Last month, I set out to explore one question: where do NFTs capture value?

This is not a thesis on what makes NFTs valuable, it assumes you already understand why scarce, permanent, ownable digital content has value.

Instead, we’ll use this essay to explore the NFT stack, breaking down the various layers as we hone in on one in particular - curation.

NFTs flow through a number of layers from creation to collection. Baked within this stack are dozens of platforms, many of which are covered in my first Mirror post on the NFT issuance landscape.

Every NFT is issued on a blockchain through a process called minting. There are different means of minting, but the end result is creating a token that conforms to a certain NFT schema (ERC721, ERC1155, or zNFT).

Once minted, NFTs can move seamlessly between marketplaces and applications, just like a cryptocurrency can move between exchanges and wallets. Oftentimes, decisions for what marketplace to release on are based on the structure of the NFT sale, including nuances like editions vs 1/1s (more on this in my next post).

In the near future, all marketplaces will feature curation tokens as an incentive to release on a given platform. Tokens enable curators to signal towards which creators (and individual NFTs) are most valuable. Curators that attract the most sales earn the most rewards.

Curators share in a marketplace’s upside by earning tokens or receiving a percentage of sales when a purchase is made through a referral or based on a curator’s delegated stake. This is drastically different from today where fees are captured exclusively by the core team, rather than a global community of tokenholders.

When this transition happens, the most active curator (measured by volume and usage) will receive the largest allocations of retroactive airdrops, drastically boosting their signal and curation abilities.

Moving forward, the largest rewards will be captured by those with specialized knowledge of undiscovered talent - essentially playing matchmaker between creator and collector to boost sales on their preferred marketplace(s).

Let’s explore how curation fits into the NFT landscape today.

The supply of NFTs will outpace the demand. The number of NFTs will grow while the average price per NFT will diminish.

We’re starting to see this today, with most open editions on Nifty Gateway starting to trade below their primary sale price on the secondary market due to a lack of demand from new buyers and a lack of signal from curators.

This forces creators to cut through the noise, leading to the formation of micro-economies - or markets that form around specific individuals, brands or creators - for NFTs and their collections.

In this new world, every creator becomes their own micro-economy. The new race is becoming a majority shareholder in those creator economies through curation.

Just as we see aggressive pushes for majority ownership in a seed-stage company, NFTs unlock these experiments at a more granular level. Access to assets are global and permissionless, and those with a capacity to discover rising talent are able to purchase meaningful pieces of a creator’s micro-economy very early in its lifecycle.

A small percentage of NFTs retain the vast majority of value. Looking to OnlyFans or Medium as an example, the top 10% of creators will account for 90% of the value.

This places a strong emphasis on community, as NFTs retain and increase their value by creating a diverse network of curators that share in that collection. This is the primary reason why CryptoPunks have performed so well. As the “first NFT”, the CryptoPunk community has ascribed value to specific traits and rarities, so much so that we’re now seeing derivatives like $PUNKS and social personas emerge around it.

Value is directly correlated to the strength of its underlying community.

Community is motivated by intrinsic values like social status and extrinsic values like future upside. It’s a curator’s job to create an ecosystem for both of these motivations to live in harmony.

Communities like Friends With Benefits will soon hold royalty claims on dozens of NFTs. Royalties will be programmatically captured, creating treasuries with lifetime value, no trust required, and no overhead.

This is why the primary sale of an NFT is not enough to give it long-term value. True value comes from the traction and continued interest around the longevity of specific collections.

Looking at Unisocks, the value of SOCKS spiked 300% in September when Uniswap announced it was giving 1000 UNI to every address holding 1 SOCKS on September 1st. (fun fact: I sold here - RIP)

Since then, SOCKS has seen no new utility, but has increased nearly 150x in price to its current value of ~$100k/pair. While SOCKS are a fungible ERC20 token, the value of the NFTs a user received when redeeming SOCKS is now averaged to be about 12.5 ETH.

As one of the first “collectibles”, SOCKS holders have described holding the token as a “spiritual experience”. Certain holders are even having SOCKS only dinners for fellow diamond hands.

This goes to show that the value of NFTs comes from the shared collectible experience within a community.

And how do you incubate this spirit? By working with curators.

Curators decide which NFTs have value, and which do not.

Curators signal to value and offer services like distribution and strategy to enhance that value.

Without curators - there is no market for NFTs and therefore, no value.

Groups like Flamingo and Gremlins curate and collect together. They share information about which artists and drops are most relevant and collaborate to form markets (and buzz) around them.

Agencies like Six curate NFT strategies, exchanging a percentage of sales in exchange for distribution channels, administrative overhead, and a seal of approval to facilitate successful drops.

We’re now seeing creators bundle premium services to build deeper relationships with their superfans - specifically to empower and incubate their biggest curators.

What’s unique about NFT curators is that their value is often democratized among its community.

Whaleshark democratized ownership of his famous NFT collection through a social token called WHALE.

Operating on the back of a WHALE DAO, all decisions around the governance of his NFTs rest in the hands of WHALE holders.

While the collection has been rather passive since launch, Whaleshark has suggested that the project will move towards more market participation in the near future. This includes taking a portion of profits from NFT sales to conduct WHALE buy-backs.

Looking at Whaleshark as a curator, WHALE is a direct way to participate in the upside of his NFT collection. Because that collection is backed by an avid community sharing in the likeness of the WHALE DAO, it has long-term value.

Plus, operational structures, WHALE salaries and quarterly reports are just some of the icing on the cake that show why Whaleshark has become a leading curator in the NFT stack today.

As Creator DAOs and Sub-DAOs start to pop up around collections like NBA Top Shots or CryptoPunks, so too will the opportunity to participate in those collectives.

Groups like The First Mint are currently working with social token incubator Seed Club to build out a blueprint for their community-first launch.

As a curator, this provides an opportunity to incubate community around new NFTs. Those that control the community control the power. After all, the best way to grow a community is to make them rich.

The best way to invest in the curation layer is by backing the early experiments positioning themselves as curators. Most curators will find ways to offer basket exposure to their underlying collection. Own a part of that basket.

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When valuing a curator, look for the following:

• Which collections do they own a significant portion of?

• Were they early to these collections, or late movers?

• Do they have the ability to influence a new collection, or simply follow on?

• Does the curator have strong leadership?

• Are there plans to democratize access to their collection?

The best curators are those with a strong capacity to influence the next CryptoPunks. Look deeper than a curator touting purchase prices, and instead focus on those crate digging to capture significant market share in an undiscovered collection.

In case you were wondering, here’s why.

The best curators are not traditional venture investment vehicles. They are the individuals, groups and communities organizing around new collections using shared capital to incubate rising talent.

While the focus is currently on NFTs, the next chapter of curation is fungible tokens. Similar to WHALE or FWB, curators will offer democratized access to their collections, and give all participants a way to capture their upside.

Curators will grow their community treasury to feature a diverse pool of NFTs, ETH to invest, social token partnerships, and curation tokens from marketplace rewards. In theory, curation treasuries could be the most diverse in all of crypto.

If you’re looking to deploy capital into NFTs, look no further than the curators.

The hardest part is going to be getting accepted.

Special thanks Variant for inspiring this post and to Whaleshark, John Palmer, Alex Zhang and Carlos Gomes for their feedback.

The owner of this NFT will receive:

• A first look at all my future Mirror pieces before they go live.

• A one hour working session to dive deeper into this thesis, and explore the rising players, trends and projects worth keeping an eye on.

• 60 FWB Pro - good for access to Friends With Benefits Season Two.

The link below shows where the $VALUE NFT lives on Zora.

Please only bid in WETH as to ensure backers can redeem their $VALUE!

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