Warning: This article should not be considered as financial advice. Anyone seeking to invest should seek the guidance of a professional advisor.
There has been an increase in the talk of Crypto stamps and Non-Fungible Tokens (NFTs) in the philatelic community over the last year. However, much of the talk is ill-informed and misrepresented, with illogical arguments presented to support personal views.
This two part article is not intended to convince anyone that they must start collecting Crypto stamps. Its purpose is to provide an informed and balanced view on this new and emerging trend, explain the different types currently available, and describe why they are now a branch of philately.
For the rest of this article, I will refer to Crypto Stamps and NFTs as just NFTs unless there is a reason for distinction.
What are NFTs?
Before I begin, here are the basic definitions you will need to understand for the purposes of this article.
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- A Non-Fungible Tokens (NFT) is a digital image.
- A Crypto Stamp is an NFT of a stamp.
- A Blockchain is an online accounts ledger that records every single transaction of ownership (buying and selling) and movement – similar to an online bank account statement. Ethereum is the most popular blockchain.
- Cryptocurrency is virtual currency. Cryptocurrency is traded the same way as one would trade on the stock market and purchase shares in a company. There are many different types of Cryptocurrency but the most popular is Bitcoin. Some cryptocurrency, like Bitcoin, has a definite amount in circulation. Others have indefinite amounts.
Some have claimed that Blockchains are less secure than banks. This is not true and both banks and Blockchains have security challenges. However, in Dec 2021, Wells Fargo and HSBC announced they will begin using blockchain technology for cross-border payments and it is expected more banks will use the technology.
Stamps vs NFTs
An argument put forth is that NFTs can simply be ‘right-clicked’ and saved. For this to be a reasonable argument, you would need to apply the same rationale to stamps.
So let’s do that – compare the argument at its core.
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- NFTs are just jpegs – that is all. If I wanted to, I could right-click and save to my computer. Why would anyone pay money for them?
- Stamps are a piece of paper with some ink on them – that is all. If I wanted to, I could pick up a ream of paper, insert it in my printer and print thousands of them. Why would anyone pay money for them?
As you see, the argument against NFTs is not logical when applying the same rationale to stamps. Paper and ink alone hold no more value in society than a digital image. The only difference between the two is the medium used to create them.
Whether or not one is tangible or non-tangible is irrelevant as they both can be manufactured by anybody.
Value
The next part of the argument is that of value. For anything to have value, society needs to place a value on the item through a common, accepted world view. The considerations that provide value are usually monetary or importance. When it comes to monetary considerations, supply and demand (basic economic principals) are applied.
The philatelic community places value on philatelic material using a number of factors which generally revolve around age, scarcity or historical importance. NFTs are similar but slightly different.
NFTs are usually released in editions, with a pre-determined number released. Like philatelic material, scarcity within an edition plays a part in the importance but not age or historical importance (although there may be some argument for historical importance emerging such as the first Spiderman NFT).
Some argue that NFTs are ‘manufactured’ scarcity, and therefore different to stamps. But this argument does not hold merit. Stamps have manufactured scarcity too (dead link removed 25/08/2022), often released in certain quantities for certain periods of time, or designed to appeal to the collector market.
Society places importance value on both philatelic material and NFTs but with different aspects. Both share aspects of ‘manufactured’ scarcity – intentional or not.
Monetary considerations
Monetary consideration differs between the two but also shares some similarity.
Investing money into philatelic material could be considered high risk. The value of a collection relies on the future demographics being large enough to support demand and keep supplies low. As the demographic ages, it is not being replaced with the same quantity of collectors. If more collections are disposed of as the population ages, and this population is not replaced one-for-one, it will either create an over-supply of philatelic material or will decrease the demand for it, resulting in losses on the original investment.
NFTs are backed by Cryptocurrency which is also considered high risk. However, the global cryptocurrency market size was valued at $1.49 billion in 2020, and was projected to reach $4.94 billion by 2030 (Allied Market Research, July 2021). By 2021 it reached USD$3 trillion (Time, Nov 2021). Unlike philatelic material, the demand for Cryptocurrency and NFTs are increasing in popularity.
Both philatelic material and NFTs have their value based on monetary considerations and both are just as risky as the other. Whether you invest money in philatelic material or NFTs, there is a risk you will lose your original investment. However, the market outlook for philatelic material is less healthy than it is currently is for NFTs.
Tulipmania
The increase in demand for NFTs is often compared to Tulipmainia. However, this is a poor comparison for a number of reasons.
Tulipmania never impacted the world economy – it didn’t even impact the national Dutch economy. Buyers never handed over cash so were never at risk, and as tulip stocks were never realised, the only losses were suffered by those merchants attempting to create a product or the wealthy who invested in those merchants. The extent of Tulipmania was exaggerated by an author in the early 19th Century and its effects had little real impact. (Tulipmania: Money, Honor, and Knowledge in the Dutch Golden Age – Anne Goldgar 2007).
Cryptocurrency is a global market. It is traded on platforms and has a common valuation based on shared transactional history – the same as a share market.
A more specialised collectible that it can be compared to is Lego. The price of Lego is commonly valued by Bricklink – an online platform that records all the transactions relating to sets and pieces across its network. Buyers and sellers can select any piece or set and see the sales history to determine the current daily market valuation, and how the valuation was applied (used, brand new etc).
Philately is a more localised market based on perception. Prices for philatelic material is set by the individual collector, dealer or auction house and are based on perceptions of value. There is no common platform that provides valuations based on previous sales history. It can be argued that some material can be valued off previous sales but this generally doesn’t extend to the vast amount of common material. While there are catalogues like Stanley Gibbons that provides valuations, these are not based on actual sales but rather a perceived retail value.
However, some will argue that stamp collecting has an extensive life. This holds merit. NFTs, in the history of things, have had a relatively small life compared to stamp collecting. Philately has gone through its boom and bust period (1970s-80s), existed for over 100 years. and continues to be a staple collectible.
The future of NFTS is not guaranteed with some speculators suggesting a bubble. However, collectors are now purchasing USD$2 billion a month of NFTs. If NFTs were to lose popularity, a global bust would also need to be supported by a bust in cryptocurrency. Cryptocurrency has continually grown in value for nearly a decade and has showed no signs of slowing.
If anything, philately has the closest comparisons to Tulipmainia – not NFTs. They are two different beasts although stamps have endured a longer life-cycle than NFTs.
Part 2 – Philately and Non-Fungible Tokens (NFTs)
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Philately must preserve its purity, otherwise everybody can “make” fakes and multiply them indefinitely. By preserving its status , a genuine stamp will keep its value which will grow in time. Now everything is speculation to the benefit of swindlers. No . Not good.
At the beginning of your article you state “Stamps are a piece of paper with some ink on them – that is all. If I wanted to, I could pick up a ream of paper, insert it in my printer and print thousands of them. Why would anyone pay money for them?”
This is a simplistic and misleading statement. I collect stamps where there are different paper types, different gums, Watermarks, Phosphor bands, phosphor coatings and different perforations. None of these can be easily created by someone at home with a printer and are often very much a part of why a stamp has a certain value. To compare an actual postage stamp to a digital jpeg is to compare apples to grapes.
The statement is not misleading – you’re just missing the point.
A stamp IS just paper/ink. It is only your world view that places a value on it (based on any variation you consider to hold value). Paper and ink alone has no intrinsic value. This is no different to NFTs where a group has placed a value on it but alone holds no intrinsic value.