The Rise Of Profile-Pic NFTs and Why Some Are Worth More Than Your House
Ever wondered why some people are crazy enough to drop six figures on a jpeg? Here’s what those people know that you don’t.
Ever wondered why celebrities such as Eminem, Steph Curry, Neymar, or even Jimmy Fallon have pictures of stoned monkeys as their profile pictures on apps such as Twitter or Instagram?
By now you probably know what NFTs are, and how they are the next stage for the evolution of the worldwide web, and A-list celebrities and influencers are bringing it to the mainstream through social media.
Those profile pictures of stoned primates are actually Profile Picture (PFP) NFTs from the Bored Ape Yacht Club (BAYC), a collection of 10,000 unique apes that function as memberships in one of the most exclusive communities in the world. For context, the cheapest ape on the opensea marketplace is currently listed for 111 ETH ($372,685). That is a staggering amount for a jpeg on the internet, yet millionaires every day are content to spend the equivalent of a house on these NFTs. Moreover, while some people deep in the NFT space think it’s a perfectly sound investment, there are many newcomers that are still left scratching their heads wondering why people are so stupid. But are they really?
This article will explain everything you need to know about PFP NFTs and why everyone may end up owning one someday.
NFT Profile Pictures Explained
In the beginning, PFP NFTs were not really a big trend as people were still coming to terms with spending digital money for digital art. However, they have been around since 2017. The ‘CryptoPunks’ NFT collection by Larva Labs for example was among the first in the subgenre of NFTs to do a collection of 10,000 generative portraits with different properties and rarities, which set the benchmark for future projects down the line. Initially, these punks were given out for free and anyone with an Ethereum Wallet could collect them, but if you want to get your hands on one today it'll set you back around 68 ETH ($224,760).
It wasn't until the second quarter of 2021, that these PFP projects garnered the attention of the masses and celebrities. 2021 was the year when bluechip projects such as BAYC, Meebits, Pudgy Penguins, and Lazy Lions would carry the majority of the trading volumes on marketplaces like Opensea.
What is interesting is that today, one year later, the trend of PFP NFTs has not died down. In fact, the demand for them has only increased. As investors, that one year has provided the world with a plethora of data on how this industry works, and the central theme that prevails every time is that the NFT space thrives on the fear of missing out (FOMO). Creating a sense of scarcity and exclusivity can drive demand through the roof if enough people buy into the hype. Furthermore, in today's market, having funny-looking art of zoo animals alone is no longer enough to entice buyers in as people want to see roadmaps that convey the future utility of holding for the long-term.
However, at the core of PFP NFTs, beneath the surface of all the money and mediocre art lies something fundamental to humans that Gary Vee calls ‘social currency’. Moreover, what separates the successful PFP NFT collections from the ones that fail is one simple thing: understanding the role of human psychology.
The Role of Human Psychology
Let’s be real, PFP NFTs have no inherent physical value other than they look kind of cool and can get you into yacht parties every once in a while. The real value lies elsewhere — your social currency.
The NFT hype and FOMO the world has seen over the past 12 months have shed light on three major behavioral psychology concepts: scarcity, social proof, and tribalism, and understanding how to feed these three fundamental aspects of humanity is key to building a successful project in this space. Let’s look at each in a bit more detail.
Anyone that understands the basics of economics knows that as the supply of something valuable decreases, demand generally tends to increase. Humans are biologically wired to recognize scarcity and value things that others cannot easily access. It is for this reason that great NFT projects understand how to leverage artificial scarcity to their advantage and limit their supply and access to whitelists to create a sense of scarceness in the NFTs. Interestingly, likely due to the lack of evolution in the human brain since our hunter-gatherer days, people can’t necessarily tell the difference between artificial scarcity and actual scarcity so it is important to recognize this aspect of NFTs when making purchasing decisions.
Humans by nature are social animals, meaning we are easily influenced by the behaviors of others and feel a need to constantly be communicating with others both verbally and non-verbally. If you think about the clothes you wear, the brands you buy from, and how many social media followers you have, these are all channels for conveying information to others about what kind of person you are.
Serial Entrepreneur and founder of VeeFriends, Gary Vee refers to NFTs as a new form of ‘social currency’ which is used as a way for humans to signal social cues such as status, wealth, personality, and taste. PFP NFTs in this sense can be analogized to what car you drive. For instance, if you have a PFP NFT of a project worth about 0.5 ETH, it’s like pulling up to the club in a 2006 Toyota Yaris, whereas the person with the PFP of a Bored Ape, worth 111 ETH conveys to others digitally, that he drives a Lamborghini.
When looking at it through this lens, it makes much more sense why celebrities and people who want to convey high social proof online are willing to spend hundreds of thousands of dollars for a jpeg.
The last aspect of psychology that NFT projects appeal to is the idea of digital tribalism. Humans are biologically wired to prefer hunting in tribes and living in a family as opposed to being alone because having a strong tribe usually meant a higher likelihood of survival for our ancestors.
In the context of NFTs, the communities and in-groups that are formed from holding a certain NFT project can be seen as the equivalent of a digital tribe. Further, the more exclusive and selective the tribe, the more valuable it is to be part of that group. For instance, to be a part of the BAYC, you need a minimum net worth of over 110 ETH ($353,000) to buy the cheapest BAYC. Not everybody has 110 ETH, so being a part of this community signals to others that you are likely quite wealthy. In this sense, the NFT PFP you have on your social media instantly communicates to others what tribe you belong to, which is massively appealing to humans.
Hopefully, by now it is clear why profile picture NFT projects are all the rage at the moment, and why some people are literally choosing to sell their physical possessions to purchase digital property that has no inherent tangible value. It makes perfect logical sense from a psychological standpoint, and that is the whole point of this article. The real value of owning a solid PFP NFT project has to do with how it curtails our ingrained psychological needs for social approval, status, and tribalism. It is for these reasons that projects with sub-par art can get away with selling for hundreds of thousands of dollars because that isn't the point of buying the NFT.
The last thing to think about is what NFT PFPs mean for the metaverse. It is highly unlikely that people will use their real faces when living in the digital realm. What is far more likely to happen is that people will have NFT avatars that they will use which will be derived from the PFP NFTs they currently own. In this sense, the PFP NFTs you own are the different lives and identities you will be able to slip into once we all move over into the metaverse.
So pick wisely.
Connect with Us
- Anas: twitter.com/ananasbrb
- Danosch: twitter.com/thecryptosheikh
- Rahim: twitter.com/rahim_mahtab
- Zayaan: twitter.com/thenftpenguin
- Sam Z: twitter.com/zuckerswag
- Kristel: twitter.com/atelier_kristel
Thank you for getting involved early in the Arts DAO journey. We are dedicating every moment we have to building and being part of the evolution of blockchain technology, the NFT space, and art more generally. We look forward to meeting with you either in one of our real-life events or elsewhere in the metaverse!