When non-fungible tokens started becoming popular, it was mostly about owning unique digital items which you could display proudly on your wall to prove your net worth. With platform/market maturity, that emphasis is shifting from financial capital to social capital. Monumental sales of BAYC tokens are starting to be welcomed with a degree of disdain by some corners of the NFT market. Why? Because the social capital is shifting within NFT groups.
After we dig deeper into the social capital component, the value of an NFT avatar's journey to development becomes measurable. We can see an increase in the number of "goodwill transactions" between avatars. Statistically, there is a positive relationship between an avatar's social capital level and an owner's immersion in the space.
In terms of the NFT economy, social capital is one of the most complex concepts to dissect because it is intangible and relies on subjective opinions. It becomes challenging to gain an objective understanding of its value both inside and outside of mainstream adoption.
One thing is clear; it's not a fad or a gimmick. PFP communities build a prestigious social network with a limited number of seats into the DNA of existing social networks. They create sub-communities inside Twitter.
This game is simple to understand and is an excellent use case for non-fungible tokens because it had zero layers of abstraction between what owners see on the screen and how they attach value to their digital goods.
We've seen NFTs take on different forms, but they all share one common aspect: scarcity. That scarcity will matter less or more depending on the paradigm of your subcultural community. This is the key to building an economy around an avatar's social capital, and it also makes them more valuable compared to standard avatars.
It is no longer enough to offer a digital good. Crypto-collectibles need to "level up" their experience with greater levels of social engagement and signaling. We are starting to realize the actual value of owning an NFT avatar is in the journey of that token and how it reflects the journey of its owners, not its financial capital.
Current blue-chip NFTs won't retain universal social capital.
There are already NFT subcultures who perceive BAYC & punks as having negative social capital, with the negative perception drawing on social signals, from how the PFP owners portray themselves, to the way the rising cost of those avatars can limit their addressable market to celebrities who may be removed from and out of touch with the cutting edge communities who have always been the tastemakers in crypto spaces.
There was a significant upside to BAYC & punks' rise: they brought crypto to the masses. The power move will be tuning into highly engaged subcultures and either picking projects to back that will appeal to those specific subcultures as they adopt tokenization or making a calculated play to create a property, a token, and an IP that will represent that subculture.
It takes time for social capital to percolate, but when it does, it creates a global community whose potential impact can be monumental.
That's a delicate process that requires an understanding of the nuances and history of the community. It takes a lot to make a token gain social capital, but it draws significant interest from outside the community when it does. This is the power of subculture.
Subcultures are made up of small cohorts who enjoy a particular lifestyle, participate in related activities to their peers, and have common interests that bond them into a close-knit community that cares about each other.
These communities will continue to emerge as blockchain technology becomes more accessible to developers & creators because they will be drawn to this new medium for its unrivaled level of authenticity & scarcity.
NFTs are here to stay. That's not up for debate. And, despite the market volatility affecting all crypto assets, the success of early adopters will lead to an increase in demand for more avatars with more substantial social capital. I love the punks. Love the apes. But my point is that NFTs going mainstream will see a constantly rewritten code of social capital, according to demographics, with zero relation to financial value. The more NFTs we have in existence, the harder it will be to distinguish one from the next; we will see a continuing contrast between their financial value and social value, becoming a more accurate measure of popularity.
The value of user-generated content is often discussed during market volatility when "value" can be fleeting. The nature of social capital provides a different perspective: its value grows over time and can be used more pragmatically than some "beacon" in the marketplace.
Most social capital transactions are between friends, but NFTs can also transfer value to strangers who may want to preserve the history associated with an avatar's journey to get where they are today. Furthermore, it lends itself well to transferring value to public figures and celebrities.
The future isn't PFPs going away; it's PFPs becoming signifiers of values and belief systems, tribe membership, and even your socio-political paradigm. We will see PFPs becoming more portable, interoperable & interchangeable.
The future is one of nonconformance, where your fellow peers judge you for appearing authentic to what you believe. We've already seen this with punk rockers and BAYC kids, upholding their values over societal status. We are transitioning into a worldview where the individual is king, and NFTs will be its foundation. People will use NFTs to signal affiliation with a tribe, and they won't care about the price.
This is not a negative point. If I'm right on this one, it means widespread adoption of #NFT by both young & old demographics that can have hugely positive effects on communities both in and outside crypto.
Remember when everyone thought the internet would lead to a new generation of isolated introverts? That never happened, and it's because the internet is a global community that has allowed us to connect with people around the world in ways we never could before. What resulted from this connectivity was an explosion of new ideas, movements, and social change.
NFTs of today with metaverse and DeFi utility may hold an advantage against their elder counterparts because, although blockchain games are yet to reach mainstream adoption, they can still be enjoyed by early adopters who want to brave the market's volatility and build the foundation of future usage. But that doesn't discount the value of PFP based social capital.
NFTs are not novelties that will go away after the excitement fades. Collectibles hold steady value over time because consumers want them in their collection and believe they will remain relevant for years to come. The network effect of NFTs will continue to grow as they are supplemented not with new functions but new communities.