NFTs Are Digital Signaling

The best way to create, predict, or validate future tech is to consider how it addresses a fundamental human need. We can see this in previous technology jumps.

• Blogging allowed people to be heard

• The iPhone made people powerful through access to information and their network

• Facebook allowed people first to stay in contact, and then to influence others

• Gaming and the metaverse allow people to reinvent themselves as someone more powerful and attractive

One fundamental human need is to signal our desirability to others. Here’s a good capture of signaling from Spent, my favorite book on the topic.

When you think about NFTs—and really any other technology that you’re contemplating the future of—don’t think about the tech itself. Think about what fundamental need it fills.

NFTs are digital signaling. They will allow people to efficiently and scalably display their value to competitors and mates.

In this way, NFTs are directly linked to power and sex, which humans care a lot about.

Think about the use cases you’ve heard of.

• Art collections

• One of a kind items

• Exclusive sets of items

• Special in-game gear

• Unique skins for characters

• Etc

They’re all the same. They’re ways of conveying how special you are. And I ask you, is there anything more important to humans than displaying how special they are?

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There are, actually. Two things are more fundamental: Survival and Reproduction. But it turns out that appearing elite and special to others helps you with both.

This will use AR in meatspace, and native displays within VR/Metaverse.

So with the combination of AR/VR/Metaverse we’re about to see the digitalization of signaling at scale.

• When you look at someone in meatspace you’ll see indicators on their clothing, or above their heads that indicate that their luxury items are authentic, along with their freshness (season) and cost of purchase

• You’ll be able to not only see that the item is authentic, but that it’s one of N small number. Think: sneakers, purses, watches, cars.

• Displays can also indicate that items were completely bespoke pieces, created by the artist/designer, along with authenticated signature of that creator.

The tech platforms will handle all the validation of the item itself, its true ownership by the wearer, the fact that the item in question is the one they’re wearing, and that the particular signature being displayed actually came from the original artist.

Trillions?

Think about the size of the luxury goods market. Now think about how many billions are lost to the fake luxury goods market.

NFTs will help people signal their value in a way that is difficult or impossible to forge, which will exponentially raise the effectiveness of that signaling—and the markets that enable it.

Summary

1. A bet against NFTs is a bet against signaling.

2. A bet against signaling is a bet against human nature.

3. A bet against human nature is a bad bet.

4. A bet against NFTs is a bad bet.

Notes

1. My friend Joel Parish points out that you don’t actually need Web3 for this, which I totally agree with. But it’ll likely be done first on Web3 just because the ideas are rising to prominence together.