Based on a Medium Piece first published **here. **

Anyone who “dipped her toe” in the NFT “waters” worries about a “Tulip” market. Well, what’s so bad about Tulips? They are beautiful. They smell nice. Some are more common, and some are rare. They are not cheap, but their market price, like other fairly pricey commodities, e.g., Saffron, balances supply and demand with measurable, almost scientific tangible attributes. I am being coy. When we say “Tulip” we mean a bubble. Like the one that happened in the Netherlands around 1630. But here we are today, with a fairly stable market of Tulips. So, what happened? Well, one of the things that happened is that in 1630 Tulips were still very new. Tulips arrived in Europe in the late 16th century. The diffusion of innovation was very slow then. Such a young market suffers from limited supply and is easily manipulated by a few influential “movers and shakers”. It has little to no benchmarks or measurement tools, no reliable attributes, and no clear future. That is the “Tulip climate” everyone is so afraid of. The NFT “climate” has a lot of these hallmarks. It is still young, and it is nested in the crypto market that is by itself also still young.

Unlike the FT crypto market, where PoX mechanisms and strategies are applied to balance supply and demand, foster value stability/curb volatility and hyperinflation (sometimes with limited success because of the other characteristics I listed), the NFT market lacks that type of Defi infrastructure, especially a mechanism that defines the underlying value (performance/quality). Two tulips may look similar. However, an expert botanist may see that one is a very rare specimen, while the other is common. Getting the seeds for that rare specimen requires training, time, and effort. Growing it requires a unique environment. There are endless variables that affect the end result. Very few people have the expertise, talent, or skill to grow such a rare flower. The direct cost of these efforts is high. However what truly drives the value and price is the unique and scarce combination of conditions, training, investment of effort, as well as direct cost. [Think of the Blue stuff made by Heisenberg in Breaking Bad.]