Collectibles have always been a unique asset class. People collect all sorts of things, such as shells, stamps, cards, fridge magnets, and more, as a hobby or even to show off. Most of the time, the value of such collectibles is highly speculative. For example, since the craze of the late 90s, the value of Pokemon trading cards has started to rise. A box of sealed Pokemon cards soared from $100 to $50,000 in the first quarter of 2021.
Collectibles are difficult to define as a separate category because technically anything (including art, games, etc.) can fall into this category. However, in the NFT world, more and more crypto assets have proven themselves to be highly collectible items. Here, we'll look at three different projects: Cryptopunks, Hashmasks, and Bored Ape Yacht Club (BAYC).
CryptoPunks
Cryptopunk has a long and illustrious history. In 2017, co-creators John Watkinson and Matt Hall (both of whom later found Larval Labs) released 10,000 CryptoPunks, all of which are procedurally generated and free to apply for (applicants only pay a small Ethereum Gas fee).
Attributes are randomized and transmitted through the generator based on the creator's curated elements. Different features appear suddenly, some rarer than others. For example, some are aliens (there are only 9) and apes (only 24), while most are ordinary ancient apes.
Even though it was one of the first NFT projects about Ethereum (even a few months before CryptoKitty), in the early days, there was very little activity on CryptoPunks. According to Hall, fewer than 30 CryptoPunks were applied for in the days following the launch. As time went on, as more and more people began to learn about the project, especially with Mashapur's article, all the CryptoPunks were finally minted.
It's a small, but passionate community. Slowly, the owners of CryptoPunks became a kind of status symbol. Origins has always created value for any collectibles market, and blockchain technology is no exception. Owning a cryptopunk conveys two things – you're either an NFT/Ethereum OG or a value derived as part of history. However, it's only when celebrities, venture capitalists, and business celebrities start snapping up them as investments that the real attention shifts to CryptoPunks. The main attraction of CryptoPunks is their historical relevance as one of the first NFTs on Ethereum. Even Three Arrows Capital, one of the most successful crypto venture capital firms in the space, has acquired CryptoPunks.
Over time, many holders began to instill their identity into CryptoPunks, to the point that people began to recognize and respect CryptoPunks holders in the cryptocurrency community. Users recognize the social status it confers and start changing their profile picture to that of CryptoPunks on social media platforms such as Twitter, Discord, etc.
CryptoPunks has even managed to attract the attention of traditional auction houses. Sotheby's and Christie's, two of the world's largest auction houses, recently listed CryptoPunks and managed to sell the rare CryptoPunks for millions of dollars.
However, in addition to being a "JPEG", CryptoPunks later became a "member pass" for Rava Lab's latest project, Meebits. Launched in May 2021, Mi is a 3D voxel character randomly created by a generation algorithm. Meebits aims to become a digital avatar of virtual worlds through interoperability across multiple virtual worlds.
There are only 20,000 Meebits in total. Half of it is owned by the owners of CryptoPunks and AutoSymbols (another project of LarvaLabs), while the other half is auctioned off on Dutch Auction. They sold out quickly after their release.
Hashmasks
"Hashmasks" is a collaborative art project created by more than 70 global artists, launched in January 2021. There are only 16,384 unique hashmasks in total.
Hashmasks introduces a combination of digital art and collectibles, where the hierarchy of value is determined by both the creator and the consumer of the artwork. Unlike other collections, the creators demonstrate the scarcity of all the features, and the hat mask includes two layers of scarcity:
1. Unique Traits – During the initial assignment, Hashmasks were randomly assigned to a character, mask, eye color, skin color, and item.
2. Name – Can be assigned a name. The name is the rarest of all traits, and users can change it by burning a Name Change Token (NCT). Each name is unique and can only belong to one Hashmasks.
Hashmasks is the first collectible, and the value and rarity of each piece is not predetermined, but it will change and adapt for many years before the final form of the last NCT is burned. Each Hashmask accumulates 10 Name Change Tokens (NCTs) per day. When a user has 1830 NCT (which is about half a year's worth of NCT), the user can burn these tokens and change the name of Hashmasks. Each name must be unique, which creates a second layer of scarcity in the artwork.
The last NCT will be issued ten years later, on January 26, 2031. Once this happens, the supply of NCT will only decrease as users burn NCT to change the name of the art. When all the NCTs were burned, the artwork was complete.
The biggest deal so far was an anonymous buyer named Danny. Priced at 420 ETH (about $650,000 at the time of purchase), this hashmask is named "Sex".
Bored Ape Yacht Club (BAYC)
Bored Ape Yacht Club (BAYC) was released on April 30, 2021. Each of these 10,000 apes is unique in that they are programmed using 170 possible traits, including backgrounds, clothes, earrings, eyes, fur, hats, mouths, and more. These features and designs are heavily inspired by the 80s genre of punk rock and hip-hop.
In the world of BAYC, the story takes place in the year 2031, when these apes hang out in a swamp club and "get weird" because they are very rich and boring. The owners of BAYC get these utilities at launch: full commercial rights owned by any BAYC, as well as access to private "bathrooms" where holders can graffiti on the walls.
Since then, a number of creative owners have created a number of BAYC merchandise items such as books, comics, coffee, and beer brands.
BAYC is one of the few NFT projects that has garnered significant attention from the NFT community. Since its launch in April 2021, the project has achieved many milestones, including a donation of more than $850,000 to an orangutan charity.
One of the main reasons for its success is the transparency and constant communication provided by the project team. Many NFT project creators no longer offer any further updates or developments after the initial sale, but BAYC has created a roadmap for the future and is always looking for ways to surprise holders.
For example, BAKC has a surprise gift (airdrop) in the form of a surprise. Similar to Meebits, BAYC holders were also able to adopt a free dog NFT on June 25, 2021. The adoption period is set for only one week. Within the first six weeks of launch, BAKC's secondary sales generated a 2.5% royalty. All proceeds go to animal shelters.
BAYC's strong culture, which grows organically due to its interactive community, good chemistry, and openness, has attracted many people to become a part of the brand. As the community grew, BAYC was eventually recognized as the second CryptoPunks.
Measuring Rarity
If you've been in the NFT space for a while, you'll notice that people often praise each other's jpeg with different iterations of the word "rare." Phrases like "looks rare" are a popular cultural callback to measuring the value of NFTs by their rarity.
As discussed in Chapter 2, creators can artificially create scarcity by manipulating metadata. For example, an art NFT collection may have 10 pieces, 9 of which are designed in blue and only 1 in red. Whether you prefer red or blue, there's no denying that red products will be rarer due to lack of supply. Therefore, it is natural for collectors to give these "rare" items a higher price because of their provable scarcity.
While the value of NFTs is highly speculative and subjective, it is one of the only ways in which value has a quantitative element. Because humans, if they are highly social creatures, usually have an instinctive incentive to acquire the "rarest" pieces and be able to display their collections. It's no different from players getting "rare skins" in Fortnite or players getting rare holographic magic sprites from booster packs.
As the NFT industry booms, more and more tools are being developed to improve the collector's experience. Two examples of this are rarity.tools and Rarity Sniper, both of which assign rarity scores based on the metadata of a collection. Users can enter the token ID of the NFT and view the rarity score (provided that rarity score is being tracked).
In the example above, the "rarest" CryptoPunk on Rarity.tools (see image left) ranks No. 1 because it has the highest rarity score (10,342.68). A significant contributor to its high score is its high attribute count on 7 attributes – a result of tracking the commonality of all features in the CryptoPunk collection.
While Rarity.tools is a website, Rarity Sniper works as a Discord bot where users enter the token ID of an NFT on their Discord channel. In the example above (see image to the right), we can see that Penguin #103 is based at 96.27, ranking 125 in the entire Pudgy Penguin series.
There are a variety of tools, each with its own scoring methodology. Some data may have different outcomes because they have different judging criteria, but the core data source will always remain the same, which is the metadata collected from their smart contracts. However, we can't stress enough that these tools are not the only way to determine value. The value of NFTs comes from various factors such as the strength of the community, cultural significance, etc. More often than not, people buy it just because they like it. That said, if you're an avid JPEG collector, these tools can be useful for curiosity.
conclusion
Humans alike have a desire to collect rare and quality items. Collectibles can be seen as cryptographic versions of digital luxury. This phenomenon is even more pronounced on the crypto site Twitter, where many anonymous or pseudonymous personalities prefer to use these collectibles as their profile pictures. This is especially prominent among CryptoPunks and BAYC holders.
In an increasingly digital world, our digital identities are becoming increasingly important. Maybe in the future, it may even surpass our real-life identity. As we spend more and more time in the virtual world, it's not hard to imagine that our digital identities could become the primary pattern for self-introduction and identification. The good thing about digital identity is that you can make any image you want, arguably more "free" than physical identity, which faces biases such as race, skin color, religion, etc.
Just like in the world of luxury or art, the value of each collection is subjective, and its value is often only recognized within a closed group. Collectibles are one of the tools to find like-minded people. Collectibles have enormous potential in the field of creating a sought-after identity that resonates with the majority of the world's population. This is the potential of the metaverse – to create a parallel world that serves life.
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Disclaimer: The above content does not constitute any investment advice, investment is risky, and participation should be cautious.