NFTs (non-fungible tokens) are all the rage these days. These one-of-a-kind digital photographs, like bitcoin, may explode in value, with some costing collectors hundreds or even millions of dollars. While rarer NFTs are often more expensive, according to a new research, uniqueness isn’t everything in the digital economy. In fact, the high demand for rare NFTs has the potential to depreciate their value.

In a university statement, Jordan Suchow, a cognitive scientist at Stevens Institute of Technology, states, “Because NFT trade data are public, they give a great chance for us to look at why individuals see particular products as valuable, and how that evolves over time.”

The researchers looked at the “Bored Ape Yacht Club” of NFTs in this study. This NFT set features 10,000 computer-generated cartoon ape pictures, each with varied accessories, attire, and fur colors, just like a stamp collection.

The picture of the Bored Ape grows rarer as it becomes more distinctive. On the other hand, more common apes have a lower value on the NFT markets.

“It’s similar to stamp collecting in that all stamps appear the same, so if there’s a printing fault or some other unique trait that distinguishes a stamp, people will pay a lot more for it,” adds Suchow.

When everything is uncommon, how rare is rare?

When the Bored Ape NFTs appeared, the value of apes with the rarest traits surged, and every collector was on the lookout for them, according to the research. This, on the other hand, backfired for those intending to invest in these photographs.

Because rarer NFTs were more valued, researchers discovered that they were more visible, thereby making them far more prevalent.

“Today, a beginner to Bored Ape trade sees these uncommon apes everywhere and thinks they’re far more common than they are,” argues Suchow. “How can individuals be expected to learn about a new category when their experience of it is dominated by the rarest examples?” says the author.

It’s similar to someone wanting to learn about pets, according to the researcher. The best option is to just visit a dog park and observe the various breeds. Collectors in the NFT world, on the other hand, went to an experimental breeder and looked at dog breeds that they wouldn’t ordinarily see in the actual world.

To put this notion to the test, the researchers chose the rarest Bored Ape NFTs and compared their findings to the image values over time. When the Bored Ape collection first came, there was a strong correlation between rarity and value, but that link vanished when new collectors began trading these NFTs.

“We’ve proven that rarity may be self-defeating — if you want to maintain value, make sure that customers aren’t only seeing the rarest goods in a particular category,” Suchow adds.

Investing in NFTs is being rethought.

According to the authors of the study, this might lead to a redesign of the NFT marketplaces and investors placing less value on uncommon photos.

The research also revealed that some aspects of these photos lost their value faster than others. Apes with strangely colored backgrounds, for example, held their worth longer than others. Those with varied colored fur, on the other hand, lost value more faster.

“What’s intriguing about this is that we’ve exposed a fundamental principle: desire for rarity is self-defeating,” adds Suchow. “That should be pretty general, so the major issue now is whether we can see this effect in other areas as well.”

The research will be presented at the Cognitive Science Society Conference.

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