On the role of provenance in NFT trades

Abstract

This study explores the role of provenance in bidding behavior in a blockchain marketplace for NFTs. We analyze how the information inferred from the ownership chain of NFTs affects valuation. The products we study are a hybrid of consumption goods and collectibles, and so provenance is expected to manifest in both use value (how the item is used) and collectible value (how the item can resell) inferred from the ownership chain. We conduct our empirical analysis using a trading dataset of an online card game on OpenSea, a blockchain marketplace for NFTs. We find that provenance of NFTs passes through past owners, dating back to the first owner, largely as collectible value in our context.