WTF is an NTF? No matter how many times I’ve had it explained to me, it still makes no sense. The best I can figure that it’s a form of cryptocurrency with personalized artwork made on a really environmentally unfriendly material being sold for ridiculous prices just so suckers can get unique furry artz
So if you find a $1 bill with a serial number like “010101010″, a collector might be willing to pay $50 for that bill.
In general, currency is “fungible”, which just means interchangeable. If I loan you a $1 bill today, and you pay me back tomorrow with a different $1 bill, same difference, that’s an equal exchange.
But if you find a person who specifically thinks Bills With Weird Serial Numbers are a neat thing they like having – they’ll pay extra for the weird $1 bill. And they wouldn’t be willing to swap it for some other $1 bill with just any non-remarkable serial number. It is a Non-Fungible Bill.
…to the collector, anyway. Not to anybody else! You can’t take it to the grocery store and say “please give me $50 worth of groceries for this $1 bill because the serial number is interesting.”
(Although, hey…if you had a way to convince lots of people that (a) all of them should turn into collectors and (b) every single random serial number is a special one they should pay extra for…that sure would be a way to make a lot of money, huh?)
Non-Fungible Tokens are the same idea, but with cryptocurrency.
Bitcoins have ID numbers. (Same with any other crypto token – I’ll just use Bitcoin as our example here.) If you can find a collector who likes Bitcoins with weird ID numbers, maybe they’ll pay you 50 Bitcoin for it?
…okay, it turned out nobody cares about Bitcoin ID numbers for their own sake.
But! The ID can be used in a URL.
This is where the art comes in.
You upload an image to that URL. Then you tell people “look, if you buy this token from me, it’s like you’re buying the image! Art collections are fun and interesting, right? Someone give me 50 Bitcoins now.”
Note that the file doesn’t need to be personalized, or unique, or anything like that:
You can upload literally any file at that URL
You can upload someone else’s art
You could upload the same file to 20 different URLs, and sell 20 different NFTs of the same art
You could load the page for a token someone else owns, download the file, and directly re-upload it to the page for a token you own
The whole server could go down, and the URL from your token could be a 404 error for the rest of forever
So if you’re thinking “this sounds like a stupid deal that makes no sense” – you’re right! You are understanding the situation perfectly. This is total stupid nonsense. For the buyer.
For the person who owns some Bitcoins, and would like an easy way to turn them into even more Bitcoins? This is a fantastic racket.
Pay me a ton of tokens – or, preferably, the US$ equivalent of tons of tokens – for this single token I have! It’s totally actually worth that much, I promise.
Also, go ahead and Venmo me $50 for every random $1 bill in my wallet. This is a great deal for you.
And if you believe all that…I’ve got a bridge to sell you.
Sidenote: the “environmentally unfriendly” part isn’t about material, it’s about energy. Producing and exchanging cryptocurrency takes an obscene amount of computing power, which uses an obscene amount of electricity. And it’s not a special thing about NFTs – it’s how all cryptocurrency works.
(A comparison I saw recently is, at the current rate, “people mining Bitcoin” for 1 day uses about the same amount of energy as “powering every commercial building in the United States” for 2 months.)
Sidenote 2: pretty sure the reason so much NFT art is ugly is, most of the Actual Artists have thought about it for 5 seconds and realized it’s a big racket. (Or been warned off it by other Actual Artists.) And the people who want to buy Actual Art are commissioning the artists directly, same as always.
So the people left in the NFT-buying scene are mostly people who…don’t care about the art quality at all. They just want in on the hype.
This is an absolutely amazing explanation! But it leaves me with another question, how does “mining” for cryptocurrency use more energy than normal internet use?
Short answer: because it was designed that way. On purpose.
Long answer: for a currency to have any useful value, the amount and production has to be limited somehow.
(Which makes sense, right? If we tried to pay people in leaves, nobody would go to work for 15 leaves an hour, not when they could go for a hike and pick 15 leaves off the trees in 15 seconds.)
Precious metals – gold, silver, copper – have been popular for all of recorded history, because the limiting factor is “this material is physically difficult to dig out of the ground.”
With US dollars, the limit is part “bills are printed with complicated techniques that you need special equipment to pull off” and part “it’s illegal to for anyone except the government to print new dollars, and we will take you to jail if we catch you at it.”
With cryptocurrency, it’s all digital, so there’s no naturally-rare mineral involved. And it’s decentralized, so nobody has the authority to claim “we are the Bitcoin Police and we can take you to jail if you do this wrong.”
If you want it to work, you have to come up with some artificial limit, and then build that directly into the base code.
I’m not any kind of expert in the technical details here, so please nobody get too picky about it…but the general idea is, the blockchain will only spit out a new coin in response to a computer running calculations.
And for every new coin, it demands more calculations than the last one.
If you could still get a new Bitcoin by, say, “not using the internet for a day, have your computer use that power for mining instead,” then nobody would spend thousands of dollars to exchange for one Bitcoin, right? Anybody who wanted one would just take a day off Tumblr to mine it themselves.
Basically, there’s no reason to buy a Bitcoin for a dramatically higher price than it would cost you to mine a Bitcoin.
And the mining process keeps requiring more power, so:
First you can’t do it with just spare processing power from your main device, you need to buy a new one that’s fully dedicated to mining if you want to keep up
The extra power usage is enough to put a notable spike in your electric bill
One computer won’t do it anymore, you need two
Then four
Then eight
You have a warehouse full of computers
You have the electric bill that it takes to power a warehouse full of computers
Plus the storage rental costs of the warehouse space
The internet bill to keep all your computers in touch with the blockchain
The air-conditioning bill that it takes to keep the warehouse from just flat-out melting
Ongoing maintenance costs
Replacement parts
Not just any parts, you are buying up high-quality graphics cards and computer chips that can do the fastest processing
And the processing requirements just keep going up and up and up….
When the exchange rate for Bitcoin is at $10,000, that implies “the cost of the equipment, maintenance, and power bills to mint 1 Bitcoin is now so high that people would rather pay $10,000 cash than deal with it.”
…okay, this is a little oversimplified – there’s also gambling and speculating involved. Say, you think oil prices are about to go up, maybe you pay a little more than the current rate, figuring the power costs of mining are about to get more expensive and you’ll come out ahead. Or say Elon Musk said something mean about a coin you have, maybe you sell all your tokens for a lower price, figuring it’s better to get out now than wait for it to crash even farther.
But you can see how they’re generally connected. Nobody would pay around $10,000 if the production cost was around $10.
One more link (which explains some of the same things in different words, in case mine aren’t working for everyone):
Another thing you need for your currency to work: it has to be useful for something other than “gambling on the price.”
It can’t just be something you endlessly swap for other currencies and hope the exchange rate works in your favor! There have to be places that say “we will take this in exchange for Tangible Goods And Services.”
Bitcoin has this, at least a little bit. Most places aren’t lining up to accept it, but it’s been around long enough to build up some credibility, so there are a few.
If I started a new cryptocurrency tomorrow where the cost of mining the first token was $10K, nobody would bother. Because it has no credibility, no staying power, no way to ever convert that currency into actual stuff.
To be clear, people are launching new cryptocurrencies all the time.
Most of them aren’t even trying to be useful, they’re just pump-and-dump schemes. Meaning the founders pump up people’s interest with “ScamToken will be the next Bitcoin, don’t miss this amazing opportunity, convert your $$$ into ScamToken now while it’s cheap!” Then they dump all their tokens, selling them to all the people they’ve convinced to buy. It isn’t long before the hype fades, the cold reality of “we can’t do anything with this” sets in, and the buyers are left with wallets full of tokens nobody new will buy, while the founders walk away with the $$$.
But some people are playing a longer game. They don’t want their currency to get “an afternoon’s worth of excitement from hyped-up crypto speculators” and then immediately flop. They want it to be useful for actually buying something, so it has a legitimate basis for getting some actual, stable value in the long run.
Or, failing that…they want it to appear to be useful for buying something. So it looks more credible. So the excitement lasts longer. So you reach outside the circle of “people who follow crypto for its own sake” and get the attention of “people who don’t care about crypto at all, but who do care about whatever Something you’ve convinced them your token will buy.”
So, hey: how big, do you think, is the market of people who care about digital art?
Now start paying attention to how many press releases for “an amazing opportunity to buy some cool new Non-Fungible Tokens” include “by the way, the specific Tokens we’re selling are from a cryptocurrency you’ve never heard of, let alone bought.”
This explanation is fairly concise and still gets to the point. I don’t think you could cover all of these facets that are relevant to the topic with meaningfully less text. And the post is still that long.
That’s another aspect of the crypto/NFT scam: you need to understand how cryptography and economics works and all the connecting parts between them. If someone levels a critique against them, crypto bros can always come out of the woodwork with another level of this whole construct and likely catch the complainer off guard with something they don’t know about or aren’t confident in.
The thing is though, most crypto bros are marks and also don’t understand how this works, instead they are psychologically committed to think that crypto is great because otherwise they lost a house worth of money for nothing but an ugly lion picture. The rest of them are true scammers, know exactly how this works, and rely on the complexity of it all to keep their marks in the dark.
That’s really dangerous! Almost nobody knows how this works! Legislators don’t know how crypto works, these people still don’t understand how facebook could possibly make money! And we expect them to regulate it?
It’s even worse though. Crypto exchanges are currently going mainstream, and wallstreet people are thinking about expanding their portfolios into crypto as well. I mean, why not? Bullshit investment instruments that serve no real purpose, that no normal person can understand and that are woefully underregulated is their whole deal! As soon as that happens the current crypto bro scammers will probably be edged out by the entrenched scam industry, i.e. the international financial sector.
Once that happens, it will practically be impossible to regulate crypto in any way. If finance has a tool to make money off, it will use its considerable influence over the political system that is stays that way.
That’s why I think it’s so important to make fun of crypto and NFTs now. It’s not just because it’s fun to laugh at those idiots (even though it really is fun). The narrative on crypto still hasn’t solidified. The average person has basically only heard of it and probably thinks it’s some kind of new techy invention that will revolutionise the economy (just like previous techy inventions that revolutionised the economy - at least that’s what the story is) and that some people got really rich off it. That might be good, right?
If instead the prevalent association with the term NFT is some losers with purple lion icons losing their shit because they paid 200k for an ugly image and then someone downloaded it from twitter, the whole “industry” suddenly loses a lot of its cool factor.
By the way, this is why I use “dunning-krugerrand” as the tag for crypto stuff. The Dunning-Kruger effect is when competent people falsely consider themselves incompetent or when incompetent people falsely consider themselves competent. Crypto technology and culture is set up in such a way that it accomplishes both.
I hate flirting. I find it humiliating. Act normal and I will decide if I find you sexy... none of these theatrics and tricks... none of this treacherousness...
