Opinion: Ordinals store not only digital value but also digital culture

Author: Yat Siu, co-founder of Animoca Brands; Translation: Odaily Planet Daily Jessica

About five years ago, CryptoKitties and Ethereum brought widespread attention to NFTs and sparked a revolution in digital ownership. Now, Bitcoin has finally ushered in its own NFT moment. Ordinals (Ordinals) are assets "engraved" on the lowest denomination (Sat) of BTC, and are regarded as Bitcoin's NFT.

Just as intense interest in NFTs overloaded the Ethereum network starting in 2017, demand for Ordinals is disrupting the Bitcoin network today, sparking a heated debate about the value and application of Ordinals.

Disruptive change forces innovation. This disruption is leading to new innovations and network effects, whether in marketplaces, games, or other aspects of the decentralized world.

In short, **Bitcoin's introduction to Ordinals finally gives the most valuable crypto community (by market capitalization) what it needs to scale meaningfully: a way to store not just digital value but digital culture. **

The interplay of NFTs and culture has been a focus of mine for years. I often say that Bitcoin is a store of value and NFT is a store of culture. I'm going to rephrase that now because Ordinals allow Bitcoin denominations as cultural storage.

In this article, I want to focus on the importance of culture to the global economy and even the digital economy.

Culture, Ownership, Network Effects, Business Creation

Culture—the expression of our collective identity, creativity, and conventions—is an often underappreciated force in both virtual and real worlds. Culture is a key factor in the development of a prosperous society and an essential component of any economy. Culture is also intrinsically linked to ownership, such as the attribution and commercialization of intellectual property.

Ownership of something gives us a corresponding economic freedom: the ability to trade and use it at will. Ownership also allows us to participate in the network effects associated with ownership.

In the case of cars, the network of businesses related to car ownership—such as insurance, spare parts, audio systems, leasing, and ride-sharing services—forms an ecosystem that is larger, more valuable, and far-reaching than the auto industry itself . Because of these network effects, the utility of owning an item such as a car is significantly enhanced, making the experience of owning a car more valuable. Every new business or service connected to something we own increases the network effect of that thing.

Another powerful effect of ownership is that owning something can contribute to our identity (culture) in ways distinct from the utility of that object. Take your fashion choices, the vehicle you drive, your family heirloom, or your wedding ring – **ownership of these items can carry deep intrinsic meanings that are only shared within small communities with no immediate economic expectations, yet still shape Our entire identity, heritage and story. **

Open digital culture store in the virtual universe

NFTs can serve as a store of digital culture as Web 3 enables true digital ownership, allowing digital items to carry personal meaning. **Given that a large portion of our lives are spent online and that, for many of us, our digital presence can be as valuable and important as our Discussion is very relevant. **

Many people are surprised by NFTs and Web 3 because of the "inflated" prices they see. They look at BAYC and say, "How can it cost more than my Birkin? A real thing I can use in the real world?" But that's wrong thinking. People don't buy expensive Birkin bags to put things in them. Pure practicality is not the point. The value of the Birkin comes from the network effect of all those who believe that the Birkin contributes value to their social identity. The sheer utility of this bag is a far behind. It's about owning a story and being part of a culture and a community that blends in with one's identity.

The same is true of digital culture in today's open metaverse: ownership, identity, and associated network effects are often more important considerations than pure utility. In a sense, social identity has become a new utility for digital items, as is the case with physical items like Birkin bags or high-end fashion in the real world.

This evolution of digital items is perhaps the most fascinating aspect of the Open Metaverse, based on the development of new virtual economies within the framework of new ownership enabled by Web 3. Consider that users around the world have spent billions of dollars on Web 2 video games and virtual goods in virtual worlds, purchasing items that are not actually owned but licensed. Skins and cosmetics have no specific purpose, but they enable users to express their culture and identity. This allows these items to generate tens of billions of dollars in revenue annually, and according to a report by Credence Research, the virtual goods market is expected to grow to more than $200 billion by 2028.

Cultural TVL: Powering the physical and virtual economy

In the real world, culture has become a major economic contributor, both in terms of job creation and the consumption and purchase of goods. We all interact with aspects of culture in different ways every day—emotional, economically utilitarian, or otherwise—and these interactions drive large parts of the economy.

Without culture, there is no entertainment. Without entertainment, there would be no TV, movie theaters or video games. Without video games (and digital culture in general), there would be no PlayStation, Xbox, Nintendo, or gaming PCs. Without advances in gaming technology, we probably wouldn't have the graphics processing technology that powers other industries. Display technology is a good example of how cultural demands have brought us better technology: within a few years, we moved from bulky and constrained CRT monitors to flat/curved panels and tiny wonders in cell phones.

The United States is one of the world's major cultural exporters, and culture (including the arts) contributes enormous value to GDP. Arts and culture will account for more than $1 trillion in the U.S. economy in 2021, growing faster than other industries. This is not surprising, as culture drives consumption, thereby affecting almost all aspects of trade and retailing.

Think of an aspect of a culture and imagine if utility was the main driver of its consumption - in many cases, that doesn't work. We can choose clothes that are only used to cover our bodies, but this practicality lags far behind the cultural aspects of fashion. People make fashion choices based on who they are and who they want to be. This need for individual expression explains why there are so many fashion options.

Cultural expression isn’t limited to fashion; it translates to other real-world purchases, whether it’s cars, real estate, jewelry, or even “surface” purchases like tattoos and piercings.

Since culture is already an important driver of real-world economies, creativity, and innovation, it has a similar impact on the open metaverse, which is forming around us every day due to the prevalence of Web 3.

In crypto terms, culture in the real world represents one of the main TVL (Total Value Locked) of any economy. The same cultural phenomenon as TVL has emerged in the virtual world: buying skin or cosmetics in your favorite game is the virtual equivalent of buying fashion in the real world, and culture is the driving force.

NFTs store digital culture, and given the economic power of culture, it's easy to see why NFTs are driving Web 3 adoption in all its forms, including avatars, video games, education, music, and many other industries. Culture is a key pillar for the economic growth and sustainability of the new virtual economies created in the Open Metaverse.

Open Virtual Universe

Unlike the mainstream, which emphasizes interfacing technologies to access proprietary "walled garden" experiences, an open metaverse is based on ownership and culture. Despite the crypto winter and various macroeconomic woes, the open virtual universe remains an incredibly exciting space. In the first quarter of 2023, NFT sales totaled $4.7 billion, which is remarkable in itself, but even more so for an industry that should have been "dead".

Perhaps most notable is the fact that digital culture stores (NFTs) generated over $24 billion in revenue in 2022, with 90% or more of that value shared with their creators and participants.

But this is just the tip of the iceberg, as we are still in the early days of commodity property rights in virtual worlds. According to McKinsey research, virtual universes have the potential to create $5 trillion in value by 2030.

As Web 3 continues to become more mature, popular and more accessible, the most important influences of culture will be manifested in an open metaverse in a more powerful way, driving demand, consumption and utility.