Newswise — Non-fungible tokens (NFTs) are all the rage, with collectors spending huge amounts of money (possibly tens of millions of dollars) to own and trade their own digital images. For researchers, it provides a rare opportunity for people to learn about new markets and study how to assign value to different categories of assets.
“NFT’s transaction records are publicly available, providing a great opportunity to see why people perceive their collections as valuable and how those perceptions change over time. “” Said Jordan Schow, a cognitive scientist who led the research at Stevens Institute of Technology. technology.
Suchow’s team examined the collection of NFTs known as the “Bored Ape Yacht Club” and conducted the first cognitive study of NFT trading. This is a set of 10,000 computer-generated cartoon apes with various features such as colors, clothes and accessories. It has become extremely popular in the last few months.
Individual boring monkeys are unique and therefore rare as well, but some features are more common than others. For example, apes in plain striped sweaters are more common than apes in suits and ties and apes in earrings, and may therefore be of lower value.
“It’s a bit like stamp collecting. All stamps printed in the same run look the same, so if there are printing errors or other rare features that make stamps stand out, people will be much more against it. You will pay, “Suchow explained. Co-authored with Dr. Stevens student Vahid Ashrafimoghari, this work will be presented at the Cognitive Science Society in Toronto, Canada, July 27-30.
When people first started trading Bored ApeNFT, apes with unusual features quickly became popular. But that in turn distorted the information situation. Rare apes were more valuable and more widely discussed, so they also became much more prominent.
“Today, beginners in Bored Ape trading see these rare apes everywhere and recognize them as much more common than they really are,” Suchow explained. “It creates a puzzle. How can people expect to learn about a new category if the experience in that category is dominated by the rarest examples?”
If a person wants to know what a dog is, Suchow explains, they could do so by going to a dog park and seeing a variety of common animals. On the other hand, going to experimental breeders and looking only at rare breeds distorts their perception of categories and the value of a particular dog.
To test their theory, Suchow’s team identified the rarest and most common features of Bored Ape NFTs and mapped the results over time to the relative value of the NFTs. The result was impressive. In the early days of BoredApe trading, shortage was strongly correlated with value, but when the influx of new entrants started trading NFTs, the connection was almost gone.
The findings hold lessons for collectors of all kinds, Suchow says. “Focusing on shortage has shown that self-defeating can be possible. If you want to maintain value, you need to hide it from people. that’s all “The rarest item in a particular category,” he explained. It can trigger a rethinking of how an online marketplace is designed and lead individual investors to allocate less value to the rarity of new markets.
Some interesting questions remain. Stevens’ team has found that while some rare NFT features, such as anomalous colored backgrounds, retain their value over time, other features, such as ape fur color, quickly gain value. I found that I was lost. Additional research is needed to understand why some features continue to correlate with value and others do not, and how it works in other categories such as stamp collecting and the art market. That’s what Suchow says.
“The exciting thing here is that we have revealed a general principle. The demand for rarity is self-defeat,” Suchow said. “It should be very widespread, so the big question now is whether we can observe this effect in other categories of collectibles.”