CHAPTER 2What Are NFTs?
Even before you think about non‐fungible tokens (NFTs), which in their most basic form are unique digital collectibles secured by the blockchain, you must understand how collectibles work. Perhaps the following eclectic Beanie Babies parable will clarify the erratic and eccentric psychology behind why we collect.
Why People Collect
Before NFTs, there were Beanie Babies…
From stamps to Civil War weapons to sneakers, people collect many different objects in various formats. So, it should come as no surprise that there is a market for collectibles in a digital form. Conceptually, it’s confusing. But on the sheer basis of wanting to own a unique item that others do not have, digital collectibles vary little from their physical counterparts. Therefore, to understand why people collect NFTs, we’ll draw a comparison to a physical collectible that took the world by storm in the 1990s: Beanie Babies.
From its inception in 1993, Ty Warner, the founder of Beanie Babies, built scarcity into his product. The plush toys were distributed in small quantities to small retailers, avoiding chain retailers and large orders altogether. Ty didn’t want people to be able to find or buy every Beanie Baby they wanted.
The company kept the number of Beanie Babies in circulation secret. It “retired” the production of certain Beanie Babies to create more exclusivity. It intentionally let misprints and faulty Beanie Babies through the cracks, which would become extra rare editions ...
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