In these glory days of crypto and the Metaverse, NFTs (Non Fungible Tokens) have risen to the top of the attention chain. NFTs are everywhere and every single self-respecting company is at least contemplating to design, market and sell their own NFTs. With this many NFT projects many people wonder what value do NFTs really have? Why would people still buy a jpeg image of someone if there is no limit to the amount of images that the artist can produce? Will the value of all NFTs go to zero when potential supply is infinite? And with all these NFTs how do you determine which NFTs will retain value and which ones will lose out? And how does Octalysis Gamification fit into value creation in NFTs?
What makes NFTs valuable?
There are many elements that can contribute to the value of a NFT. However there are 3 core things that truly determine long lasting value of your NFTs: Scarcity, Meaning and Community. These correlate to 3 of the Octalysis Core Drives: Core Drive 6, 1 and 5.
NFT Value: Scarcity
The first element that drives value is built into the blockchain technology itself that underlies the NFT phenomena. Blockchain guarantees that a NFT is unique and is not replicable, and thus has scarcity. In the Octalysis Framework it is connected to Octalysis Gamification Core Drive 6: Scarcity and Impatience (the human motivation to want to have something you cannot have yet). This is a unique trait of NFTs and the individual item (image or loot or any other NFT utility) cannot just be copied. Some people still say that NFTs have no value since you can just take a screenshot of the image. They don’t understand that that would be the same as taking a photo of the Mona Lisa in the Louvre Museum in Paris. By taking that photo you have not taken away any value of the original. To the contrary, you could say that you added value to the original by wanting to make a photo of the original, as you went through the trouble of making a copy of something. that has value to you.
NFT Value: Meaning
The second crucial element that drives NFT Value is related to Octalysis Core Drive 1: Epic Meaning and Calling. If a NFT has no meaning, nobody cares about it and it has no value. If you have a book that belonged to George Washington then that book will have value just because of that emotion laden fact, and many other people that identify with the former president will think like you do. However, if there were millions of copies of that book it would take away from the meaning associated with that book.
This is the same with NFTs. Sometimes NFTs get released in series of thousands so that the unique meaning of the individual NFT is impacted negatively. Even though the individual NFT is still scarce (as it is unique), the fact that there are thousands of other NFTs that are similar can drive the meaning of the individual item down.
In our view, the NFTs with the highest value also manage to incorporate meaning in themselves. Ideally over time and through actions of NFT owners they should be able to add even more meaning to it. A prime example of a NFT project that tries to give users the chance to continuously add meaning, and hence value, to their NFTs is Metablox. In Metablox you can buy NFTs of address blocks that exist in the physical world (say a residential block in the Los Angeles City suburbs). Since there is a limited amount of blocks in Los Angeles, the NFTs have value. However Metablox also allows you to upload memories to the blocks, thereby adding meaning to the NFTs. The more memories are uploaded the more valuable the NFT will be. Some blocks (like landmarks and hotel complexes) will have an enormous amount of memories attached and may turn out to be super valuable. The whole NFT experience is built on Octalysis Gamification, ensuring the highest levels of user engagement over time.
NFT Value: Community
The third element that is crucial to creating and maintaining value is Community. NFTs that can have communities rally around it, links to Octalysis Core Drive 5 (Social Influence and Relatedness): the motivation we feel when we are connected with and/or feel influence over other people. The more people rally around a NFT platform, the more demand there is likely to be and the more scarcity value is created. At the same time a community is deepened if it has shared memories in the form of common history, myths and other belief systems. So digital value will be enhanced when there is opportunity for building shared memories and community identity. Sometimes these communities form autonomously (like the Bored Ape Yacht Club for example) but it is safer to actually design for it to happen with the right Gamification design that optimizes community interaction and identity building. Most NFTs collections do not have such design build in and will have a hard time maintaining or increasing their value in the future.
NFT Value: How to design for it
We believe that Octalysis Gamification is the missing link for success of the current digital transformation (like blockchain, AR/VR, AI, NFTs). We need to care of the availability of well functioning hardware (the blockchain) and effective software (building decentralized Apps) of course. But it is the engaging user journey that will ensure continued interaction of users with the digital transformation that we are in now.
If you are curious about Yu-kai Chou’s views on blockchain, digital transformation and NFTs, have a look Raoul Paul’s interview with him on Realvision.
We work with many metaverse and blockchain companies to advise on whitepapers, DAO, tokenomics and of course building gamified user journeys that last and create lasting value. So for more targeted advice on how to design metaverse, NFT and blockchain projects feel free to reach out for a free consulting session.