Understanding Manufactured Scarcity through the Lens of Magic: The Gathering & NFTs
Blockchain and web3 technologies often dominate discussions in the crypto world, but there is another realm where manufactured scarcity and collectibles reign supreme—the trading card game (TCG) Magic: The Gathering (MTG). Magic provides valuable insights into the concept of scarcity, which can be applied to non-fungible tokens (NFTs) as well.
Wizards of the Coast, the creators of Magic, have yet to delve into the world of NFTs. However, the game itself serves as a prime example of manufactured scarcity and physical collectibles. Similar to the luxury goods market, Magic cards have long-standing markets for buying, selling, and collecting. The recent discovery of the most expensive Magic card ever further demonstrates the allure of scarce items.
A notable event in the Magic world was the creation of a special edition card featuring the one ring from J.R.R. Tolkien’s The Lord of the Rings, coinciding with the release of their themed Magic set. This one-of-a-kind card was distributed in a single pack of Magic cards, reminiscent of Willy Wonka’s golden ticket from Roald Dahl’s book. However, instead of a magical chocolate factory, the finder of the one ring card becomes the owner of the most scarce Magic card in existence.
The anticipation and speculation surrounding the one ring card before its discovery highlight the demand for manufactured scarcity. Similarly, NFTs have been subject to criticism for being overpriced JPGs or art pieces. However, just as people actively trade and play with Magic cards, NFTs have the potential to become a respected asset class.
Currently, NFTs hold a somewhat blurry position among collectors. Unlike trading cards, which are actively traded and played with, NFTs are primarily seen as collectible art pieces or investments. NFT buyers value these digital assets subjectively, with the intent to profit from them. However, there is potential for NFTs to serve dual purposes in the future—some holders may retain them purely for investment, while others utilize them for their utility.
Although there are already examples of NFTs being used for membership and in web3 games, such as RealVision and NFL Rivals, respectively, these instances are still exceptions rather than the norm. Currently, most NFT usage revolves around speculation. The record-breaking sale of Beeple’s NFT artwork for $69.3 million caught attention during a crypto bull market, where significant funds were thrown into the ring. However, this behavior does not represent most ultra-high net-worth individuals seeking long-term investments.
For NFTs to establish themselves as a mature market, the art aspect must develop alongside genuine collectibles endorsed by well-established brands. Established brands possess the ability to manufacture scarcity due to their significant brand equity among customers. The transition from physical to digital collectibles, perceived as legitimate collectibles, will likely take time. The generational shift, particularly among Zoomers/Generation Z and Generation Alpha, who grew up with web3 and digital assets, is where this change will be most evident.
While NFTs may seem incredibly expensive compared to traditional trading cards, the prices are driven by a cohort of speculators and early crypto/NFT adopters. Most individuals outside of these asset classes are more risk-averse. Therefore, the shift from physical to digital collectibles may take years or even decades to materialize fully. Thus, the one ring card, with its physical presence, is likely to retain its value over time.
In conclusion, Magic: The Gathering provides valuable lessons in understanding manufactured scarcity and collectibles. NFTs can learn from the longevity and popularity of trading cards like Magic, eventually establishing themselves as a respected asset class. The transition from art-centric NFTs to genuine collectible NFTs will require time and a generational shift towards accepting digital assets. Until then, physical collectibles like the one ring card will continue to hold their value in the eyes of traditional collectors.