In the 1980s the global phenomena known as the internet started growing and gaining traction. As internet service providers started popping up, most people could not grasp the implications and impact this would have on the economic environment. The internet was growing fast and connecting humans around the world. The physical analog world was acting as a dam for information and the internet was breaking the dam and creating a free flow of information around the world. Forty years later we are really seeing the benefits of this free flow of information, but at the same time old business models are being disrupted forever.
In the age of the internet, the free flow of information is driving the price of information down to the marginal cost of information, which is zero. Marginal cost is the cost added by producing one additional unit of a product. As all information trends towards its marginal cost the world is transitioning to a world of abundance. Embracing bitcoin is a way to embrace the abundance and share in the benefits as all goods become abundant against the absolute scarcity of bitcoin. Jeff Booth explains this concept in his book The Price of Tomorrow. Using a smartphone as an example of abundance creation, we can see how this made calculators, flashlights, maps, and many other items trend towards their new marginal cost of zero. As these items were dematerialized into software they were transformed from a physical good into information through software, and all information is trending towards its marginal cost.
NFTs are an attempt to transfer an old business model into a new world of abundance and are trying to fight a headwind that is sweeping the globe. Artists and musicians were some of the first business models that felt the initial disruption with the ease of file sharing in a peer-to-peer connected world. The first disruption came from centralized sources and were possible for the industry being disrupted to fight, but the victory was short lived as decentralized applications continued the disruption. We can all look back at the progress of the music industry disruption starting with Napster leading to BitTorrent. This free flow of information is driving the price of digital music, movies, and art to their marginal cost of zero. The idea that a musician can record a song once and multiply the song a million times at zero marginal cost and be paid for each additional unit is a bit absurd when you really think about it. Once the song is recorded into a digital file it is dematerialized and can be replicated an infinite amount of times at a marginal cost that is zero or near zero. This goes for any digital file like photos, art, movies, etc. NFTs will not fix this.
NFTs are an attempt to create artificial scarcity and intellectual property in a world of abundance which is counterproductive to progress and create inefficiencies in the market. There has been a lot of good writing on inefficiencies of artificial scarcity and intellectual property by great Austrian economist. Here is Jakub Bozydar Wisiniewski On the Impossibility of Intellectual Property . NFTs and artificial scarcity as a type of intellectual property is a form of rent-seeking. I suspect that the headwinds of decentralization and abundance will prove in time that NFTs are a complete waste of time and resources.
However, I do believe Artists and Musicians should be paid. The ones who see the tailwinds of digital abundance will be the ones who benefit first. Those who use the dematerialization of their product to their own advantage will be better off than those who stand and fight the inevitable. A musician can record a song and release it to millions for free, we already see this happening on a lot of platforms. They can use this leverage to build an audience then capitalize on the audience by selling tickets to shows and selling out venues on a tour. Even better if they sell the tickets for bitcoin to embrace the deflation around them. They could embrace the lighting network to do live streams online and have people pay to tune in and request songs or do live Q&A. The same ideas for digital artists can be used. Artists can create art and ship it for free to build a reputation then leverage the reputation to do custom art for websites or sell physical art. But it all comes back to embracing the fact that they can dematerialize their product and ship to millions of people for free to build a brand or audience.
The artists who embrace the world of abundance will greatly outperform the rent seeking behavior seen in the NFT space and the continued disruption of free information will continue.
