Is that Jpeg Worth 70 Million Dollars? Value Construction and Perceptions of Non-Fungible Tokens

Abstract

Non-fungible tokens (NFTs), one of the most talked about technological innovations within Web 3.0 discourse, has stirred awe and confusion in the recent months. While interest in NFTs has grown rapidly in the marketing and the broader business literatures, the question of their value remains a theoretical puzzle. The mystery created by the millions of dollars paid for some NFTs while others are virtually worthless hampers our understanding of what constitutes the value of an NFT. Thus, an appreciation of NFT valuation can advance our theory of value, with implications for businesses. In an attempt to shed light on what drives the value of an NFT we develop a theoretical framework involving a typology of value construction and value perception for NFTs based on two main dimensions––legitimacy (extrinsic vs performative) and groundedness (connection to people, places, or times). We specify four types of NFTs based on subjective and objective dimensions that extend and enrich our theory of the value. We then detail further elements shaping NFT valuation. Finally, we offer advice on how to make sense of value construction and perceptions of NFTs. While our paper is mostly about object valuation, we briefly consider person, culture, and situation factors that also affect valuation. But since the market is agnostic with regard to such factors, we emphasize the NFT object. We end the paper by outlining a research agenda that can push research on NFT forward as crypto and metaverse markets develop.