Playing the Game of NFT Collectibles
This article is a brief analysis of how trading NFT collectibles on platforms such as OpenSea have led to the gamification of financial trading and investments. Examples of specific trades, listings and successful projects are used to support the argument for the “anomalous trait theory” proposed herein. While the article does offer a degree of guidance on how to identify potentially valuable NFTs, the information is not intended to constitute financial advice and should not be construed as encouraging or influencing to invest in any particular NFT collectibles or crypto art in general.
It’s no secret that crypto art and NFTs (non-fungible tokens) based on blockchain technology, has experienced a boom in 2021. This phenomenon may have left those unacquainted with the technology perplexed as to how an image of a colored squiggle can sell for US$ 2.44 million (750 ETH).
Navigating the exciting (and volatile) landscape of NFT collectibles can be daunting, especially so for the apprehensive among us, due in part to the prevalence of crypto scams and the industry’s tendency to “techno-hype”. Despite these suspicions, however, trading NFT collectibles has been gamified, allowing individuals with knowledge, experience, an appetite for risk and an eye for crypto art to realize astronomical returns on initial investment.
In a market where traditional norms of artistic merit are less relevant, how does one develop an “eye for crypto art?” Fortunately, members within its active communities have provided guidelines for determining the value of an NFT collectible in an attempt to provide some method to the madness. Any interested parties can join an NFT project’s Discord channel where the community answers questions, shares information and encourages enthusiastic speculators to DYOR (do your own research). The gamification of investments in crypto art is made more apparent by the fact that the NFT movement was launched owing in part to Discord, which is primarily a voice and internet-relay chat platform focused on gaming.
It is well-established that rarity is a primary factor for determining value, with other market forces playing equally vital roles. DappRadar’s article, “How to value CryptoPunks”, summarises these factors succinctly. Since the underlying principles are ubiquitous across NFT-art projects as well as their derivatives, understanding these factors is akin to learning the basic mechanics of the game and should serve as the first lens through which the value of crypto art should be judged.
Rarity tools (algorithms based on NFT collectibles’ attributes) have also been developed to provide metrics-driven valuations, but have been criticized for being developer-biased. To beat the game of NFT collectibles, it’s necessary to develop one’s own understanding about a particular project whilst taking all surrounding factors, including social media, into account. It is evident from projects such as Pudgy Penguins that Twitter and TikTok accounts can greatly influence interest in a particular project.
Before opening your MetaMask Wallet to the weird and wonderful world of CryptoKitties, CyberKongz, EtherRocks and Bored Ape Yacht Clubs, it is worth analysing the rarity models of the “OGs” of the genre, Larva Labs’ CryptoPunks. Like most collectibles, each punk possesses one or more attributes of varying rarity. Combinations of these attributes influence a punk’s position in the market. Only 44 of the 10 000 minted punks have the multi-colored “Beanie” attribute, making it the rarest and most valued stand-alone attribute a punk can possess.
While rarity does influence value, strict reliance on metrics-driven valuations is not the way to play the game. The market around the CryptoPunks collection proves that buyers value aesthetics (referred to by the community as “vibes”) over rarity, which indicates a departure from traditional rarity-value models for a subjective approach to NFT collectibles. The community has attached greater value to traits like “Hoodies” and “3D Glasses” which often trade for considerably higher sums than the “floor punks” (the punks listed at the floor price of the market). While “Hoodies” started off being priced not much above floor, their premium has increased over time due to their great looks and desirability as avatars (profile pictures).
There are also non-attribute (and often unlisted) characteristics that are referred to as “traits”. Traits are characteristics of NFT collectibles that distinguish them to a further degree from others within a collection. In the context of CryptoPunks, albino punks (typically called binos) represent a further level of hidden rarity. There are approximately 3000 punks of each color, but only 1018 albino punks, and as a result, collectors are more interested in bino punks, which often trade for much higher than punks with similar attributes without the albino trait. Despite being unlisted, these traits have been discovered by the community and integrated into the trading-meta of CryptoPunks, which has, consequently, influenced the rarity models of subsequent NFT projects.
The splash art on Larva Labs’ website features 16 CryptoPunks. These punks share a common trait — they are publicly recognizable in that they are featured prominently on the developer’s website. Simply put, these pieces of crypto art will always be more famous than others, therefore, possessing this trait will improve its marketability.
Another area where traits can appear is in the “ID#” of a piece of crypto art. CryptoPunks have listed ID-numbers ranging from 1 to 10000. There are only 999 punks with 3-digit IDs, which distinguishes them from the vast majority of punks with 4-digit IDs. While this may not seem significant, it’s an example of a non-obvious characteristic that has been recognized by the community as a factor that may influence the intrinsic value of a punk. Other valuable IDs include the first 10 (1 to 10) and the last 10 punks (9990–10000) as well as punks that have ‘000’ in their IDs (1000, 2000, 3000). One of the unique IDs is ‘1337’, which is slang for “elite” amongst hackers, potentially making CryptoPunk #1337 a hacker trophy. It should come as no surprise that #1337 is currently for sale by the owner for a cool 1337 ETH (approximately US$4.3 million at time of writing).
The game of trading NFT collectibles has a lot more depth to it than having knowledge of the attributes and traits. There are, in my opinion, several hidden mechanics in the game that very few players are aware of — the so-called “anomalous traits.” The theory of anomalous traits suggests that the specific configuration of attributes and traits of (any) collectibles can result in anomalous or unique traits that can drastically influence a piece’s intrinsic value, elevating them to the status of collectors’ items. This is evident from the emergence of CryptoPunk “tribes.” There are several tribes within the collection of punks with anomalous traits: clowns, pirates and vampires.
To form part of the clown tribe, a punk must possess the attributes “Clown hair green” and “Clown nose.” Punk #6740 is the only albino clown, which in this context, creates the anomalous effect of looking like clown make-up. Punk #6740 is unique in that he is the only one of four clowns with clown make-up, making him the truest expression of the idea of a clown and, therefore, the King of the Clowns. The fact that he dons a “Luxurious Beard” gives him even more personality (perhaps he is a sad clown?) This bozo has no reason to cry since his last bid, at time of writing, was a clowny 112 ETH (US$286,000.00). He has a notable side-kick, punk #2475, who is the only female clown in the entire collection.
Another example where you’ll find buried treasure in the CryptoPunks collection is the pirates who must possess the attributes “Bandana” and “Eye Patch” to be part of the crew. Each of the 27 pirates are worthy of their own epic tale of the high seas, plunder and swashbuckling, but there are a few captains that stand out from the rest of these salty dogs. Punk #9212 resembles Blackbeard in that he is the only pirate with a “Luxurious Beard, with the resemblance being further accentuated by his bino pallor. There is another pirate captain, punk #3852, that has the most swag of the buccaneers, being the only pirate with 5 attributes. There are only 166 punks with 5 attributes, making this punk’s booty golden. Finally, punk #2249 is the only zombie pirate and with only 88 zombies in the collection, he claims the title of Undead Admiral of the open seas.
A lesser known tribe that has been slept on in the community’s crypto-coffins is, undoubtedly, the vampires. There are 147 punks masquerading as vampires with the attribute “Vampire Hair”, however, only 2 out of 10 000 punks can truly be regarded as vampires. These purebloods must possess two attributes: “Vampire Hair” and “Buck Teeth.” The buck teeth together with the vampire hair create the anomalous effect of “vampire fangs” as can be seen in punks #6976 and #8811. Punk #6976 is currently trading at a devilish 666 ETH after being picked up for a bloody 4 ETH in January 2021, thus claiming the title of Nosferatu. The vampires are a painful reminder to crypto art collectors to hold onto their pieces until they truly comprehend their value in the market.
The anomalous trait theory has been around since as early as 1993 in card games like Magic: The Gathering. Collectable trading card games use hierarchical structures of rarity to sell card packs with rarities ranging from commons, uncommons to rares, however, knowing which cards would be immortalized as forming part of “The Power Nine” was extremely difficult without a similar framework of reference (baseball cards were possibly the closest reference at the time). This same phenomenon is evident in the CryptoPunks collection in that the punks were minted in June 2017, remained relatively unknown until September 2020, after which the community started attaching value to the various attributes and their rarity when the price of Ethereum increased. One could, however, argue that the earliest evidence of anomalous traits dates back as far as the 18th century with philately and stamp collecting.
The particular excitement or hype around opening card packs with the chance of opening an ultra rare has been adopted in modern video games in the form of “loot boxes.” The process of minting an NFT collectible or “drop” within a collection is analogous to opening a loot box for in-game loot. When you execute the smart contract to purchase an NFT collectible at the project’s launch, your transaction triggers the minting process on the Ethereum blockchain, generating a random NFT with randomly generated attributes within a collection. There is no guarantee that you will receive a valuable item, nor that the item’s value will appreciate, however, choosing the correct project and playing the game correctly can be lucrative.
Blockchain technology and NFTs have heralded a renaissance period of digital art. NFTs have created a new channel of distribution for artists, improved traditional systems through which they receive royalties and given fans and collectors of artistic works a new medium through which they can own a piece of an artist’s soul on a blockchain ledger. Apart from artistic works, the video game industry has also started adopting NFTs as a way to truly own in-game items, thus creating a “play-to-earn” model of game design. Although the communities around these projects are composed of people from different professional, educational and social backgrounds, they are all united by this new concept of ownership in a decentralised, virtual world. This phenomenon is not unlike the gaming community, which has brought people from all age groups and nationalities together to experience a state of play for almost half a century.
With VISA acquiring punk #7610, it is apparent that NFTs are becoming a new class of digital assets. If fractionalisation of these collector’s items becomes more prevalent, it could lead to an even broader concept of gamified investments. We are only at the beginning of utilizing the potential of this technology to complement our real world or, perhaps, the rise of the NFT meme economy signals that reality is a thing of the past.
