02 January 2022

I honestly don't understand the value of NFTs

From descriptions of non-fungible tokens created and sold since December 2020. An NFT is a digital item with a unique tag that is stored using blockchain technology.

A tweet from the musician Soulja Boy asking, “How do I sell my tweets.” $1,288

A GIF of a kitten in the form of a Pop-Tart flying in a sky of exploding stars. $534,681

Nine plots of virtual land in the video game Axie Infinity. $1,500,000

Eight screenshots taken by a recently unemployed person depicting: a termination letter, an email stating that unemployment benefits were running out, a rent charge for a former apartment, a bill showing $65,000 in student-loan debt, a letter from a debt-collection agency regarding an uninsured visit to the doctor, a credit report showing a score in the low 500s, and a letter stating that this score must improve in order to find a job. $1,777.78

A tweet stating, “This is a $100 tweet.” $100 
Other examples at Harper's in an article appropriately titled "Crock Market."

Addendum:  Reader James offers one explanation -
The scam of NFTs is very similar to that of many of the recent record breaking, high value video game auctions that have occurred in recent years. Essentially, that the people buying these things are generally connected in some way to the seller and are colluding to set / inflate the price to give the appearance of value so that an unconnected third party will buy something that is essentially worthless for it's perceived worth as an investment. This video goes into a lot of detail on the nature of the scam but it's similar to the three card monte scam that Dave Chappelle talked about here.

TLDR: I have a picture that I sell to my friend for $1000, he then sells it to our other friend for $1001, who then sells it to another for $1002, at which point I buy it back for $1003 and around and around it goes until someone from outside of our group sees a picture which seems to be trading regularly and is seemingly increasing in value at a steady rate. They buy my worthless picture from someone in our group for the price of $2000 at which point we split that money between ourselves and start the whole process all over again.

11 comments:

  1. NFTs are also an energy sucking environmental disaster.

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  2. You could extend this to any art piece or historical artifact.

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    1. Exactly. Most privately owned art is stashed where no one can see easily it, even the owner. https://www.nytimes.com/2016/05/29/arts/design/one-of-the-worlds-greatest-art-collections-hides-behind-this-fence.html

      The world economy today is increasingly dominated by the 1%'s search for safe stores for their massive wealth. It explains why so many types of assets are inflated, like digital currencies, NFTs, the art market, real estate, tech start-ups, SPACs, and the stock market (which has been inexplicably rising over the last several years, despite our wobbling democracy and an ongoing pandemic).

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  3. Worth also reading Everest Pipkin's article about NFTs and why they are not only bad for the environment but why NFTs aren't worthwhile even if the environmental impact can be solved https://everestpipkin.medium.com/but-the-environmental-issues-with-cryptoart-1128ef72e6a3

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  4. May I refer you to Brian Eno? Via Boing Boing:

    https://boingboing.net/2022/01/02/brian-eno-on-nfts.html

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  5. The scam of NFTs is very similar to that of many of the recent record breaking, high value video game auctions that have occurred in recent years. Essentially, that the people buying these things are generally connected in some way to the seller and are colluding to set / inflate the price to give the appearance of value so that an unconnected third party will buy something that is essentially worthless for it's perceived worth as an investment. https://www.youtube.com/watch?v=rvLFEh7V18A&ab_channel=KarlJobst goes into a lot of detail on the nature of the scam but it's similar to the three card monte scam that Dave Chappelle talked about here https://youtu.be/GSGzW4MYcXU?t=294

    TLDR I have a picture that I sell to my friend for $1000, he then sells it to our other friend for $1001, who then sells it to another for $1002, at which point I buy it back for $1003 and around and around it goes until someone from outside of our group sees a picture which seems to be trading regularly and is seemingly increasing in value at a steady rate. They buy my worthless picture from someone in our group for the price of $2000 at which point we split that money between ourselves and start the whole process all over again.

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    1. Thank you, James. I've boosted your comments up to the body of the post so more readers will see them.

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  6. I think the current hype around NFTs is completely artificial. For over a year now I've seen them advertised all over the internet and media in general including by the BBC here in the UK for their "crazy" trading prices and I've yet to find anyone that can adequately explain their value or purpose in any real sense outside of some vaguely defined and spurious benefit to artists by purportedly making transactions easier in a way no human being seems able to understand or communicate to others.

    They're talked about as some kind of revolution as if artists have no way of selling their work via the means that have existed and served that purpose forever or just having their own website which school children learn to make these days.

    To me they just seem like the most blatantly fabricated and least sophisticated speculative bubble being used to part people with their money. It almost feels like the people behind it all are saying "How obvious can we make this thing and still profit?" At least with other bubbles in the past you had a physical object to show for your transaction that you could stick in your collection, even if it was a piece of junk stuffed toy or metal disc. It may not have held the value that you paid for it but it still had some small degree of intrinsic value. What do you actually get for your money in the case of buying a tweet?

    But that's where we've arrived in the game of generating get-rich-quick schemes to fleece fools looking for their next moonshot, what would be interesting to find out is how many of these transactions are genuinely being made to suckers buying in to it.

    I genuinely feel that along with cryptocurrency in general, it's an unnecessary, high-minded concept that is rife with corruption and far too open to manipulation even by individuals. Someone like Elon Musk can make billions and produce enough CO2 to give Mars an atmosphere over breakfast by buying Doge coins, tweeting that Doge is the future while he's on the toilet then selling them while he has his coffee. I'm not saying that's what he does, but he could very easily and that's a really big problem.

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  7. Not a fan of NFT or crypto. Both work counter societal goals. Both unregulated. Both filled with investors who "believe". The people making money in these spaces are doing so via manipulation, marketing and vast cadre of the educated poor.

    Brian Costello, former CEO of Twitter, interviewed by Kara Swisher in the SWAY podcast called it "digital scarcity". There is one Mona Lisa. There are millions of Mona Lisa images. So in the digital space there is no scarcity. The scarcity market is in formation and is being manipulated by "market makers". Lots of $ flowing in from the middle east. A notion about NFTs is that the original creator always receives a portion of the sale any time the NFT sells. So, in terms of art (thinking of art historically) this would benefit the creator for a lifetime. That's a plus. On the downside, you will have vast pump and dump type schemes as you have described above. As the NFT field is unregulated and appears that it will be so for some time, it is enticing to the rich who can get in on the ground floor and create the manner in which they will build a marketplace, buy and sell NFT and keep their cash generating income that is off the books. To me, a digital shell game. Unless you are in the market-making group, you bear all of the risk.

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  8. I read recently that when you buy an NFT, all you are getting is a link to the file, and not the file itself?

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