Even in the metaverse, not all identities are equal

Author: Misyrlena Egkolfopoulou, Akayla Gardner, Bloomberg

Compiled by: Yangz, Babite

The complexity of the real world is beginning to seep into the virtual stage of the Metaverse, where identity is both a reflection of social capital and a determinant of social capital.

The price differences of digital avatars based on race, gender, and skin color are reflected in the popular NFTs collection known as CryptoPunks, which contradicts the utopian and egalitarian ideals touted by the world closely associated with cryptocurrency, decentralized finance, blockchain, and non-fungible tokens.

According to participants and observers in the field, part of the reason for these price differences is the lack of diversity among investors who favor these status assets. This is a demographic predominantly composed of men and white individuals. Female Punks and those with darker skin tones tend to sell for less than avatars with male characteristics or lighter skin.

CryptoPunk investors say that this price difference is not due to personal bias or racism, but rather the fact that those currently willing and able to pay the highest prices for digital goods are not bidding on avatars that do not look like them.

"If you look at the blockchain space, (then you will find) it basically skews towards white and male," said Tony Herrera, a California immigrant activist who owns 60 CryptoPunks. "If one punk is dark and another is light, the light one will be more popular."

Tony Herrera

To understand the role of identity in the virtual world, one can refer to the case of Richerd Chan. The engineer and entrepreneur from Vancouver, Canada, wanted to solidify his reputation as a cryptocurrency pioneer, so he purchased a digital avatar.

Reportedly, (below) this JPEG file cost over $80,000, which in cryptocurrency terms is 45 ETH, making it Richerd Chan's largest expenditure ever. Chan spent two weeks searching for a network character that perfectly represented him. On March 31, he clicked the purchase button for this pixelated image, which depicts a medium-skinned male avatar wearing 3D glasses and smoking.

37-year-old Chan said, "This is a very natural form of self-expression. The 3D glasses make it stand out, and although I don't smoke in real life, it makes it very avant-garde." As an Asian, Chan said he appreciates the slightly darker skin tone of the image. "I identify with it."

(It's worth noting) Chan is not joking. In October, he turned down an offer of $9.5 million from another online enthusiast for this avatar. Chan said it was a strange proposal, but his digital identity is not for sale.

Reportedly, Chan has spent 143 ETH (now worth over $600,000) this year alone to purchase four pixelated avatars. All of these avatars are from CryptoPunks. For him, owning a CryptoPunk represents the "OG" title in the crypto space or indicates that you have the ability to pay a high price to join an increasingly exclusive club.

In this digital world, the value of the social capital encoded in your pixels is a function of different types of attributes. At the most expensive NFT avatar tier, prices vary based on elements such as accessories, hairstyles, and clothing, as well as skin color. In other words, not all Punks are equal.

Investors say that uniqueness and scarcity are key drivers of the prices of CryptoPunks and similar NFTs in the free market for digital goods. For example, among the existing 10,000 CryptoPunks, only 9 are "alien" characters. Recently, Sotheby's auctioned one of these aliens for nearly $12 million. Additionally, the 24 apes and 88 zombies in the collection also command higher prices than more typical Punks due to their relative rarity.

By gender, there are 6,039 male Punks and 3,840 female Punks, with fewer female Punks in circulation. According to DeGenData, since August, a total of 2,124 male CryptoPunks have been sold, with a median lowest sale price of 99 ETH. During the same period, 1,165 female CryptoPunks were sold, with a median lowest sale price of 95 ETH.

Moreover, data shows that since the explosive entry of NFTs into the mainstream in August, the average weekly lowest sale prices of medium-skinned and dark-skinned CryptoPunks have consistently been lower than those of light-skinned Punks. And compared to male Punks, female Punks have also seen lower prices.

Since August, the weekly average lowest sale prices of dark-skinned male CryptoPunks have lagged behind those of their lighter-skinned counterparts.

Male Punks price statistics, data source: DeGenData

The data is based on the lowest prices and does not adjust for any characteristics that might drive additional value.

The pricing of Meebits also shows a similar trend (Meebits are similar avatar NFTs akin to 3D Lego figures). According to Meebits listings, most low-priced characters sold on the digital asset market OpenSea are designed to resemble Black individuals. In May of this year, Herrera expressed his dissatisfaction on Twitter about the lowest-priced Meebits all being dark-skinned. He called on his followers to collectively purchase more Black NFTs to raise their prices. Herrera said he no longer believes there is any racial bias in price changes; this trend simply reflects the quantity of purchases.

"You can buy anything you want as long as you have the budget for it," Herrera said. "People of color will become limited editions."

Reportedly, Herrera once owned over 100 CryptoPunks. He started purchasing them when these NFTs were less than $10. In 2017, when CryptoPunks were first created, savvy crypto fans could acquire them for free. This January, some Punks were purchased for what is now considered reasonable prices, in the thousands of dollars.

Now, entering this corner of the cryptocurrency world requires thousands of dollars, and in some cases even millions. Amid a wave of interest from companies including Visa and Christie's, the prices of CryptoPunks have skyrocketed. As of December 1, CryptoPunks owners have listed NFTs for sale ranging from nearly $400,000 to $24 billion. The highest recorded sale value exceeds $7 million.

John Watkinson, co-founder of Larva Labs, the company behind CryptoPunks, said he hopes to create a diverse character series to attract a broad range of collectors. "We are frustrated by the pricing disparities in CryptoPunks in terms of race and gender," Watkinson said. "Unfortunately, because the market is purely decentralized, we have no leverage to directly influence it."

Natalia Karayaneva, founder of real estate company Propy Inc., purchased a female CryptoPunk with a mohawk in March at the recommendation of her fiancé. Karayaneva recently sold this Punk for about $150,000, three times her purchase price.

Karayaneva said, "In the cryptocurrency community, there aren't that many women in senior positions who can afford (such high-priced CryptoPunks)," noting that female CryptoPunks often trade below male CryptoPunks.

Gender Dynamics

In recent months, the prices of female CryptoPunks have been discounted compared to male CryptoPunks.

In addition to rarity, there are certain attributes that push Punks to the top of the price list. Hoodies, 3D glasses, VR goggles, headbands, top hats, and beanies are all attributes that investors are willing to pay high prices for. Generally, most Punks have two to three attributes, and typically the more attributes a character has, the higher the price. Among the fixed collection of 10,000, only one CryptoPunk has seven attributes, including a cigarette, earrings, a mole, buck teeth, classic sunglasses, a top hat, and a beard. It is widely regarded as the most valuable CryptoPunk.

The abundance of available attributes means that investors can creatively use their Metaverse characters, including adopting traits that are completely different from their "real" identities.

According to NFT investor Nick Kneuper, the high price point of each CryptoPunk means that most buyers must make choices and tend to select one that they believe best represents their avatar, while he himself regrets selling his three CryptoPunks in August. More importantly, Kneuper said that even those who can afford multiple Punks may be reluctant to choose an avatar that does not reflect their racial identity.

"Some people might worry that if they are white but use a Black Punk as their avatar, they could be accused of digital blackface," Kneuper said.

Since August, the weekly average lowest sale prices of dark-skinned female CryptoPunks have consistently lagged behind those of their lighter-skinned counterparts.

Female Punks price statistics

Long-term crypto bull and billionaire Mike Novogratz tweeted that he is "troubled" by the reality of racial bias entering the Metaverse, thus he engaged in this particular controversy. On November 9, Novogratz tweeted, sparking a series of responses about what is and isn't allowed in the Metaverse.

Reportedly, this tweet was posted a few days after Novogratz's cryptocurrency company Galaxy Digital Holdings Ltd. purchased Punk 8466, a dark-skinned male Punk wearing a mask, headband, and beard. According to Larva Labs, this Punk was sold for 98.50 ETH ($421,543) on October 30. A spokesperson for Galaxy Digital declined to comment on the company's decision to purchase a dark-skinned Punk.

Black NFT investors are participating in the conversation through their purchases. Web Smith, founder of media company 2PM Inc., stated, "As more and more Black investors enter this space, I think this is happening, and these dynamics will change." "What you will see is that many high-net-worth individuals representing a broader diversity in America will enter this market, and six months from now, we won't be having this conversation anymore."

Ameer Suhayb Carter

One of these individuals is Ameer Suhayb Carter, a user experience designer, who founded a predominantly Black community called Crypto Cookout. This club, with 450 members, has collaboratively purchased two CryptoPunks through a purchasing model known as fractional ownership, where each Crypto Cookout member is a partial owner of these two Punks.

"We're not really trying to create this imbalanced market," Carter said. "It's just that we've seen that things that are Black or identified as Black can be cool or not cool, (we need to act) until it becomes cool."