How much is an NFT worth? It’s a question that has crypto heads wondering and non-crypto people watching with bated breath as “jpegs,” as their collectors playfully call them, sometimes sell for prices that make their eyes water. Non-fungible tokens are more than just digital pictures that can be passed around, since they can be used to represent anything from diamonds to royalties, event tickets to metaverse personalities. But this doesn’t answer the question of what an NFT is worth.
The flippant answer is, “As much as the next buyer is willing to pay for it,” but that doesn’t quite hit the mark. Bitcoin isn’t backed by anything, but that hasn’t stopped it from becoming a $400 billion asset class with a track record of success going back more than a decade. NFTs are much more recent, and the market is still trying to figure out what they offer. One company says it has solved the problem of loosely priced NFTs. It is interesting to note that this company has never worked with crypto before. Coub.com, which is known for its short videos (microvideos), is moving into web3. It has a creative idea for how to price the NFTs that will carry its name.
Collateralization is a risk for NFTs
Collateral is a well-known idea in the crypto world. Every day, tens of thousands of people use their crypto assets as collateral to get stablecoin loans. For the same reason, some platforms also let you use blue chip NFTs (like Apes and Punks) as collateral. But what about NFTs that are backed by something solid and measurable and are collateralized? That has never happened before in the business.
So far, the value of NFT collections has been based on their “floor price,” or the lowest price at which they can be bought on the open market. This is a rough estimate, because it only takes one NFT owner out of thousands to change the price at which they sell their NFT to bring down the floor price and make the measure useless. When you take into account the price of ETH, which is often how NFTs are valued, you have a way to value things that needs to be updated often. Coub.com says it has found a more fair way to evaluate NFTs by using the fact that they can be programmed.
The solution that Coub.com will use for its NFT collection, which will ship later this year, could be seen as “evidence of social engagement.” According to a news release from the company, the value of each micro-video NFT on Coub.com will be based on its social analytics. Views, shares, and comments will be used to boost the value of a clip if they show that people are interacting with it. This not only gives users a reason to make interesting content, but it also makes sure that creators get paid fairly for the work they put in.
Many projects give their NFTs value based on chance, with a “reveal” happening after the minting process is finished. Even though the process is exciting for buyers, it is completely random. Only a small number of buyers will be lucky enough to get a rate trait NFT that could be worth a lot of money. Once NFTs are sold on the secondary market, the floor price shows how much the whole collection is worth.
Even though Coub.com is new to Web3, it knows a lot about what makes great content because it has been running its video-sharing platform for ten years. It has outlasted Vine, TikTok, and YouTube to become a tight-knit community of “coubers” who know exactly what they want: small amounts of entertainment that they can watch over and over again.
Knowing how popular NFT speculators are and how easy it is to join, which could lead to similarly bad art, Coub.com wants to avoid making the same mistakes as its predecessors. Its “watch-to-earn” model gives users money for watching videos, and it gives producers money for how many views popular “coubs” get. Each short video clip can be bought through an auction, and the highest bidder will get the platform’s native currency for each time the clip is watched after that.
Will social proof be used to back up NFTs, or will it join the list of good ideas that never caught on? It’s too early to say. But with Coub’s web3-enabled app coming out in Q4, we won’t have to wait long to see if “floor pricing” in the NFT is doomed to be forgotten.