On January 1, 2022, American rapper Eminem bought a Bored Apes Yacht Club (BAYC) NFT for $462,000. A month later Canadian pop star Justin Beiber would buy another BAYC NFT—this time for $1.3 million.
Since then, more celebrities have snapped up more NFTs for eye-popping prices. The long list includes rappers (Jay-Z, Snoop Dogg), sports stars (Steph Curry, Kevin Rose), and even brands (Visa, Budweiser).
Eminem uses Bored Ape #9055 NFT as his Twitter avatar.
To many people, the current surge of interest in NFTs makes zero sense. “They are just JPEGs, anyone can right-click-save them,” goes the refrain among NFT critics.
However, many miss one of the points of NFTs: they were never intended to “make sense” in the first place. An NFT functions as a status symbol, one made specifically for our increasingly digital world.
While NFTs definitely have some utility, I doubt celebrities are dropping six-figure amounts on them for that reason. To understand why NFTs have become prized assets, we need to understand the history of status symbols and how NFTs fit into the picture.
The Evolution of Status Symbols
Wikipedia defines a status symbol as “a visible, external symbol of one’s social position, an indicator of economic or social status.” It further adds that “as people aspire to high status, they often seek its symbols.”
Throughout history, humans have found new objects to represent status. While these items reflected the sociocultural dynamics of their respective eras, their defining qualities have remained largely the same.
A status symbol must be rare, or at least project a perception of artificial scarcity. It must be associated with members of a particular class, such that possessing one confers status on the owner. Lastly, there must be some cost associated with securing ownership of the status symbol.
When all these qualities combine in one object, it becomes a status symbol. Of course, culture has some influence on what is a status symbol and what is not. An object may be rare, associated with a group, and difficult to acquire, but command no status—because the people don’t think of it as a symbol.
Without turning this into a history lesson, humans have had pretty fascinating objects as status symbols:
The ancient citizens of Romans associated purple linen with the empire’s affluent families. Similarly, ancient Asian civilizations considered jewelry, especially jade and pearl, as the exclusive preserve of the upper classes.
Ancient Romans considered purple clothing a symbol of royalty.
Status symbols always change in value according to the prevailing trends in culture and technology. For example, owning large collections of books handwritten by scribes was a status marker in medieval societies. However, the invention of the printing press made books easier to produce, leading to a drop in the value of those dusty tomes.
Status Symbols in the 21st Century
As humans, we have come a long way since we hunted animals with flint spears. However, little has changed concerning the way we perceive status and symbols associated with it.
The only thing that’s the objects we use to connote status.
Every era has had its status symbols. Chanel scarves, Hermés bags, and Givenchy dresses in the Sixties. Classic Porsches and Ferraris in the Nineties. Century-old wines, Renaissance paintings, and first-edition books in the early 2000s.
Lately, though, the influence of technology on status symbols has increased. Products representing the epitome of engineering and design have become status symbols for Millennials and Gen Zers, many of whom could hardly care for a dusty, first-edition book or an old painting.
For instance, instead of classic cars, Lamborghinis and Aston Martins engineered for superior performance have become the new symbols among automotive enthusiasts. And the latest iPhone or AirPods is likely to command more attention at a Millenial/Gen Z party than a Givenchy dress.
Supercars have replaced classics as head-turners.
How Did NFTs Become Status Symbols?
Once we notice the increasing association of cutting-edge technology with status, the appeal of NFTs becomes apparent. Say what you want about them, but there’s no denying that NFTs are a piece of revolutionary technology.
Ascribing scarcity and uniqueness to digital objects has always been difficult: anyone could make a copy of a digital item—painting, video, meme, GIF—and distribute it. No one could tell the difference between the original and the copycat, which created problems, especially for digital creators.
The arrival of blockchain technology and its application to provenance and authenticity changed things. As an unalterable, public, and secure database, the blockchain made it possible to assign uniqueness to digital assets.
Cryptocurrencies were the first use-case for this technology. By ensuring the uniqueness of each coin, blockchain technology prevented people from double-spending cryptocurrencies on the blockchain.
It didn’t take long for people to figure you could start representing other things as unique digital assets. However, the development of non-fungible tokens was what really brought this idea into mainstream consciousness.
Non-fungible tokens are unique digital assets that cannot be exchanged for another item of equal value. A five-dollar bill is fungible because you can swap it for another five-dollar bill. Cryptocurrencies are fungible; you can trade 1 BTC with your friend and get a 1 BTC in return, with no difference between the two.
A pair of limited-edition Nike Air Jordan sneakers are non-fungible. If you exchanged them for another pair in that series, you’d likely get a different-looking pair. The same goes for autographed novels, trading cards, and other rare items.
An NFT, whether it’s a picture of a cartoon ape, six-second video, tweet, artwork, song, or essay, is unique. Sure, it’s a file and anyone can make a copy, but a look through the metadata will confirm details of the NFT’s history.
For the first time in history, a digital asset could be considered rare as much as a physical item. This change provided fertile grounds for NFTs to emerge as status symbols in a world gone increasingly digital.
Understanding the NFT Boom
Today, a huge chunk of our lives is spent online. In particular, online activity skyrocketed at the height of the COVID-19 pandemic. Locked in and unable to interact in person, people turned to social media for interaction, organizing Zoom happy hours, virtual concerts, and even virtual marathons.
Even though the pandemic has receded, online interaction has continued to grow. People are spending time interacting on Reddit, Clubhouse, Twitter, and Twitch—often more than they do in real life.
Online communities have become the new avenue for human interaction, replacing physical locations. Every form of interaction is now virtual—concerts, marathons, meetings, Happy Hours, clubs, and more.
As any sociologist will tell you, every community will rapidly evolve its system of hierarchy and status. And it will have specific symbols associated with the notions standing and status.
The online world has always sought its status symbols: objects that are rare or unique, associated with specific groups, and difficult to acquire. Now, it has them in the form of NFTs.
An NFT is a unique item, and many popular NFT series, like Bored Apes or CryptoPunks, are produced in limited quantities. This means NFTs have rarity and scarcity, qualities every status symbol must have.
NFTs are predominantly associated with individuals involved—or at least interested—in crypto and blockchain technology. For this quality, NFTs pass the test of association required of status symbols.
The last test (cost of ownership) is where arguments about the classification of NFTs as a status symbol start. Some argue that since anyone can create an NFT, owning one is easy, making NFTs unfit as status symbols.
While this is a solid argument, it fails to ignore one crucial attribute of status symbols: their value depends on public perception. There’s no reason why buying a ‘70 Porsche should cost more than a 2022 model, yet the former will likely cost thousands more on the market.
There may be thousands of NFTs floating around, but some are going to command more value because of their socio-cultural significance. And that makes some NFTs more difficult to acquire than others.
Crypto Punk #5822 sold for 8,000 ETH or $23 million.
With some NFTs selling for millions of dollars, we might as well admit that these items pass the test of ownership costs.
NFTs do not only satisfy requirements for status symbols, but they also reflect the prevailing cultural and technological trends:
- First, blockchain technology is among the most popular cutting-edge innovations today. If we assume younger generations associate status with technology, then NFTs—a product of blockchain technology—becoming a status symbol makes sense.
- Second, NFTs are digital assets that possess rarity, group associations, and cost of ownership. If we assume that digital worlds have replaced physical communities, then it’s logical that digital assets will connote status, just as physical items connote status in the physical world.
No matter how you look at it, all the signs point to the logical conclusion—that NFTs have become society’s newest symbols.
You may wonder: why are humans enamored with the idea of status? Scientists, sociologists, and philosophers have asked the same question for years, without finding concrete answers.
All we know is that humans have always wanted and found ways to show off their station. And now that the world has moved online, NFTs have become the latest objects in humanity’s endless drive to signal social standing.
We could even argue that an NFT makes for a better status symbol than real-life items. This is likely going to sound blasphemous to some, but hear me out.
If you bought a Lamborghini, it would be difficult to show it off. Beyond the people who see you drive it—if you drive it at all—no one else knows of your new Lambo.
You could post car pictures online, but that’s unlikely to generate any reactions. Why? Well, People cannot immediately confirm whether your Lambo is original or a cheap knock-off. After all, this isn’t the first time someone on social media would try to fake wealth by posting deceptive images.
However, you could use a popular NFT as your avatar on a social network like Twitter—and people would pay attention. And if you could prove that your NFT is the real deal, perhaps by showing the metadata? Mission complete.
Steph Curry shows off his BAYC NFT to his 14 million Twitter followers.
On a large social media platform like Twitter, thousands, if not millions, of people will have no choice but to notice that particular NFT. Plus, no one would accuse you of owning a fake since Twitter allows you to verify ownership of NFTs.
In a way, NFTs are perfect for today’s world of hyperconnected online communities. As more people spend time in virtual worlds (i.e., “the Metaverse“), NFTs will acquire as much importance as physical status symbols.
Twitter now allows users to use and verify NFT avatars.
A Reply to Critics
As with any cultural phenomenon, the topic of NFTs has attracted huge debate online and offline. Critics have been particularly vocal, calling them “worthless pictures” and describing the NFT boom as a case of Tulipmania.
As I explained at the beginning, NFTs don’t make sense to many people. Why would anyone want to pay millions for a file?
This brings me to a crucial point: NFTs don’t “make sense,” but neither do any of the status symbols we have today.
Some would argue that a $300,000 Ferrari has utility because you can travel with it. The question is: why spend that money on a Ferrari when a cheaper Toyota would do?
Let’s not forget that supercars are rarely driven by owners. Not only does the low profile and poor gas mileage make them impractical, but driving a sports car constantly reduces its value. Which is something many owners—who buy expensive cars as investments—would prefer didn’t happen.
Moreover, if you don’t have a problem with people paying millions for artworks that hang on a wall, then don’t criticize people paying for NFT art. It’s the classic Slippery Slope argument—you can’t pick one without accepting the other.
Wait a sec. Someone paid $450 million for this painting?
Like ’em or hate ’em, NFTs are here, at least for the foreseeable future. They will serve as society’s newest symbols—an alchemy of art, technology, and culture.
Will their value drop at some point? Maybe. But then baseball trading cards and classic game consoles are still exchanging for jaw-dropping amounts, so you can expect some NFTs will retain their value in the future.
The world has gone digital, and interest in NFTs is only a by-product of this shift. Once everyone gets this, then perhaps NFTs may start to make sense.