall feel of the project.

Most NFT collectibles like ABS automatically end up on OpenSea (an eBay or Craigslist for NFTs), whether you list it for re-sale or not. If you own one, you may notice that you’re getting buyers bidding on your bombs already. Currently, the floor (meaning the cheapest one for sale) is about 4 or 5 times the original price that we set the bomb for. So, quick flippers can unload their ABS NFTs to catch a nice profit. The majority of our holders, however, are sitting tight. After buying them blind and waiting for them to hatch, everyone is anticipating the “reveal” of their bombs to see which ones they got and more importantly, how rare they are.

Resale has always powered collectibles markets. When I was a kid, I read Beckett magazine, a pricing guide for baseball cards. These rookie and error cards rose up and down the pages like stocks, depending on how few were out there in the marketplace. When I got into sneakers and streetwear as a teenager, the same framework applied. There were only so many vintage Jordans and Dunks on store shelves – especially before Nike started retro’ing them – and as more enthusiasts piled into the culture, the prices rose. The brands eventually capitalized on these dynamics and categorized product as “limited edition,” leaning into the rarity level of a piece. NFT collectibles follow the same train of thought. What makes certain NFTs more expensive than others is how “special” they are according to the attributes. Those CryptoPunks wearing purple hats I mentioned earlier? There aren’t as many of them, so they re-sell for about $100,000 more than an average Punk.

Adam Bomb Squad is also loaded with rarities and scored by infrequent attributes. This was by design, but also inherent in the artwork. Again, ABS is a history lesson. The Hundreds and our generation of streetwear mastered the game of limited distribution and Veblen goods, marrying the mindset of luxury with street collectibles. Therefore, rarities are relatively affixed to how prevalent the bombs and backgrounds were over the brand’s timeline. There’ve been seasons where The Hundreds was confined to tighter sales channels and those bombs will respond accordingly. There was a time before functional e-commerce, before DTC opened up the brand to a wider audience. There have also been years as of recent where we clamped down harder on Adam Bomb iterations as the brand took a different creative direction. Plus, there are so many brand guidelines that any time that Adam, Madam, or Badam broke a rule in the past, it’s come back to haunt us in the NFTs as a scarce trait. For example, the bombs are always meant to face to the right. So, imagine what happens if you get Adam turned the wrong way?

When NFTs reveal, it’s a big day because not only do you get to see which designs you bought, but how rare your NFT is according to the metadata listing the traits. The secondary marketplaces like OpenSea immediately publish the characteristics alongside your NFT and sites like Rarity Tools calibrate how special your purchase is. Immediately, the trades, the dumps, and the wins begin as buyers come in to scoop NFTs with higher point value, sellers cash out, and investors hold for the long run.

We aren’t going to do that.

Yes, upon reveal, you’ll get what you paid for: your Adam Bomb Squad NFT. This is your membership card, but highest of all, it’s a piece of art. We want you to appreciate the drawing and gauge how you feel about the combination you received. For just a brief window of time, we want to encourage the community to mind the creative part of all of this. This is bound to annoy some flippers and opportunists who are here to turn and burn NFTs. And it also foils some of the savvier buyers who take advantage of less sophisticated participants, prying a valuable bomb from their hands without proper understanding of the game. If nobody knows how rare their bomb is according to an algorithm, they’ll either a) hold tight and wait, b) sell them off out of frustration, or c) buy and sell according to which ABS bombs speak to them. We’re praying for more of the latter, especially as this project has onboarded so many new collectors into crypto. For much of our camp, this is their first NFT and we want to continue educating and protecting them. Plus, our community is attracted to certain bombs because of personal memories. I guarantee you there’ll be someone out there collecting Watermelon Adams, whether they’re rated floor or ceiling.

In a few days, we will post everyone’s metadata. I’ve written exhaustive stories for every bomb and every background that we’ve been leaking in our Discord. There are attributes specified from artistic styles down to whether Adam’s spark is lit. And if you follow our Discord, you already know the Black Adam is the rarest of them all, tracing back to our legendary Black Adam T-shirt, the most exclusive physical item from The Hundreds. We are all about re-selling NFTs and the investment side of all of this. That is part of the thrill and theater. We just don’t want people to forsake the cultural and artistic facets of the movement and this is our celebration of what’s most meaningful.

If you couldn’t already tell, we are in this for the long haul (and by “we,” I don’t mean The Hundreds, but our community). I’m excited for short-term wins and if people make gains off this in the near future, more power to them. Branding, however, is about pairing that love with longevity. I call it, “Passion and Patience.” I literally wrote the book on building brands around community. We are now taking all those principles, all those hard-won lessons, and applying them to Adam Bomb Squad. At the end of the day, everybody wants something limited, but if you hold an ABS NFT, you’re only 1 in 6,500+ unique members to this clubhouse (as of this writing). There are 8 billion people in the world and in the next month, in the next year, and in the next decade, we believe hundreds of millions of new people will come knocking on that door.

Meanwhile, you’re here with us, already inside the green 1s and 0s. Let’s party.

—X—