Do NFTs have value?

Manabesh Kar, CFA
3 min readDec 21, 2021

I have been a tradfi professional (never thought I would introduce myself this way, but never mind..) observing crypto as an asset class for last 3–4 years and the way it has evolved, has literally blown my mind. A lot has been said in this space. And rightly so. Crypto has truly mastered the art of giving. Blockchain developers have been given employment opportunities, college goers have been given futuristic gaming platforms to play and earn on, old school thinkers have been given a platform to rant about how stupid everyone else is and validate their intelligence ( or lack thereof) , social platforms have been given new users, art creators have been given a new breed of clients, investors have been given new return opportunities and low-income populace in different parts of the world have been given a chance to change their fortunes.

All of the above is metcalfe’s law playing out in multiple dimensions in multiple timeframes, simultaneously creating a complex maze of developments leading to the biggest of revolutions we have seen. NFTs have been a late addition to crypto space and people don’t quite understand it. The main point that I want to touch down upon in this piece is- value creation.

Do NFTs really have value ? How can value be created out of thin air? Why are people paying millions for pictures that can be right clicked and saved in your hard drive?

Value is an interesting concept, extremely subjective when viewed in isolation but truly objective when viewed as a group or community or society. According to economic theory, a rational economic man only seeks to operate in such a way that personal utility is maximized. Whether humans behave rationally or are behaviorally biased, utility maximization is the ultimate bedrock of society. Without utility seeking behavior, goods and services wouldn’t be exchanged and societies wouldn’t function. Value can come from various sources. Consider a LV bag. 5% of LV bag’s value perhaps comes from the fact that it can store keys and the other 95% comes from the fact that society has by and large agreed that it is a store of value. Physical utility and social agreement constitute value in this case. Agricultural goods are purely the former. Bitcoin and other meme coins are purely the later. Lot of things in life are somewhere in between. If you possess the skills to create physical utility out of something you build, or create a community that agrees on something as a self-fulfilling prophecy, you have created value. NFTs are easier to transact, store and…

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Manabesh Kar, CFA

Macro derivatives trader, ex Morgan Stanley , ex BNP options trader, crypto enthusiast | Views are personal , no investment advice