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Comment by bondarchuk | Hacker News Reader

>NFTs are blockchain-based records that uniquely represent pieces of media.

There is a jpg of an artwork on the internet that anyone can view and copy. There's also a non-fungible token that's linked to this jpg. I just don't see how NFT proponents want to make the actual connection between the one and the other in a way that's both decentralized and unique.

- You can have some authority that says "THIS artwork belongs to THIS token". Then, you don't need blockchain, because you have a central authority.

- You can encode the relation on-chain by e.g. taking an md5 of the jpg. How do you know which token claiming to be "the unique token for that jpg" is the real unique one? Even if there is a class of token that preserves uniqueness, it can only do that internally within the class, we're back to the previous point of needing some centralized allocation to say which class of tokens is the real one.

Edit: for the last point, you can take the one with the earliest timestamp of course, as per another comment.

Anything I missed? Has anyone even thought about this in-depth? Are a16z's crypto dabblings just empty hype chasing?

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I'm mostly in the "empty hype chasing" bucket. As with many things in the blockchain space, I think there are a few interesting idealists whose work could be seen as fun, compelling experiments. But because of the cryptocurrency bubble, anything like that immediately gets turned into OMG FUTURE YOU MUST BUY NOW. Which for me ruins it, and certainly breaks key product development feedback loops.

One minor thing I'd add to your picture; the potential for competing NFT authorities. Bitcoin, which was sold as inflation-proof because there are only so many of them, now has 250+ competitors with nominal market values of over $100m. If the NFT thing works at all, a bunch of hucksters will immediately set up in competition, and there surely will be a lot of duplicate registration in different spots. ("I own goatse!" No, I own goatse!") In which case, the only way to determine actual ownership of a given MD5 is provenance from the artist.

I can't find it now, but some genius on Twitter suggested creating an NFT registry for physical bridges, so George C Parker can live again a century later. https://en.wikipedia.org/wiki/George_C._Parker

I’m just learning about this stuff, but it seems to me that the NFT is mostly just a blockchainy version of the good old “certificate of authenticity” which artists and galleries have provided for ages.

Last year I bought some fine art photographs. They were “giclee” which is a fancy word for ink jet. They were signed and numbered. I got my certificates.

The artist, or whoever has a copy of the original digital image, can make unlimited prints. They can even make better prints! The only thing stopping them is that the art world has decided to have this made-up rarity and to treat the certificate of authenticity as a guarantee of, well, “authenticity,” whatever that means for a digital photograph or for that matter a shiny metal balloon dog.

So one thing the NFT claims to be is that certificate, especially as applied to work that was meant to be experienced on a screen.

I'm thrilled the see this discussion on here, and you're very correct. There's nothing stopping the artist from making more digital prints. And this is currently why at art shows you see original, physical media pieces (oil, acrylic, watercolor) going for high prices, while digital art has seemingly no collectability.

Some years ago, I was at an art convention https://ix-online.com/default.asp) and was discussing this with a couple of collectors one evening, asking if they'd ever buy an "original" digital piece. And they indicated that they would, but only if it either had some sort of embellishment making it truly original as a print (Artist signature on the print, maybe a message or small sketch on the back, etc) or, some sort of agreement, be it binding or on pain of loss of reputation, that more prints in the series wouldn't be made. In other words, something to make it rare.

The only digital pieces I've seen go in excess of four figures are ones that have been "hand embellished", that is, the artist drew their image on the computer, printed it, and then went back over with a physical medium to give it the look of traditional media. And since that can (currently?) only be done by hand, that makes it unique, and therefor to collectors, valuable. And these works are not only valuable in the sense that the individual enjoys it, but many works appreciate and grown in value as the artist grows and so become an investment as others now want to own that unique work.

I'm married to a fantasy illustrator who works in a digital medium, and while I'd love to see her art be juried into the same showcases I see reserved for the physical medium, the flawless reproducibility that's possible seems to deter collectors more than some certificate that says "I own this" does. Perhaps over time that digital signature will eventually be valued more to the collectors than the rarity, but in everything I've seen, for an art collector, holding up your blockchain when everyone else can fulfill their demand for that work and obtain the same quality is cold comfort.

I'm really interested to see if anything becomes of these, but currently I'm more skeptical than optimistic.

Well some digital stuff gets Art World love, just not most of it. Museums have been grappling with a lot of these questions for years, at least since video art made it into collections. And on a conceptual level I’d say for longer.

What does it even mean to own a Sol Lewitt wall drawing?[0] There is a whole wall of art at SFMOMA that is less “owned” than an NFT-backed goofy little “punk” graphic.

So far it doesn’t seem like the curatorial voices have made it into the NFT conversation.

I found it interesting that Beeple hedged and actually made an artifact to go with the digital version of his daily editions.

The gallery I bought prints from last year has some interesting takes on it, they are only dealing in digital art but they are a (small) physical gallery.[1]

I also have no idea where this is going, I was barely paying any attention until a week ago despite having an artist friend who’s involved in blockchain stuff. But I definitely find the conversations interesting! Learning new stuff almost daily now...

[0]: https://en.wikipedia.org/wiki/Sol_LeWitt

[1]: http://mymuseum.co/

To add a perspective outside of high value art - NFTs have an interesting potential to change the virtual goods space ($XX billion dollar industry).

Today Fortnite and games like it get major revenue streams via selling special skins, game items and other art work. Now name a property that let's you trade or gift items? If you can name any - do they let you trade on ebay? How many platforms let 3p artists contribute to the platform? I don't think you can honestly describe this market place as anything but primitive.

NFTs solve the hard problem of accounting for virtual goods in a wildly open, secure and interoperable way. They can codify an incentive structure that allows trading on a secondary market while ensuring creators, platform owners, and even former owners can receive percentage royalties. You could easily imagine Fortnite's Ninja streamer selling one of his skins on a stream to a fan for a significant premium - and some of that revenue could be codified to flow to the platform, the artist that made it, heck ninja could set it up that any later sales send 5% to a food bank.

Thats just one reason for me why NFTs are a high potential technology. Are there challenges? Tons of them (look at eth gas prices...) But it doesn't seem insurmountable. Ultimately there is utility and value. Definitely not hype.

It could get even more interesting if you have some NFT domains that are shared between different virtual realms, like different video games or social media sites.

Imagine owning a username in the form of an NFT, and every MMO game that integrates with that system will ensure that the owner and only the owner of that name can can use it in game.

As far as I can tell, this is indeed all 'empty hype chasing' on the part of the founders, but the people who actually believe in it probably end up trusting in a central authority - which means a database would have sufficed.

Still, it's amazing how many people are willing to shell out money for this - many of them are likely trying to sell their acquisitions to the next sucker, though.

I also use to kinda wonder about the connection between the onchain data, and the offchain reality, especially when people talk about using blockchains for supply chains. What mechanism do you have in place to get them to sync?

But when it came to NFTs and art, I think it lines up. It use to be the enjoyment of a piece was inextricably tied with the ownership of something. It was the way physics worked.

And then, we had photography and subsequently digital tech, and now we are able to separate the ownership of a piece from the enjoyment of a piece through a digital copy. Now you can enjoy a piece without ownership!

But aghast! What does that mean for value of ownership? Well, the social contract we all collectively came up with is that the original physical piece is worth a lot, and a copy isn't, regardless of the technique. And we have lots of mechanisms in society to enforce that, from people that specialize in detecting fakes to the court of law.

It also kinda worked, because while you could digitize the painting, you couldn't digitize the ownership of an art piece--because there was only still one original. So the ownership (not the enjoyment) of a art was still scarce due to physics and not digital, because for the longest time, we didn't know how to make digital things scarce and original. In fact, we thought that's why digital was so great. No cost duplication has changed the world.

But, apparently, you can make digital things scarce. Through cryptography.

So if you view this as a progression of the separation of ownership and enjoyment, the enjoyment got digitized first. And now, we're seeing ownership being digitized. But ownership is kinda weird because it's both digital and scarce!

Back to the connection, I think the connection is simply a social contract in the way money is a social contract. "This NFT represent an ownership for this art piece."

I think there are ways around it, for future works. I can imagine art pieces being procedurally generated by a computer, but hand picked by the artist. The artist then records the parameters for the procedural generation inside of the NFT. Then, any owner for the NFT will be able to generate the art, and that would be the connection.

At the end of the day, that still relies on some social contracts, like agreement that these parameters is applied by this procedural generation algorithm, etc.

I can understand it if wrapping crypto/some form of chain around a piece of digital media made it non-fungible. But that is horseshit (afaict), as the op’s analogy goes. It’s not making or scarce, it’s making up to a billion people be able to ‘own’ a part of it. And it’s digital so anyone can copy it. It doesn’t even come in a nice frame.

I realise this is just having a go at a single part of your conversation, that I otherwise have no issue with

This concept of a ‘social contract’ is messed up. It’s a way of saying ‘I can only fully enjoy my ownership of this item if a central authority tells me I can’.

That’s just crazy, who in their right mind would want a world like that. Why do we need an authority figure to control enjoyment of a thing?

by social contract, I mean it to refer to the same social contract we all use to agree that paper money and metal coins have value. Or that you cover your mouth when you sneeze. There doesn't have to be central authority here.

As mentioned in another thread, NFTs are like a certificate of authentication in the Art world. It represents the ownership of something. That's separate from the enjoyment of something.

The pleasure of owning something is now separate from the pleasure of enjoying something. NFTs address the pleasure of owning something, not the enjoyment of something.

“You can have some authority that says "THIS artwork belongs to THIS token". Then, you don't need blockchain, because you have a central authority.”

You need blockchain because central authorities can shut it down; however, most smart contracts in this space are centrally controlled.

I think the reason people struggle to understand how NFTs make sense is because it is new and there is no mental model for it. It’s easy to dismiss, but if you think about it and in particular if you program an ERC721 contract and/or use it, you begin to get it. Younger generations won’t need to do this because it’ll just be the way things are. You won’t trade MtG cards but NFTs. You may be in a VR game and see a work on art on the wall and buy it right there for your collection. It is absolutely legit regardless of the mania or the fact that contracts aren’t decentralized (yet).

But why do I need the NFT if it's just a jpg and I can copy it from the game source?

Why is an original Picasso worth millions when I can download a picture of one and print it out for free?

The picture of the picasso is not identical to the original.

A jpeg is bit for bit identical when copied.

It's not considered original, if you don't own the NFT. Like money, it's a social contract.

For the longest time, in order to enjoy something, you had to own it. Because physically, there was no way to enjoy it unless you were in its physical presence.

Then we had analog tech like photography, and for a little while, people wrestled with who owned what. But we decided that the original physical painting is proof of ownership, and a photograph of it can still be enjoyed, but is worth less, and not actually owned. This makes sense, because the physical copy is less easy to reproduce.

And now, we've figured out how to make digital things scarce. Now, the ownership of something is indicated by ownership of the NFT, not of the physical original work of something. The tie between the NFT and the digital image is largely a social contract, in the same way that money is a social contract.

You’ve made the same point about scarcity here but i think most people just can’t buy it. It is literally not scarce

NFTs are artificially scarce. There are limited numbers of each token that can be bought.

The enjoyment of the piece is not scarce. The ownership of it is not. They use to be one in the same. Today, they are not.

Ownership of what?

https://superrare.co/artwork-v2/bloodsculpt-20261

https://kemendo.com/Images/bloodsculpt.jpg

Which one is the real one?

Each link you posted points to two separate digital objects both for the "enjoyment of a piece", not the "ownership of the piece". Think of ownership of a piece as the certificate of authenticity.

The first link is on superrare. The superrare image can also be enjoyed by anyone. However, the (very small) link (https://etherscan.io/tx/0xd9e4971bef6d37807605e0eb635eb4b6d9...) to the transaction on the page, tells me the owner of the art piece is 0x053e84e80cfb38d672d53394de3dade1fbbacd25.

The second link is on your own homepage. You can claim ownership on the image (since it's on your homepage), which gives you the enjoyment of the piece. But you don't claim ownership of the art piece.

Now, who determines which one is the real one? Depends on the counter-party you're transacting with, and what they're willing to honor.

If I as the counter-party, am being sold ownership of the art piece from both you and 0x053e84e, I'd take it from 0x053e84e, for the same reason you tried to make: digital images are exact copies. He own the non-duplicable NFT and provably so, and can transfer that NFT to me.

If I as the counter-party is the creator of the piece, I can give certificate owners extra VIP features for the art piece, like a chance to meet me, or a one time delivery of a look-book of the making-of of the piece, I can do that, and be sure that it's not fake owners. The pleasure of ownership is different than the pleasure of enjoyment of the piece.

So what links the NFT (the certificate) to that particular image? Well, right now, it's conferred by Superrare. If this is turns out to be an issue, I can see ways around it.

One option is to use procedurally generated art, where the parameters are stored in the NFT. I think there may be others.

I think what people are actually buying with an NFT is only marginally related to do with the art - I think people are buying the top spot of a specific ledger and the art etc...is an avatar used to represent the ledger.

The question is whether anyone cares about the scarcity. I think the more complicated the item, the less it makes sense perhaps. The more utility in the item, the less I care about a separate ID number associated to it, I would think. For example, let’s move away from pictures momentarily and instead think of lossless music files. You consume music more “actively” than an image, and a literally identical music file seems weirder to pay more for. Or perhaps a movie. “An original pressing” NFT movie that has the same content as the $5 version. To some extent it feels that the Napster revolution proved the opposite: people are willing to take a hit on quality for price, and I would have hoped once upon a time that the response would have been to go more physical. People like plastic, so include trinkets you can do things with when you sell a digital thing because the trinkets can’t be downloaded (until we figure out crazy 3D printing of arbitrary materials I guess).

In some respects, blockchain currencies make the most sense precisely because they aren’t bound to some fictionally scarce “physical analogue” to remind you that it’s just a number. The currency says “the number has value, that is the one axiom you must believe”. An NFT muddies this by saying “the number has value BECAUSE it is tied to this unique thing that actually isn’t unique.”

Edit: One added point: if the scarcity is “real” due to some outside constraint (a card that can be used in a game, and thus it’s not yet copyable asset that people are buying but the unique ability to use it), then the above does not apply and NFTs seem like a fine way to standardize a cheating proof way of handling this.

> The more utility in the item, the less I care about a separate ID number associated to it

I completed agreed to the point you were making and then I got reminded of sneakers. They are supposed to be of high utility and yet 'limited edition sneakers' command a high price and are never used (in fact they lose value on being used).

I think other threads in the discussion point out the difference between the price people pay for 'owning' an artefact versus 'enjoying' an artefact. In the music case also, I can totally imagine a successful artist taking out limited NFTs on their music and their super fans buying it, trading it amongst themselves. Most people who want to 'enjoy' it won't care but I guess a case can be made for die-hard fans wanting to own it.

One way I as a creator can care about scarcity is it lets me build community with superfans. NFT holders of my work can have access to special events to meet me, or to see behind-the-scenes, or get other artifacts, like original sketches.

The utility of the enjoyment of my art is for regular fans. The utility of the ownership of my art is for super fans. And the value of superfans to me as a creator is to build long life-time value of customers, ready audience for my future work, an effective cheap distribution channel.

If I as a superfan has a creator that honors these NFTs, then I too will care about the scarcity--not of the digital artifact that lets me enjoy the work (the image), but of the digital artifact that lets me participate as a superfan (the NFT).

Yeah absolutely — you are creating truly scarce value in that case through an external means (just like an in-game card that lets you do things in the game others can’t do, vs.- “pure collectible” that does something: I tweeted about this here: https://twitter.com/tolmasky/status/1365908735542005762 )

That being said, it will be interesting to see how creators react to these tokens being resold (which is an essential aspect of this). That is to say, in the model you are describing you are taking on a long term relationship in order to demonstrate the scarcity, which is different than a one-time sale of unique piece of art. You will thus take on the problem of scalpers and the realization that many of the superfans you are serving got access to your future rewards through paying a third party much more than you got for the initial sale of the token — which is of course nothing new, this happens with art resale too, it’s just less repeatedly in your face as you provide these benefits over time.

> You won’t trade MtG cards but NFTs.

How about MtG cards that are NFTs? Before a match, both players commit to a deck of cards and produce a zero-knowledge proof that they own all the cards in the deck (i.e. without revealing which cards they have.) All kinds of cryptographic tricks will be necessary to simulate the process of shuffling and drawing cards while ensuring that nobody can cheat. Exciting!

It's actually not that hard, if you require players to reveal their complete deck after the match, and if you are willing to wait for cheaters to be caught at that time.

(If you want to support cryptographic poker, where opponents learn nothing if there's no showdown; then you need lots of shenanigans.)

This really helped me see potential in NFTs. Before your comment, I was just seeing NFTs as this new certificate of authenticity/ownership that was going to be lost in a sea of property rights management governance. But after reading what you wrote, I'm starting to see NFTs not as the big deal, but the apps that build on top of NFTs. Because having a MgT digital card by itself may not mean much, but the MgT application layer may only recognize official NFT cards to play (which seems easy to do from an app perspective) and therefore the NFT gets used in this code.

So I think NFTs may hit more in other fields outside of art, like digital playing cards, digital event tickets, etc. May still work for art. Could be fascinating to have an app layer on top of the art. Almost like an art museum, or maybe exclusive art events where you have to have specific NFTs to attend. Almost like exclusive membership to a club.

(Oh great, now with all these ideas in my head I may not sleep lol)

I think you're both onto something here.

For art I'm skeptical (See my reply in this same discussion for why), but for creative works with utility, and NFT might be more useful if the platform they can be used on requires validation of the token. In that sense, it seems to become a sort of public DRM.

I'm sure we can spend a long time musing on the implications of that.

I'm actually building a TCG so this is from my perspective in that context and referring to TCG "like" apps only.

An abstract representation of a digital item not tied to the app/platform has some benefits:

- It can allow a market for them without me having to implement the market itself;

- That in turn makes the items themselves more valuable

But it also has many downsides and some significant:

- I don't have to implement the market but I have to conform all my app to work with that particular way of representing the item and I have to make interfaces to it all. If then I want to implement an internal market it has to be fully integrated with the outside.

- For ownership verifications it's much more heavy to assert ownership. As a practical example, in order to allow users an incentive to play when you signup you get a set of item "packs", with random contents generated when they're opened, the items in that pack can be used in tournaments/matches that require ownership of the items but in order to remove any benefit from creating multiple accounts to hoard items and resell them, the items in those packs are "owner_only". They can be used but not traded or sold. To do verifications for selling for instance, it's a simple db query, to do verifications of ownership before a match is started it's a simple db query. I would imagine it would become easily much heavier to do any of these simple things, or you might need to wait until your "purchases" are settled so that they show up, and etc.

- Then the blockchain itself. Is it connected to the outside world and managed by multiple parties? Can those multiple parties get together in a 51% party and rewrite the story of the blockain in which the assets used in my game are stored? Is it an internal blockchain? If it's internal why use it at all instead of a db with backups and consolidation?

I'm sure there's other considerations. The idea of a market for items that is larger than your app items is certainly interesting but not sure the logistics play out. Would love to see some ideas explored in that field though.

*edit formatting

I could see something amiibo (https://www.nintendo.com/amiibo/) like where the NFT basically unlocks things in different games but really struggle from a business perspective why you’d choose the crypto route over owning the market yourself. Particularly if there is supposed to be some permanence to the asset the NFT points to. For example the game no longer makes money but for some unforeseen reason someone owns an NFT of a game item worth $100,000 what happens when you pull all the game infrastructure and therefore the linked item down?

Or the token gets lost or the token is stored somewhere and goes down or ... a million other scenarios, that are just as easily served by a database?

I might be wrong but what you pointed out is exactly why NFTs might succeed. Sure Nintendo has enough credibility to own and operate its own market, but for people who are trying to compete with Nintendo, the fact that artefacts are tradable outside the company's ecosystem and control becomes a point of differentiation.

I think it might actually work for other digital items outside games - sincerely in games unless they're interoperable between platforms I don't understand what would be the advantage - but maybe things like coupons, say you got a coupon from a signup somewhere, and it was represented as something with an expiry date, associated with an email or phone or wtv, but you were never going to use it, maybe selling that and the person associated with it changed to the new owner that then could redeem/use it? Again, not sure it's useful.

Yeap, that's I think one of the disconnects - while it would allow you to have a market beyond the game the items, in the case of a fully digital TCG, are only valuable due to the game and their scarcity in the game, plus the game needs to have some game play options where having the items is relevant.

Amiibo looks more like the skinning/customisation market - probably they don't have an impact on the game.

In TCGs with games/tournaments where you need to own cards to play them there's an actual "desire/need" for a market to trade/buy - although it seems most digital TCGs nowadays all do the hearthstone thing of being able to "create" items by destroying others which diminishes the need for it, I personally don't like that mode, but I also don't see where a blockchain helps instead of a DB and backup of all "actions" recorded.

The real mona lisa has massive real-world value. You can get a copy of the mona lisa that the average person can't distinguish between for $10.99, and yet that copy in no way reduces the value of the real mona lisa (if anything it increases it).

Things that are intentionally non-fungible don't care much about being copied, as long as you can always identify a copy, at the end of the day it's mostly a status game. But status games do have real-world value.

Even if they do manage to make it unique, who actually cares?

You have a token and a jpeg. I have the exact same jpeg. It's not an original in a gallery vs. a mass market print, the copies are identical.

Why should anyone care about who owns the damn token?

There are cultural currents that place a value on ownership of intellectual property.

Imagine various MMOGs recognizing some NFT standard as authoritative, and only allowing designs to be used for character skins if the gamer owns the NFT corresponding to the design.

As far as I can tell NFTs don’t actually give ownership of the IP. It’s not like the NFT owner could go around DMCAing other copies of the work?

You're right, they provide a verifiable testament of the creator's will as to who should have ownership rights over the IP, which is enough to provide ownership rights in many contexts.

The authority is the artist. They say which token is the certificate of authenticity.

Most NFT use cases which are emerging right now are essentially legal ownership created to the owner of NFT token.

In other words let's say there is a unique painting, now they established that the owner of a certain nft gets to own certain rights over that painting which could be licensing or other rights.

NFTs have essentially decoupled the ownership of a role of a contract with the transference of that assignment to an individual.

Instead of modifying the owner who has the claim on a certain piece of art or object by modifying a document, they are simply using blockchain to establish the ownership of a token and token links it's owner to the contract.

> Anything I missed? Has anyone even thought about this in-depth?

Yes. I think you are taking the most poorly executed NFT (a token and jpeg centrally hosted on the internet) and extending that to all NFTs.

There is no right or wrong way to make these NFTs, and a jpeg/token may work for many use cases anyway...but I can certainly accomplish and satisfy all your issues/concerns. That is create a unique digital artwork that is hosted on the blockchain represented by an NFT that is all self authenticating without the need of any central authority...unless you are classifying the ethereum blockchain as the central authority

The ownership is only a matter of social consensus, and those rights can be eroded through various avenues. Still, the consensus is perceived as having enough strength to give the NFTs value.

Is the value the sense of ownership or just from people trading them like other crypto?

It's hard to know which comes first. It's a bit like Keynes' Beauty Contest:

https://en.wikipedia.org/wiki/Keynesian_beauty_contest

The verifiability aspect seems to create a Schelling point where they attain and maintain value.

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