The NFT sector has surged in price over the past few weeks, with CryptoPunk taking the absolute lead.

CryptoPunk is a 24 x 24 pixel image NFT, and the total number is limited to 10,000. The most expensive one sold for 4,200 ETH in March and is now worth more than $7.57 million.

If you want to buy a CryptoPunk now, you must prepare at least 51.85 ETH, which is still the floor price. For that price, you can only get a very average CryptoPunk. If you want rare CryptoPunks, pay more ETH.

There are a few more points you need to know about CryptoPunk:

1. The CryptoPunk has become a status symbol, owning it is like owning a Ferrari or an expensive bag.

2. CryptoPunk owners often use these punk images as social media profile pictures.

3. It is a very low thing to use a CryptoPunk that does not belong to you as your avatar.

Over the weekend, hundreds of people switched their avatars to the same one—Zombie Punk, a zombie punk figure.

The image sold for 1,201.725 ETH ($3.75 million) at auction last Friday. However, no one is dissatisfied with so many people using the same avatar, because they are all the owners of this avatar - they participated in the PartyBid auction in the form of a group, pooled funds together, and auctioned this amount of money Million-dollar punk heads against rich whales. Calling themselves the "Party of the Living Dead," they won the confrontation.

PartyBid makes NFTs more social. It uses the form of parties to give hundreds of people the opportunity to buy, own and manage expensive NFTs together. The social nature of this website is obvious, and the webpage will display the moving mouse pointer and comments issued by users in real time. In last Friday's auction, hundreds of people participated, and the screen was filled with moving cursors and emoji, which was a spectacle. This feeling is hard to describe in words, you can see it for yourself.

Not long ago, NFT was declared dead countless times, and was once regarded as a "zombie", but what is the situation now?

The Metaverse has been discussed extensively over the past few weeks. Venture capitalist Matthew Ball published a series of 9 metaverses, Microsoft CEO Satya Nadella talked about the corporate metaverse, and Facebook’s Zuckerberg and his colleagues talked about countless multidimensional universes.

Undoubtedly, NFT will play an important role in the Metaverse. When everything goes digital, proving you own something and can take it with you via the internet becomes key. But it's not about the metaverse, it's about the social network.

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1. What is "Status as a Service"

Eugene Wei, who worked as a product manager at Amazon, Hulu, Flipboard and Oculus, is also an excellent technology critic on the Internet. Everything he writes is classic, and his February 2019 "Status as a Service" may be his best work yet. Some key points relevant to this article are summarized below.

Eugene Wei started with two interpretations of human nature:

1. Man is a monkey in pursuit of social status

2. People want to get the most social capital in the most efficient way.

Few people will question the above two statements, but almost no one analyzes the current social network from the two dimensions of social status and social capital. Unlike money, which can be measured in numbers and thus be analyzed very well.

Most of the social networks we are familiar with generate far more social capital than they actually generate financial capital, especially in the early stages; almost all of these companies accept the popular argument in Silicon Valley: In the early stages, companies should delay generating revenue , in turn rapidly expanding the coverage of the network. These are all related to social capital. Although we cannot quantify social capital, as sensitive social animals, we can still perceive its existence. This is because:

“In many respects, social capital is an important indicator of financial capital, so the nature of social capital has received much attention. It is not only a good investment target or business practice, but by analyzing social capital dynamics, it can also explain various seemingly non- Rational online behavior."

In less than 1,000 words, Eugene Wei inadvertently laid the groundwork for the analysis of what was happening now two years before the NFT mania broke out.

NFT blurs the line between social capital and financial capital, and as the media often points out, it seems irrational to pay thousands or millions of dollars for a JPEG (a format for pictures).

Those who deny NFTs make the same mistake that Eugene Wei pointed out that people make when analyzing social networks: ignoring the importance of social capital.

For a long time, people have used Metcalfe's law to explain the development of social networks: "The value of a network is proportional to the square of the number of users connected to the network." According to Metcalfe's law, the more users a social network has, The more valuable it becomes with each new user.

The problem is, Metcalfe's Law doesn't do a good job of explaining what happens in the real world. Metcalfe's Law predicts that whichever network grows first will be the most valuable network to each new user, creating an insurmountable lead. However, after Facebook replaced MySpace, Instagram and Snapchat still stole the attention of young users from Facebook. People's preferences are not clearly captured.

It's not that Metcalfe's Law is wrong, it's just that it doesn't capture the exact reason why people use social networks, it's not just a matter of pure utility, so Eugene Wei proposes a new framework that adds social capital to portfolio to analyze the power of social networks.

Eugene Wei evaluates the strength of social networks from three dimensions: social capital, entertainment and utility. Here we can simplify and only look at the two axes of social capital and utility.

Utility is relatively easy to understand: If you can find the answer to your question on Quora, or easily reach your high school friend who lost his phone number on Facebook, then these products are providing utility to you.

Social capital is harder to measure and depends on creating a "successful social status game." To explain why some new social networks succeed and others fail, he uses an analogy: cryptocurrencies.

He says the new social network is a lot like an ICO:

1. Each new social network will issue a new form of social capital, like a token.

2. You must have workload (proof of work) before you can get tokens.

3. Over time, it becomes harder and harder to mine new tokens on the social network, creating an inherent scarcity.

4. Many people, especially older ones, scoff at social networking and cryptocurrencies.

This is a great metaphor. Take Bitcoin and Twitter for example.

1. Bitcoin issues BTC tokens, Twitter "issues" followers.

2. Miners earn bitcoins to secure the network. Twitter users can gain followers simply by posting something witty, funny or exciting in 140 characters or less.

3. Now the cost of mining Bitcoin is higher than before, and the difficulty of mining Bitcoin will continue to increase until all 21 million BTCs are mined. In the early days of Twitter, you could get attention by tweeting about what you had for lunch, but now, people are chasing longer content.

4. This is especially obvious.

15 years ago, neither Bitcoin nor Twitter existed. Now, both are forces to be reckoned with. They reward early adopters, incentivize them to work for the network, and make it increasingly challenging to mine new coins.

It is important to understand these four points, the most critical of which is "proof of work".

If every Twitter user has 1 million followers as soon as they sign up for an account, then becoming a big V will not form any social capital. The scarcity of accounts with millions of followers makes them more valuable, and it is Proof of Work that makes them so scarce.

Entertainment aside, Eugene Wei talks about 5 curves that social networks follow, 4 of which are trade-offs between social capital and utility over time:

The first one is "utility" first, and then "social capital".

There is a good saying, "come for the tool, stay for the network". Instagram began as a simple photo tool to attract users, and later became a photo-based social network, where people attract large numbers of followers and conduct business cooperation.

The second type is "social capital" first, and then "utility".

Eugene Wei highlighted Foursquare, Wikipedia, Quora, and Reddit as harnessing the promise of social capital to get people to do free work before evolving into utilities for the masses.

The third type has only "utility" and no "social capital".

Messenger apps are great for connecting with people you know, but they don't really help users build social capital.

The fourth type has only "social capital" and very little "utility".

Eugene Wei put Facebook into this category. He mentioned that many friends around him stopped using Facebook, and it didn't have any impact on their lives.

The fifth type has both "social capital" and "utility".

To find an example, Eugene Wei used WeChat, which combines a Facebook-like Moments feed (social capital) with many useful features. "People use WeChat to message friends, shop, read the news, play games, pay at brick-and-mortar stores...almost everything you can do on your phone, you can do on WeChat."

WeChat has created a killer combination of "social capital" and "utility" from the beginning, which has not been really replicated in the west.

Nevertheless, Eugene Wei pointed out that even good social networks are limited by two asymptotes, either stopping growth or leading to total collapse.

Social Asymptote 1: Proof of Work.

Not everyone is willing to gain social capital on social networks, and this creates a ceiling. I'm obsessed with TikTok, but I've never made a TikTok because I'm not very good at dancing and I'm not willing to put in any amount of work to do what the TikTok algorithm needs. TikTok is still growing at a staggering rate, but if even me, who loves the social network, stops using it, it's bound to face a ceiling.

Social Asymptote 2: Inflation and depreciation of social capital.

When a social network becomes more and more successful and there are a large number of users using it, the company behind it will inevitably introduce algorithms to maintain a high signal-to-noise ratio for most users, which is to resist "expansion". But the problem is that in doing so, not every follower can see every post of the blogger, and some reliable information may be mostly reduced to ashes.

From a devaluation standpoint, social networks may become less cool as more people join. Case in point is what happened when parents started joining Facebook: a lot of young people left Facebook for Instagram and Snapchat. Once the trendy kids start leaving, the less trendy kids follow soon after, and then the next group, and the next, as more and more non-fashionable people (or parents) join in, the trendy ones ratio will soon decrease.

At this point, Eugene Wei warned, “It is best for the product or service to be good enough in terms of utility, otherwise the departure of top users will seriously damage its vitality.”

Here's the heart of the argument:

1. Analyzing social networks requires more than just their network effects.

2. There are three analysis indicators here: social capital, utility and entertainment.

3. New social networks like ICOs, especially those that will use Proof of Work of appropriate difficulty to create scarcity.

4. There are many paths that social networks follow, but the best ones have high social capital and utility from the start.

5. Even successful social networks have two asymptotes: the proof-of-work cap and the inflation/devaluation of social capital.

6. Networks starting with high social capital need to figure out how to build utility before hitting the asymptote.

In the rest of the article, Eugene Wei gave many examples to add rich content to the paper. Here, to save time, only a few points related to this article are presented:

1. Social capital can be used as temporary energy. "You can use social capital as incentive bait to get everything you need in your business model."

2. The new proof of work will prolong the social status game. By adding new proof of work, new potential social capital is effectively created for users to mine. Las Vegas casino games are played for real money, attracting players with an attractive ROI. Some MMORPGs also provide players with other benefits, such as a sense of community, and tend to have a longer lifespan than purely skill-based games.

The simplest scenario for measuring social capital is when people exchange social capital directly for financial capital. "These transactions allow the value of social capital to be directly revealed. For example, by selling a high-level World of Warcraft account in the open market, you can see how much it is worth."

"Restricting the porting of social connections is necessary from a social network's standpoint, but from a user's perspective, it's frustrating. One way to curb those social giants is to require users to be allowed to port their connections to other networks. This will weaken the power of social networks in the dimension of social capital and force them to compete more in the dimension of instrumentality and entertainment.”

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2. A brief introduction to the recent situation of NFT

Let's briefly go through the history of NFT.

NFT stands for Non-Fungible Token. The power of NFT is that it makes digital assets scarce. Scarcity makes digital assets valuable, like supercars, artwork, or rare postage stamps. Artist Beeple's "Everyday" wouldn't have sold for $69.3 million if there was no way to prove that users were buying genuine copies.

In 2017, CryptoKitty introduced the concept of NFT, but NFT will really become popular in early 2021. Beeple and NBA TopShot lead the way, with Bitcoin and Ethereum hitting new all-time highs. The new crypto billionaires did what rich people do: buy art. But many people are skeptical of NFT, thinking that these are just toys.

Then, in April, cryptocurrency prices dropped and NFTs cooled along with it. Some voices said, "Look, I knew it was a bubble when people started spending millions on JPEGs!"

In June, crypto site Protos and a number of blogs published similar articles, all citing a 90% drop in numbers:

The second sentence of the article reads: “NFTs peaked on May 3, with $102 million sold in just one day.” The party is officially over, though, “according to Protos, NFT sales over the past week Only $19.4 million."

A month later, something interesting happened. NFTs are making a comeback. Two marketplaces, OpenSea and Axie Infinity, saw $106 million worth of NFT transactions in the past 24 hours alone.

According to DappRadar, over the past 30 days, the top 10 NFT markets have seen $1.86 billion in transactions.

This time around, it feels as if the NFT is driving up the prices of ETH and BTC, rather than the other way around.

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3. Why NFT can make a comeback

Let's go back to what Eugene Wei said.

1. Investment is social status

Recall the two points made by Eugene Wei:

• Man is a monkey in pursuit of social status

• People want to get the most social capital in the most efficient way.

It's a very complicated fact that we status-seeking monkeys are turning to digital monkeys and hoping to get the most social capital in the most efficient way possible.

In this wave of NFT market, Bored Ape Yacht Club (Bored Ape Yacht Club) was the first to launch an offensive.

The third-ranked NFT in the past month was Bored Ape Yacht Club ("BAYC" for short). Like CryptoPunks, there are only 10,000 of them.

BAYC’s website describes itself as “a limited collection of NFTs, the tokens themselves representing your membership in the Ape Yacht Club”.

Unlike CryptoPunks, BAYC is brand new: it launched on April 30 and is today the third most popular NFT collectible, likely because it combines "social capital" and "utility."

The New Yorker recently wrote an article titled “Why Boring Ape Avatars Are Taking Over Twitter,” noting: “It’s become something of a status symbol, kind of like a fancy watch or a rare sneaker.”

Apes remain a theme outside of BAYC, with two of the four most expensive CryptoPunks of all time containing "ape" elements:

If it's irrational for people to spend millions of dollars on pixelated images of apes, then "Analyzing Social Capital Pathways" can help explain these seemingly irrational online behaviors.

So, instead of ignoring these things that are becoming a reality, let's dig deeper and bring NFTs to Eugene Wei's theory.

This is the power of NFTs: they are high in social capital and utility, and increasingly high in entertainment. They get a triple win on social networks.

First, social capital.

In the game of "investment is social status", NFT becomes a kind of social capital. There are currently only 10,000 Cryptopunk and BAYC, and in this limited set some of them are of high value and thus bring high social capital. Owning a CryptoPunk or BAYC and using it as your Twitter, Discord or Telegram avatar says something - you're either early, rich, or both rich and early.

The use of high-priced items to increase social capital is nothing new—look at art, expensive cars, yachts, private jets, handbags, or any scarce item that rich people buy to signal social status. It's just that NFT is clearer and more open.

Second, utility.

NFT can also be used as an investment, as a ticket to enter the Discord group, or even hung on the wall in other forms. As NFTs develop and penetrate a wider audience, owners will gain more access to events and more unique experiences.

Buying a BAYC already gives the owner access to the Boring Ape Yacht Club. NFTs like Axis offer real utility: employment opportunities for thousands of people. The Meebits pictured below, from Cryptopunk creator Larva Labs, come with 3D models and animations that can be used as characters in the game.

Third, entertainment.

Although Eugene Wei didn't delve into this area, most successful social networks score highly on the entertainment axis. It can be said that TikTok is both a social network and an entertainment network. The same goes for YouTube. Lots of people lurk on Twitter for hours a day without interacting, purely for fun.

NFTs are fun, too: Some have started creating virtual characters featuring apes or punk avatars. Auctioning on PartyBid is as much an investment as it is a social event.

The entertainment attributes of NFT have just begun. Punks Comic is creating comics based on 16 punk heads, and will add more elements in the future, and will soon expand to BAYC.

Obviously, this is just the beginning. Many NFT supporters believe that major cultural events can be recorded with NFT, and this method itself will also have an impact on these activities.

So, NFTs provide social capital, utility, and entertainment...is this valid on Eugene Wei's "new social network is similar to ICO" point of view? Considering that they are both projects in the cryptocurrency space, it is simple:

✅Each new social network issues a new form of social capital, a token.

✅You have to prove your work (Proof of Work) to get tokens.

✅ Over time, it becomes harder and harder to mine new tokens on each social network, creating an inherent scarcity.

✅Many people, especially older ones, scoff at social networking and cryptocurrencies.

There are some nuances here.

NFT more directly connects social capital and financial capital. One way to get an NFT is to get in early, when it's being created, or early on, before most people are interested in it. Another way is: buy. The former stands for Proof of Work (POW) - figuring out which projects should participate early, while the latter is closer to Proof of Stake (POS) - participating in projects with ETH.

There is also an intuitive commonality between the two: Many people, especially older people, sniff.

Even I admit it: becoming a social network seems a bit out of reach for NFTs.

It doesn't look like a social network. If anything, it's more of a small community, like a supercar club somewhere. However, unlike these small clubs, which are too small for analysis, NFTs can bring social status and social capital on a global scale. But compared with social networks such as Facebook, Snapchat, TikTok and Twitter, NFT is a completely different type.

In my opinion, NFT is an emerging social network, and its strategy is effective.

In the "Status as a Service" paper, there is a section titled "Why Duplicating Proof-of-Work Is a Bad Strategy for Status-Driven Networks", duplicating an already existing form of Proof-of-Work, only in Small changes in places won't work because you're not really creating a new social status game, so there's no reason to migrate users from an existing network when the new network doesn't have users yet.

Bitclout, though in the cryptocurrency space, is similar to Twitter, rewarding people for doing what Twitter does: saying witty, funny or smart things. The difference is that if you succeed on Bitclout, your tokens become more valuable and you earn money. The direct exchange of social capital for financial capital is enough to allow people to transfer workloads to a new platform, which is very challenging for platforms.

What's different about NFTs is that it doesn't require people to leave their existing social networks. Instead, it would be good for NFT holders if everyone was showing off and talking about their NFTs on their favorite social network. This boom can generate more demand and indirectly create opportunities.

If Netflix execs saw that everyone was tweeting about CryptoPunk, they might turn it into a show that rewarded owners. If the folks at Christie’s saw everyone on Discord talking about Art Block, they might put one of the paintings up for auction, adding credibility and influence to the collection.

Once this happens, NFT holders will build a huge social capital and continue to invest this capital in the network. For example, if CryptoPunk gets a Netflix show, the punks starring in it could become celebrities in their own right and build a wider social capital on the social network.

NFT is not a social network in the traditional sense. Without a company, there is no offline venue that can gather holders. It can only be gathered in blockchain games and virtual worlds such as CryptoVoxels, Decentraland or The Sandbox. Maybe someone will build an anonymous social network and have an NFT to enter. But most likely, it doesn't belong to any of the above, it's something new: the Superverse, a superverse.

Doesn't mean NFT is"A better social network," meaning it will be a "super social network" that will stand above other networks.

As mentioned above, “Limiting the portability of social relationships is necessary from a social network’s standpoint, but from a user’s perspective, it’s frustrating.” If regulators force social networks to This will weaken the power of social networks in the dimension of social capital and force them to compete more in the dimension of instrumentality and entertainment.

What if, instead of regulation, a new entrant with inherent portability?

You can earn social status anywhere, own it without platform risk, and carry it with you on the Internet. No matter which platform rises or falls, NFT will not be changed. Any social network with a profile picture is fertile ground for NFT distribution. Holders have already shown off their cypherpunk, RTFKT sneakers on their Twitter avatar or Instagram photo.

It's not just a few people who do this. Groups with specific NFTs, such as the "Living Dead Party", can migrate to any new platform together, use Discord as a base, and enter other new fields from here, transforming 10,000 scarce assets into hundreds of thousands or hundreds of A scarce asset supported by tens of thousands of people.

Eugene Wei mentioned the viewpoint of "come for the tool, stay for the network". The same is true for NFT, which becomes a tool to bring the network to the most socially and economically valuable place.

With that said, a caveat is in order: the price and demand for some NFTs may drop, or even plummet. Recently, an NFT created in 2017 — “Ether Rocks” — has seen a surge in demand, selling for more than $100,000. The project founder also called it "the pet rock of the blockchain world". This kind of "resurrection" is a test for the community. Whether this type of NFT can have value attributes depends on how strong the community is.

That said, NFTs do appear to possess some characteristics that make them resistant to the two asymptotes proposed by Eugene Wei.

For the asymptote of proof of work, NFT can add new proof of work and extend the half-life of the status game. Eugene Wei cited two examples of successfully extending the life of status games-casino games and massively multiplayer online role-playing games, and these all have the same characteristics as NFT.

NFT can simultaneously achieve "use real money to set an attractive game ROI" and "be more durable than pure game skill challenges".

This means that NFT only needs to face breakthroughs in "encryption technology adoption" and "affordability". There is no doubt that more innovation will allow NFT to reach a wider group of people, while retaining the advantages of scarcity, or replacing scarcity with other advantages, such as community.

For the asymptote of "inflation and depreciation of social capital", the decentralized nature of NFT plays a role. Although some platforms can use algorithms to present certain NFTs, NFT itself is portable, and the owner can choose a place to use and display it.

They're also less likely to suffer from the evaporative cooling effect on social networks, because NFTs aren't a single thing -- they're clusters of small communities, each with their own standards.

There are only 10,000 CryptoPunks in the world, but eventually there may be thousands of DAOs and fractional ownership groups, each with its own standards and rules, forming its own small community. This distributed structure will make NFT more resilient.

The current NFT is still in its early stages. Even I, as someone who likes these things, don't own cypherpunks, apes, or other mainstream NFT collectibles. The industry also needs to build more infrastructure and build more structures to connect different NFT projects.

NFTs appear to have the right ingredients to build a new form of social networking — a “super universe” — on top of existing networks like Twitter, Instagram, Snapchat, Discord, and TikTok, and will adapt and thrive over time .

New NFT projects can leverage a powerful combination of social capital and financial capital as a starting point. Ownership brings social capital, utility, and entertainment. From figuring out the next big thing, to creating brand extensions (like Punks Comics), to marketing specific NFTs to increase awareness of the entire franchise. Cypherpunk proprietors have bought billboards in New York, Miami and London to spread the word. When money, status, and community come together, there is a powerful dynamic.

Four. Conclusion

Four. Conclusion

A big thing might start out like a toy, and the next big social network might not start out like a social network at all. The future is going to be crazier than predicted, and a social network based on JPEG ownership clearly fits the bill.

So, seeing this, what do you think?

Social networks reward those early adopters, and a social network with monetary rewards gives early adopters a double benefit. Go explore, find an NFT that resonates with you, and get involved. At the very least, don’t be one of those old folks laughing at NFTs.