NFT – What is the value?
https://www.nytimes.com/2021/06/30/business/world-wide-web-nft.html?searchResultPosition=5
In June, an NFT sold for its highest price yet at 5.4 million dollars. A NFT is a non-fungible token, which are unique blockchains used to store video, audio, etc. The NFT sold is a picture of early code, which has been in the public domain prior to the auction; however, this particular NFT also included a time stamp and reflection on the code. The idea behind NFTs is it allows for ownership over images, audio, videos on the internet, which could become rather important if the internet becomes more privatized, but at the current moment the internet does not seem to be moving in that direction. This has brought into question what the true value of an NFT is and how that value will change overtime. As of recently, the NFT sales have dropped by 89%, which could partially be attributed to the overconsumption of the product causing a decrease in its value.
This NFT was sold by either an ascending auction or a first price sealed bid, where the reserve price was $1,000. This means that whoever bid the 5.4 million dollars should have bid below their value of the object, so that they left the auction with both the NFT and money left over. Although the buyer remains anonymous it is unlikely that their true value of the NFT would be so high. Even though NFTs are very popular right now, their longevity is quite uncertain as it is not antique and is not as likely to increase in value. The unknown future of NFTs has given them no concrete value, but has made them at the moment seemingly priceless as some people are paying $1000 to a million dollars for a picture of a celebrity or drawing of a frog. Furthermore, it seems as though anyone participating in NFT auctions is reliant on the other bidders to determine their value of the object, which is not a dominant strategy. This is because your value prior to the auction is the only one you should be willing to pay despite what other participants do. While the future of NFTs and the privatization of the internet are uncertain at this time it doesn’t seem like investing so much money into them will later result in a positive payoff for the buyer.