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Apologies if this isn’t the right forum. Just trying to understand the concept of scarcity with NFTs.

With physical goods, there is tangible scarcity. For instance, there are only a certain amount of Michael Jordan rookie cards out there. Creating another batch involves costs in printing, distribution, retail etc.

With NFTs, scarcity is artificial. Say, for an NBA Top Shot, what keeps them from minting more copies? Marginal costs are essentially zero, so it’s like printing money.

What am I missing?

Leo
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You aren't missing anything. There is only artificial scarcity.

One could argue that physical goods also have artificial scarcity. For example, a sports card company could print thousands of Michael Jordan rookie cards in 2021 - but they wouldn't be worth very much.

tjr226
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  • There are costs to printing the MJ rookie cards, packaging them, distributing them, selling them retail. Sure, less than market value, but there is a non-trivial cost. Digital goods are instantly created, and scarcity is entirely artificial. – Leo Apr 07 '21 at 02:11
  • Digital goods on Ethereum aren't free - you have to pay gas to create them. It can be as high as $50-100 USD, way more than the cost of a new basketball card. – tjr226 Apr 07 '21 at 02:37
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    Thanks. I didn’t know that. This helps. – Leo Apr 07 '21 at 02:38
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There can only be one "first batch". There is a common understanding that only the first batch, which can be provably shown to be the first thanks to the blockchain time-stamping and public addresses, has meaningful value.

The marginal costs related to production and distribution are irrelevant for high value objects.

Rexcirus
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Everything is artificially scarce. Why doesn't Bentley just manufacture several million cars @ 50k each like Ford and Tesla? Because they want to create exclusivity. This is true for the housing market, trading card market, NFT, etc.

Oscar G
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  • What’s the marginal cost for minting and selling a new NFT? How does it compare to the marginal cost of manufacturing, distributing and selling car? – Leo Apr 30 '22 at 21:14
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You are correct with you comparing it with money. Same principle of demand/supply work with NFT as with any other tangible and intangible asset. It doesn't really matter how large or small is potential supply if it is offset by the demand.

Ivan Falimendikov
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  • Your answer could be improved with additional supporting information. Please [edit] to add further details, such as citations or documentation, so that others can confirm that your answer is correct. You can find more information on how to write good answers in the help center. – Community Jan 06 '23 at 21:33
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In a blockchain like Ethereum every operation is public. If someone creates more copies everyone will be aware.

Another difference is that every token has its own serial id and that cannot be copied. Even if they create more copies there will be just one token with id equal to 1.

Ismael
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  • Thanks. This I get. But with something like NBA Top Shots, for a shot worth $100 with 500 copies on offer, there really is nothing keeping them from minting 500 more and printing $50K from thin air. Though the new copies may dilute the previous, there could be ways around this, e.g. doing it discretely or slowly. – Leo Mar 31 '21 at 00:38
  • @Leo It is an equilibrium they have to decide when they design them. Either you mint a lot at a cheap price or just a few ones that are expensive. Perhaps somewhere in the middle is the better option. Companies dedicated to that probably have done market research and know their customers. – Ismael Mar 31 '21 at 01:00