There’s little social value in helping make Elon Musk another $1 million in the NFT market, but the technology can still be put to good use, says Ethereum’s Vitalik Buterin.
Ethereum co-creator Vitalik Buterin believes NFTs can be applied to socially relevant causes such as charities and funding public goods, but not while the technology is still viewed as a “casino that largely benefits already-wealthy celebrities.”
The author of the Ethereum whitepaper said there was little social value in helping celebrities like Elon Musk add another $1 million to their bank balance by selling NFTs. But he does believe that with support and coordination, non-fungible tokens could have a significant impact on other areas of society.
In a blog post titled “The Most Important Scarce Resource is Legitimacy,” Buterin said public attention and resources are often allocated to whatever most people perceive to have legitimacy — a game theory term which he defines as:
“A pattern of higher-order acceptance. An outcome in some social context is legitimate if the people in that social context broadly accept and play their part in enacting that outcome, and each individual person does so because they expect everyone else to do the same.”
In short, people act in a coordinated fashion if they perceive that everyone else will do the same, and especially if it benefits them personally. The NFT market, which has seen half a billion dollars in volume in the last few months alone, is also swayed by the ever-changing forces of mass public perception.
“Which NFTs people find attractive to buy, and which ones they do not, is a question of legitimacy,” said Buterin.
“If everyone agrees that one NFT is interesting and another NFT is lame, then people will strongly prefer buying the first, because it would have both higher value for bragging rights and personal pride in holding it, and because it could be resold for more because everyone else is thinking in the same way,” he added.
The influence and pull exacted by celebrities such as Elon Musk is potentially enormous. The Tesla CEO has been credited with moving the Bitcoin (BTC) and wider cryptocurrency market on numerous occasions, both positively and negatively. The attention brought to NFTs by Twitter CEO Jack Dorsey was commendable, said Buterin, referring to the social media chief’s decision to auction off his “first tweet” NFT to charity for $2.9 million.
But, if the focus remains on such people then the potential for NFTs to have any real social impact could be lost, claims Ethereum’s co-founder:
“But they could also be a missed opportunity: there is little social value in helping Elon Musk earn yet another $1 million by selling his tweet when, as far as we can tell, the money is just going to himself (and, to his credit, he eventually decided not to sell). If NFTs simply become a casino that largely benefits already-wealthy celebrities, that would be a far less interesting outcome.”
Buterin suggested two potential ways to help make NFTs more “legitimate” as a method of acting as a funding mechanism for causes which in some way promoted a social good.
Buterin said a decentralized autonomous organization could be set up which, with the collective approval of its decentralized governance community, would “sanction” certain NFTs if it was guaranteed that a portion of the sales revenue would be passed on to charitable causes.
Another way would be to work with social media platforms to integrate NFT displays into users’ profiles, allowing them to show off the thing they invested their money into. In combination with the first idea, wrote Buterin, this approach could work to “nudge users toward NFTs that contribute to valuable social causes.”