Soogand Alavi, the assistant professor of marketing who provided the prototype. He recently penned a paper in the International Journal of Research in Marketing, where he analyzed how provenance affects NFT trades. Her research reveals an intriguing connection between the NFT marketplace and other collectibles from across history. This relationship is a bit like the things featured on “Antiques Roadshow.” As Alavi and co.’s work demonstrates, an NFT’s provenance and ownership deeply affect its value. This is the same effect that determines the value of a physical antique.
Alavi’s academic focus is researching NFTs in different markets, such as gaming and art. Her research explores the motivations behind why people buy and collect these digital assets. One such focus has been researching how provenance impacts NFT sales. Our new detailed analysis shows just how much the history of the ownership can boost or detract from an NFT’s value.
As an extension of her research, Alavi played and examined Gods Unchained, a widely popular blockchain game that allows users to buy/sell/trade NFT gaming cards. Gods Unchained currently has hundreds of thousands of players buying and selling game cards. Alavi explored the speculative trading activity of NFT gaming cards. In the course of this study, he discovered some key insights into the value drivers of the NFT market.
Alavi's paper, titled "On the Role of Provenance in NFT Trades," highlights the importance of an item's history in determining its worth. She contrasts this with the world of physical collectibles. People are often willing to pay a premium for products that come with an exclusive provenance. It’s like saying a baseball bat once owned by Babe Ruth would sell at a markup. Its link to the storied player makes it extraordinarily valuable. The former owner’s prestige rubs off on the buyer, fueling the collectible’s desirability.
This is significant because if a collector can prove the provenance of a collectible, its worth skyrockets to collectors. According to Alavi, this principle extends to NFTs. Knowing the origins and previous owners of an NFT greatly increases its value. This sudden increase in desirability can increase its market value by millions of dollars.
As Alavi explains, even a bat that Babe Ruth gave to someone is worth so much more if its provenance—that history of ownership—is recorded and explained. One that can prove its origins—or at least its association with an artist who has made waves—has more value. Conversely, an otherwise exact same NFT with no provenance might be worth significantly less.
