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The financialization of social currency

The Saturday Essay
The financialization of social currency
By Alex Wilhelm • Issue #3 • View online
Welcome to The Saturday Essay, a relaxed weekend writing project from technology and financial journalist Alex Wilhelm.
The Saturday Essay publishes once per week, on Saturday, discussing business, economics, and politics.

It is ironic that many of the same individuals who mock political virtue signaling have NFT social media avatars. Social signaling for me, not for thee, I suppose.
Crypto in late 2021
Today’s crypto market is a busy place. It has the righteous anger of a religious spat at times, with bitcoin maximalists arguing that any work done in crypto that isn’t on the One, True Chain is akin to stupidity at best, and fraud at worst.
Crypto today also sports a rapidly-evolving social code, and hierarchy. And the more one can show that they truly get it, the higher one can rise.
The way to prove that you do get it – that you are on the putatively correct side of crypto history – is to signal. And signal heavily.
This is why you cannot scroll your Twitter feed without seeing folks apending .eth domains to their names, and using their rarest, or most exclusive NFT as their profile picture.
A Bored Ape is particularly good. CryptoPunks were good for a minute, but appear to have fallen off . I am now seeing mutant apes, which appear to be some sort of IP spin-off that I find to be a hybrid of both ugly art and derivative creativity.
This isn’t to say that I mind folks having fun. I do not, Fun is good, please have as much as you can.
What I do mind, and frankly hate, is the financialization of social currency.
Wealth as virtue
To have a rare NFT is to own a material amount of crypto wealth, either in the form of stored crypto-assets that one used a portion of to buy said NFT, or, even better, to control wealth stored in the value of an NFT that you bought early for an equivalent song – early matters, as it implies that one is plugged-in.
A rare NFT is living evidence that one gets it. My issue with this form of social proof is that it is inherently financial.
The NFT game is entirely about money today, either in generating it or hoarding it or working to build a system in which more can be accrued. Few NFTs have utility value, and if you wade through threads and communities you will find plenty of notes about floor prices and precious little about the quality of the art itself.
A Lazy Lion, Punctilious Panda, or Avaricious Aardvark is social signal in the form of transmuted capital, social currency displayed through the lens of crypto-wealth.
In the present moment, NFTs are nothing more than a form of coin sitting on a blockchain that allows for speculation. And from that speculation, the hope of fresh wealth, and thus more evidence that one gets it.
What a disappointment.
Early in the crypto era – I have actively covered crypto since early 2013, for what it’s worth – there was more talk about democratization of finance, and the tearing down of artificial walls between markets to allow for friction-free transfer of money around the world. The goals were big, and the potential impacts emancipatory. How things have changed.
Work is still being done on those problems, but most of the chatter you’ll hear today about Web3 is far less serious. A lack of consequence is not a complete sin; it’s a well-worn saw in technology that many important things are built first as toys, and later tools. But it appears that crypto is making the same journey, in reverse. From permission-free money and a financial revolution to a series of increasingly silly speculative wagers that are predicted on self-reinforcing hype cycles that lead to potentially astronomical financial gains, and, yes, more social proof.
Pardon me for being boring, but I already live in a world where social currency is far too often financial. And I don’t particularly like it. I do not need my digital world to mirror my IRL experience. I want to change the world, not replicate our current mistakes onto the blockchain.
NFTs have potential, it’s true. I can think of a handful of neat cases in which a non-fungible token could have real use. Some involve music, some sit closer to my beloved gaming world. But today NFTs are mostly images or similar, displayed in social media trophy cases as little more than the digital equivalent of parking a sports car outside one’s suburban home.
Perhaps today’s batshit NFT market will lead to innovation that will allow for a more free, fair, and low-cost global financial market. But I doubt it. It’s embarrassingly easy to find out just how rube-esque many of today’s NFT market participants are. And the most popular blockchains are choked with speculative transactions, their on-ramps barricaded with high fees and slow transaction confirmation.
What have we actually built?
A method for the already rich to show how wealthy they are through silly digital artwork. Who cares?
Did you enjoy this issue?
Alex Wilhelm

A weekly essay digging into economics, startups, and fun. Written by Alex Wilhelm, a medium-quality nerd and S-1 fanatic.

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