That’s how much notable NFT collector Gmoney spent in January on a CryptoPunk NFT, or nonfungible token. Like most people in the crypto community, he is known only by his online alias and prefers to remain anonymous.
You may be thinking, “But why? Why did I purchase a 24 x 24 pixel image? Why does this image have any value at all?” Gmoney says.
NFTs are digital assets. They can be jpegs of pixelated characters like CryptoPunks, but they can also include anything online, such as art, collectibles and even memes. Each NFT is represented by code on a public online ledger called a blockchain, which tracks each time an NFT is bought and sold.
First and foremost, NFT investors see long-term value in the assets and the tech. As with any investment, they hope their NFTs will appreciate over time.
But beyond that, owning NFTs offers a form of social currency. There’s value in the social status and acceptance from the crypto community that comes with owning a respected NFT, just like a Rolex or a Lamborghini in real life, Gmoney tells CNBC Make It. It’s a “flex utility.”
“When someone buys a Rolex in the real world, they don’t spend the thousands of dollars because of the watch’s utility value. A simple $5 watch could perform the same utility. It is to ‘flex’ their status,” Gmoney says. “With an NFT, by posting it as my avatar on Twitter and Discord, I can quickly ‘flex’ with a picture.”
“It has the same effect as wearing that Rolex in real life, but digitally,” he says.
Scrolling through Twitter, you can come across thousands of accounts with CryptoPunk or other NFT avatars — from jpegs of clipart rocks to cartoon apes to cute penguins — all using their collections to “flex” online.
Sure, you could save and share a jpeg without spending thousands on an NFT, but in the crypto world, it doesn’t have the same effect. When an NFT investor drops money on one, they can show off their new buy on Twitter and find a community of other NFT owners, Gmoney says.
Flexing NFTs started within the niche crypto community, but is becoming more mainstream. In the last 30 days alone, there’s been about $2.4 billion in sales volume on OpenSea, the largest NFT marketplace in the world. This is a massive jump from last year, when OpenSea saw under $50 million in sales volume in September 2020.
That means the community is growing. And at its core, this trend is all about the strength and benefits of being part of one.
“Wanting to be part of something and wanting to be part of a group is natural, especially when they have the same value alignments,” says Gmoney.
“Community is the single most valuable aspect of NFTs,” says Cooper Turley, a widely known crypto and NFT investor. “Without a community, NFTs have no value. My NFT investment thesis is based solely around the strength of an existing community, or the potential for one to emerge.”
Owning an NFT, like a CryptoPunk, and posting it online can have upsides like “recognition, respect and status” within the crypto community, Turley explains.
That’s why there’s value to buy in, rather than admire from afar, he says. “Owners receive access and benefits far beyond a traditional membership,” Turley says. “They are able to build deeper relationships, find meaningful work, and most importantly, find belonging.”
Gmoney says he has seen businesses and partnerships form at community events or on NFT Discord channels. Folks can find mentorship, support and guidance in the crypto space by being part of a community.
Obviously, not everyone can afford to spend thousands — or even hundreds — on NFTs.
But “flex” and community have become so sought after that it has even led to a demand for renting NFTs.
Through reNFT, customers can rent NFTs for a few months to jump-start their engagement with the crypto community. So far all have been gifted, but Nick Vale, co-founder of reNFT, says renting an NFT is somewhat of a reputation voucher.
Vale has seen at least one user’s social media engagement skyrocket after replacing his social media avatar with a “rented” CryptoPunk for three months. It allowed the user to make a name for himself in the space, Vale says.
And this could just be the beginning. “I think we will see this evolve more as NFT tech engrains into social media as a whole,” Vale says. “It is the evolution of the ‘blue checkmark’ as we know it.”