The latest crypto hype is NFTs. That’s not to say that NFTs are new or revolutionizing, just that it is the scam that has been going around lately and is now on the way out for the next scam, Web 3. In this post, I’ll explain what NFTs are and what they are not, how they are being used and why (or why not!) they are about to revolutionize everything. I’ll be referring to some NFTs but I will not be linking to them as NFTs should be topics of ridicule, not of promotion. I’ve already written about NFTs before, but here I’ll look at it in some more details and consider some places where NFTs or NFT-like constructs really do make sense. Also, where cryptobros completely miss the target while trying to promote their latest scam.
NFTs are touted as digital art. An NFT can be a digital picture, a digital video, or a piece of digital music that can be bought and sold as physical paintings, movies, or sheet music/albums, thereby empowering digital artists to monetize their craft. This is almost 100% false. NFTs could be that but that is not how they are implemented.
NFTs at their core are just digital tokens that can owned and for which ownership can be transferred. Importantly, it is not possible to make multiple copies of an NFT: when a token is transferred from one person to another, the first person no longer has a copy of the token and cannot sell it again to somebody else. This idea is absolutely not new. Money in your bank account or tickets bought at Ticketmaster behave the same way: you can transfer money between accounts, including accounts held by other people, but doing so will not duplicate your money. Similarly, a ticket to see Olivia Rodrigo in Amsterdam in June 2022 can reside in your Ticketmaster or be sold to another fan, but only one of you can go to the show. Or I can wear a hat in Team Fortress or sell it to somebody else, but only one of us can wear it at a time (unless we have two different hats that look the same).
These tokens are “non fungible” in the sense that it is not possible to substitute one token for another. If I have €10 in my wallet or bank account, spend it, and then get another €10 from a friend, I have the same amount of money as I did before. Money is fungible: any €10 is as good as any other. Some things are not fungible, though. A ticket to see Olivia Rodrigo in Amsterdam in June 2022 is not the same as a ticket to see her in Paris the day before, or a ticket to see Rammstein in Aarhus on the same day as Olivia Rodrigo plays in Amsterdam. Nor are two tickets to the concert in Amsterdam necessarily the same: they can be in different tiers or have different numbered seats.
NFSs is the idea that such “ownership” and “transferability” of “something” which is “non-fungible” can exist on the blockchain. A ticket to see Rammstein in Aarhus is already non-fungible but it is controlled entirely by Ticketmaster, which can make it difficult to transfer it to somebody else in case a concert with an up-and-coming star were to play on the same day 700 km away. From a certain perspective, it can make sense that such ownership exists outside of Ticketmaster and that transfer can happen in a secure manner without being at the mercy of Ticketmaster. There are also many reasons you would not want that, but let’s ignore that for now.
NFT is short for such non-fungible tokens, and that is all they are: tokens that represent something. I first heard about such tokens in a dystopian tale about how in the future everything would be Ayn Rand cranked to 11 and controlled by bitcoin somehow:
…all houses are managed by simply tracking ownership of a single, specific satoshi assigned to each property. This satoshi acts as a colored coin, much like a title search in 2014. In effect, if the satoshi is handed to another person, the new person is assigned legal ownership of the property.Shitty powerfantasy about a future where Bitcoin has not been eradicated
Here the single satoshi (it’s like cents for euros/dollars but dumber and for bitcoin) acts as a token representing ownership of a house.
In 2017 this idea was fleshed out and implemented in the first big beanie baby boom on the blockchain in the form of CryptoKitties, which hilariously caused one of the blockchains to be unusable for a long time because blockchain is not a technology, but instead a badly conceived proof-of-concept scammers pretend is the future. CryptoKitties are collectible cards but on the blockchain. You cannot actually do anything with them except trade them. Ownership of a particular crypto cat is tracked on the blockchain and that’s the extent of this new revolutionary idea.
In late 2020 and early 2021 the most common crypto scam, initial coin offerings or ICOs, were starting to peter out. All the money that could be made selling worthless new bitcoins to clueless VCs, grifters, or clueless poor people hoping to become part of the new elite had been made, and crypto needed to rebrand to continue the scam. NFTs were the answer. Many of the popular NFTs are just CryptoKitties again, but now in the shape of monkeys or pixelated avatars, all generated algorithmically. Like with ICOs, there were hundreds or thousands of such schemes, each more ugly than the other, and cryptobros could now pretend to be art connoisseurs. While I can follow an argument for viewing all NFTs as a sort of commentary on the art world and/or collectibles and therefore performance art, each individual series is derivative as all hell, and individual crypto monkeys are definitely not art. Uniqueness or some notion of rarity does not mean art or valuable. For a comment on how uniqueness is meaningless, I refer to my own Drunk Monkey Consulting example, which is a modernized version of the library of Babel: each monkey or book is technically unique, but no more than a random shuffle of a deck of playing cards is.
Crypto monkeys are best compared to collectible cards like baseball cards or Magic cards. To a Magic player a Black Lotus may be special, but to a real person it is just another Magic card. Even so, both baseball cards and Magic cards can command silly high prices, though I believe baseball cards have gone out of fashion because the flooded the market. Magic cards also have the thing going for them that you can actually play a game with them, and some of the rarer cards are stronger than regular cards. Of course, people just playing for fun can just mark a regular card (or make their own) and pretend it is a Black Lotus for the game, but that does not work in tournaments because of monopoly. Crypto monkeys and the other NFT scams are more like baseball cards in that they cannot really be used for anything but without the even the emotional connection to a ball-thrower you may admire.
Another application of NFTs is to represent digital art. For example, John Cleese from the Monty Pythons did a shitty drawing and put it on OpenSea, the very centralized platform for doing “decentralized” scams with NFTs. Initially I thought it was actually art: Cleese making fun of a new scam by making a wildly overpriced shitty drawing only to then not sell it. It turns out it was not: he was cashing in on the scam and enriched himself by cashing in on the meme. That’s when I lost all respect for him. Some months later, Terry Gilliam did the same albeit with some art that people might actually want to own. That’s when I wrote off Monty Python forever and it also retroactively ruined a lot of their output for me.
While grifters like Cleese and Gilliam can profit off of NFTs, there is also a small opening for less known artists to sell a piece they have genuinely spent time on. And there are genuinely up-and-coming artists, including talented ones, that have made NFTs of very cool pieces of digital art. Except NTFs don’t really work like advertised. NFTs do not solve any of the problems they claim to. Owning an NFT does not give you anything other than “ownership” in a very abstract sense. What down ownership mean here? Copyright? Only the owner can look at the piece? Reproduction rights? No, none of that. Because they are all very difficult problems to solve. An NFT is just a token and actually enforcing any of those very meaningful notions of ownership is very, very difficult, so NFTs just don’t do that. Often, artists explicitly retain the copyright to their art when selling an NFT, and then what is the point? Anybody can copy the picture because it is digital. Without any rights connected to an NFT, can an NFT holder do things like exhibit a piece that a non-owner cannot? It’s all very unclear by design!
The problem of what ownership of an NFT means is not an insurmountable one. NFTs could be minted with provisions that ownership of the NFT is the same as ownership of copyright or a license to use the piece in some way, which may or may not require legal changes. But ownership of a NFT of a crypto monkey or a bad drawing (or a good one!) cannot prevent anybody else from copying it. In fact, the most funny joke (I invented it, if you want to buy an NFT of the joke contact me) is to threaten owners of NFTs with right clicking on their art (or, more likely, “art”) and selecting “save as,” thereby making a copy. This to the point that the mortal enemies of NFT-grifters are called right-clickers. Of course, if an NFT truly represented copyright, an owner could pursue such copyright infringement using the legal system, but then the added value of the NFT becomes very, very small: it’s literally just a transfer of copyright or sale of a license. And stock photo sites already do that.
Of course, copyright problems are even more rampant in the NFT world. Since everybody can make NFTs, it is entirely possible to make an NFT from somebody else’s art or just plain clone somebody else’s NFT. Both are happening on a large scale. This can technically be solved (have the creator sign their pieces using a digital signature), but not in a manner that will actually work for the average user (case in point, encrypted and signed email has existed since the 90s but is used by absolutely nobody because it is cumbersome to do so). And doing it with blockchain has the added disadvantage that everybody can make an account calling themselves Pablo Picasso, and it would be very hard to tell it from the account of the real Picasso. And even stronger, this would not really apply to the small up-and-coming artist the technology claims to be for as it would be easier to forge their signature as it would be recognized by fewer people. Amusingly, singe decentralization is a lie in the crypto world, it is entirely possible to make a DMCA request for NFTs of art you own to the very centralized platforms used for making them (or, even better, just to Google or Amazon which are typically used to host the actual arts), entirely validating the point of the NFT not being an entry in a central database.
NFTs are in a clear bubble where scammers buy and sell crypto monkeys to each other or even themselves, not to own the “”””””art”””””” but in anticipation of selling it later for a profit. There is notthin inherently wrong in that, except it is just a ponzi scheme with a bit of sugar coating. Similar schemes have existed with Beanie Babies, old coins, Magic cards and evidence suggests the same is happening to old computer games. That does not preclude them from having some value; Beanie Babies are ugly cheaply made dolls that kids can play with, I used to collect coins as a kid, I have several friends that enjoy playing (and some also collecting) Magic cards, and old computer games can still be fun and have nostalgia for people my age. That’s all cool and good, but kids these days have iPads with TikTok and Roblox on it so why bother with gritty old dolls, I have a shiny AmEx card now, so why bother with coins, Magic cards can be played online now so you no longer have to smell your opponent or collect Black Lotuses, and I can get most classic games on Steam/GoG without any old-fashioned scarcity. In fact, most of the old collectibles are better now that scarcity is gone and they are definitely not worth the inflated values they had during their respective bubbles except as a token to sell on.
Cryptobros will always tell each other (and others unluckily enough to get within shouting range) how they “are early” whenever it is pointed out that their shitty “tech” sucks, unaware that “early” means “at the hight of the bubble” and that once we are no longer early, most (if not all) of the existing NFTs become worthless: first movers will not be the owners of the long-term valuable assets. If blockchain in some form still exists in 10 years (and I am absolutely not convinced it will), it will not look anything like blockchain of today. And the bitcoins that are valuable today will be dead then. The early internet used telnet, ftp, and uucp mail, whereas today we use scp, websites, and email (or any of a million messaging networks). None of the early internet is left. Or, to put it in more recent terms: nobody uses early internet forums/chat rooms/IRC/news groups today, nor does anybody use Myspace, Tumblr, Foursquare or Geocities today. Today, people use Facebook, Twitter, or Tiktok. And companies that have been around for a while like Microsoft, Amazon, Google or Apple today do wildly different things than they used to do (Amazon used to be an online bookshop but is not an enterprise computing giant with a small retain branch tacked on, Microsoft used to do operating systems and programming languages but now do enterprise computing and online document editors, Google used to do search but now do a combination of ads and other evil, and Apple has pivoted from computers to mobile devices). Bitcoin will not be the currency of the future even if (and that’s a big if) blockchain survives in some form, and an NFT bought today will be worthless tomorrow unless it really represents something of actual value like actual ownership of art from an artist that becomes famous or entry into something with real-world value. It is so easy to launch a new bitcoin or NFT platform and there’s no reason the US or EU would not launch their own digital currency without all of the connections to crime of bitcoin.
Art (like Big Mac sauce) is brilliant for money laundering because it is priceless so it is hard or impossible to judge a fair price. That makes it possible to sell a water color done by a monkey together with a bucket of heroin for $200.000 and make the deal seem legit: to the outside world we could just not mention the heroin and pretend the money was for the painting alone, making the earnings seem legit. NFTs can be used the exact same way, and due to anonymity, it is even possible to be even more inventive: if I have $200.000 in bitcoin, I can make an NFT of a picture of my ass, sell it to myself (via one or more anonymous accounts) for $200.000. Then I would have $200.000 in bitcoin and an NFT (on paper) worth $200.000: I just doubled my money! I can now sell the NFT, having made value out of nothing. This is also very often happening in the NFT space. Money laundering and selling briefcases of paper with a few bank notes on top are not new problems caused by NFT or blockchain (proving again they cannot actually invent new things), just more problems that NFTs do not solve but instead try to just sort-of ignore.
One place I can see NFTs have genuine value is in things like concert tickets. Concert tickets have several big problems, some of which could genuinely be solved by NFTs. One such problem is the resale problem: it is hard to do resale of tickets in a way that ensures both buyer and seller that the other party is not a scammer. A buyer can pay using fake money (or, since it’s no longer the 1980s, a stolen credit card) and get the ticket for free. Conversely, a seller can just not transfer a ticket after sale or sell it to multiple buyers, leaving the buyer out the money but without a valid ticket. This is presently solved by disallowing third party resales and only allowing resales via the issuer, who can validate the ticket, invalidate the old one, and issue a new one on sale. This sort-of works, but makes a monopoly for resale (and the amount they can charge) and allows the issuer to impose restrictions (e.g., making it impossible to sell a ticket for more than you paid for it). Since the issuer will be Ticketmaster in almost all cases as they have a near-monopoly on tickets for events, there are genuine reasons for changing that, and NFTs could genuinely solve the resale problem. Event tickets are also different from digital art as they have a clear actual value: entry to the event on a given time. That is not to say that NFTs are the only solution to the problem (forcing Ticketmaster to allow third party escrow/resale companies to reissue tickets would also work). It is also not to say that NFTs solves all problems of event tickets; one of the big ones being that artists genuinely want fans to be able to attend at a reasonable price and not at a price that the market can bear. Taylor Swift also wants the 14 year old girl to be able to be in front of the stage even though I would be able and willing to pay 5 times as much as her for the ticket. That is a genuinely good thing and makes ticketing difficult: it is very hard to prevent ticket scalpers from buying all the good tickets and reselling them at a premium, and NFTs can definitely not solve that. Artists have recently taken to solving that by giving “proven” fans early access (Taylor Swift basically had social media “quests” giving access to pre-sales, and many artists force purchase of a non-transferable piece of merchandize like a t-shirt or a CD which is fine with actual fans but problematic for scalpers). NFTs would not solve this, and anonymity would likely only make it worse.
I can also see a perspective in using NFTs for limited merchandize for artists. When I pay overprice for a behind-the-scenes tour or meet-and-greet ticket, I often get some sort of cheap tat only given to people who have paid overprice for their tickets. The merchandize is virtually worthless (produced for less than a dollar in China), but is limited edition and therefore in a sense priceless and allows me to think back to the experience. The value is not in the merchandize but in knowing that I am “special” (along with the 1000s of other people paying €1000 for a €100 concert ticket) and providing me with something to remember the experience by. It’s not impossible that an NFT could provide something similar. Backstreet Boys tried (and failed) to get in on that. Little Big also did an unfortunate NFT scam (I’m not sure it has proven to technically be a scam yet). I think I’ll prefer something more tangible like a cheap laminated lanyard sign hanging on my pinboard, but I can understand if younger generations would be happy with something on their phone.
The last space where NFT idiots claim their shit-for-technology has value is in the
lootbox web 3 space. They claim that NFTs will be the drivers for possessions in the metaverse. I literally watched a video on Youtube (no linky because no promoting shit) providing 4 reasons Facebook had no chance in defining the metaverse. The metaverse is just like the Nintendo Virtual Boy or VRML or Second Life in that it is a three dimensional virtual world. The fact that you likely have only heard of one or two of those should signify just how revolutionary and likely to succeed the metaverse is. Cryptobors will tell you that ownership in the metaverse will be defined by NFTs (that was reason 4 Facebook could not define the metavaser: cryptobros had already “invented” NFTs). That way you can own a piece of land or a table or a Team Fortress hat in the metaverse and sell it to others or even take it with you from Facebook’s metaverse to Fortnite. This is the dumbest idea since dried water for so many reasons. First, this is not new. Lootboxes/in-app-purchases already exist and people hate them. Second, game makers have no reason to do this: why sell an NFT for a Team Fortress hat people can use in Facebook’s metaverse instead of forcing them to purchase it again? Third, abundance is really good: it’s nice that a 12 year-old can cosplay as a millionaire with 10 cars in Minecraft without having to pay real money for them or buy a new car when they inevitably crash it into an Ender Dragon. Fourth, while rarity absolutely appeal to some buyers (the type that plays pay-to-win games), it is vastly more profitable to game companies to guard rarity behind extremely high prices or consumable items than behind some random NFT. Fifth, NFTs solve absolutely none of the actual problems of transferring data from Fortnight to Minecraft to Facebook Metaverse.
Like NFTs do not solve the actual complex problem of copyright/limited distribution, they also do not solve the actual problem of transferring a hat from one game to another. This is a genuine problem, and I think an interesting one to solve. There are many reasons it would make sense that I could integrate virtual experiences from different providers. This is perhaps most evident in the modern landscape of social networks: why do I need to curate friends of Facebook, follows on Twitter, mutuals on instagram, contacts on my phone, etc. This is a genuinely complex problem that the very providers that have to implement it has very little incentive to solve: if I could take my Facebook friends with me literally anywhere else, I’d rid myself of the smell of Zuck in an instant: the value of a social network platform is the lock-in achieved by my connections there, so the dominant players have zero reason to change that. On top of that, it is a very complex problem. Which data should be transferred? How should I deal with anonymous alter egos or have different friend circles on different networks I don’t necessarily want to intermix (for example there’s no reason I would want my pals on OnlyFans to know of my less family friendly actions on LinkedIn). Web browsers have existed for 30 years and browser extensions for more than half that time, yet it only recently became standardized how to make browser extensions that can be used in multiple browsers. The exact same problems apply to integration of metaverses. How should my hat NFT be rendered in each game? How should it work to ensure a balanced and meaningful experience? Can I just bring a tank from a Call of Duty game to fight a medieval peasant in Assassin’s Creed? Why can’t a game just allow you to have 1000 copies of an NFT anybody brought into it?
In conclusion, NFTs are not anything. They can represent transfer of some asset, either virtual or real. As they are now, they don’t really do that, because they are mostly used by grifters selling the fantasy of “what if?” There are things that genuinely could be improved by NFTs if they actually worked as promised, but in most cases they look at what may genuinely be a real problem and just say “what if NFTs solved this” instead of solving the complex part, just selling the idea of revolutionizing some small part of the world using magic dust. NFTs do not solve digital art. They do not solve digital goods. They might be able to be part of a solution representing ownership of intabgible but real goods like event tickets, but they do not solve all the problems and the solution may even exacerbate some of the existing problems. All of this is entirely ignoring the most common argument against NFTs, that they are an environmental disaster, expensive and slow. I’m ignoring it, not because it is not important, but because it is such a common argument and I wanted to present arguments showing that NFTs are lacking even if they worked the best cryptobros claim they do and can. I’m also ignoring all the obvious problems of hilarity that is NFTs getting stolen left and right leaving the owners with no recurse but complaining to the very centralized issuer for much the same reasons.
If you want to support independent artists do so directly: go to their exhibitions/shows, buy their art, or support their OnlyFans/Patreon if you’re into that sort of thing. Don’t legitimize a crypto scam and money laundering hoping some of the money will seep thru to the artist. If you’re an artist sell or give your art away, either physically or virtually. The allure of sellig a piece for tens of thousands of dollars/euros can be great, but the ones that do so are extremely rare (that’s why it is reported on) and most sales of that magnitude are just money laundering or wash trading. Selling art is hard and so is avoiding theft, but NFTs do not solve those problems.
Time person of the year 2006, Nobel Peace Prize winner 2012.