NFTs must contribute to creating real social impact to continue to be legitimate
Vitalik Buterin, the co-creator of Ethereum, said in a blog post yesterday that while Non-Fungible Tokens are still viewed as a “casino that largely benefits already-wealthy celebrities”, the technology has the potential for application in socially relevant causes like charities and funding public goods.
Titled ‘The Most Important Scarce Resource is Legitimacy’, the post acknowledges that there is little social value in Elon Musk making another million to his bank balance by selling NFTs. However, NFTs are not only limited to that, and can have crucial implications on other areas of society. Thus, Buterin argues that public attention and resources are allocated to what most people consider as ‘legitimate’.
He defines the game theory term by saying “An outcome in some social context is legitimate if the people in that social context broadly accept and play their part in enacting that outcome, and each individual person does so because they expect everyone else to do the same.”
The NFT market, which has witnessed half a billion dollars in volume in the last few months alone, is also influenced by these forces of legitimacy, the Ethereum whitepaper author said. Which NFT is seen as attractive to buy and which ones are not is a matter of mass perception, he added.
“If everyone agrees that one NFT is interesting and another NFT is lame, then people will strongly prefer buying the first, because it would have both higher value for bragging rights and personal pride in holding it, and because it could be resold for more because everyone else is thinking in the same way,” he explained.
While celebrities like Elon Musk have often been credited with moving the crypto market on numerous occasions, and Twitter CEO Jack Dorsey brought a lot of attention towards NFTs when he auctioned off his first tweet NFT for a charity, the focus has to shift from this to the real social impact for NFTs to remain legitimate, Buterin explained.
He also suggested two potential ways of making NFTs more “legitimate” by using the technology to act as a funding mechanism for causes which in some way promoted a social good.
One, setting up a decentralized autonomous organization that would “sanction” certain NFTs if it was guaranteed that a portion of the sales revenue would be passed on to charitable causes and Two, to enable social media platforms to integrate NFT displays into users’ profile. The second initiative when coupled with the first will “nudge users toward NFTs that contribute to valuable social causes,” he concluded.