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Comment by soarfourmore | Hacker News Reader

Would someone explain an NFT to me, as an adult (not ELI5)? I keep reading stories like this and don’t understand why it would be valued at 500k

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I also don't get it. An NFT is basically a small piece of text on the blockchain saying that you own the thing at a given URL. It doesn't mean you have copyright over the relevant intelectual property. There's nothing stopping the URL from returning a 404 at some point. And anyone can create an nft of anything, even if they don't actually own the intelectual property.

It really is as crazy as it sounds. The closest real world analogy I've seen is that it's like the people who sell deeds for plots of land on the Moon.

What's the URL for this particular NFT?

The info is linked to from here:

https://foundation.app/DisasterGirl/disaster-girl-25046

Here's the token:

https://etherscan.io/token/0x3b3ee1931dc30c1957379fac9aba94d...

What's burned into the blockchain is the URL of a JSON file which is hosted on IPFS:

https://ipfs.io/ipfs/QmYBvcJMaYFrUwhTRcbiHqFBoYPP54t4aBCnk1K...

That in turn points to the image, also hosted on IPFS:

https://ipfs.io/ipfs/QmeQ6c5HdnEDcheHmWuKWdwMHBBZg1eGpgV5h3H...

Here's the transaction which minted the token with the IPFS URL of the metadata as input:

https://etherscan.io/tx/0xccc3f7ee08307dd469af7c65c55e087edc...

More about hosting NFT content on IPFS here:

https://docs.ipfs.io/how-to/mint-nfts-with-ipfs/#a-short-int...

As to NFTs themselves, you’ll have to understand Etherium smart contracts. This particular NFT is a Foundation NFT which implements the ERC-721 interface:

http://erc721.org/

(Except the underlying contract actually appears to be https://docs.zeppelinos.org/docs/1.0.0/upgradeability_adminu... which I understand to be a contract that proxies its implantation. I’m not entirely clear how that works.)

This explanation making rounds on Twitter is actually pretty good: https://twitter.com/yogthos/status/1387570034139140102

As for being an adult and not getting ELI5, see the last paragraph in that explanation. Yes, I am serious.

Source: https://queersamus.tumblr.com/post/649552477605249025

Digital data (IE an image) is fungible; it can be copied at near zero cost.

NFTs (Non-Fungible Tokens) use the blockchain to “claim” ownership by being a single non-replicatable representation of that digital data.

In reality, it’s value is entirely dependent on people believing NFTs have value & that there’s only one blockchain in which they should exist.

I’ll add that whilst I’ve provided a somewhat technical definition, as to the logical reason someone would pay that amount of money: no idea whatsoever.

I guess they’re hoping that these things retain and even increase in value. At some point in history we decided that ink on canvas could be immensely valuable based on scarcity (arguable also they’re nice to look at, unlike an NFT), and I’m guessing they hope the same for NFTs. I guess memes are highly recognizable works of art to some?

The logical reason is: To pump prices because you are running a scam.

https://twitter.com/FoldableHuman/status/1387956657171271681

By this logic, pretty much every asset you can buy with money is a scam. I'd rather say NFTs and money are social constructs.

By what logic is that? I do not see any logic anywhere here that would imply any such thing.

“as to the logical reason someone would pay that amount of money: no idea whatsoever.“

One possible motivation: they see themselves in a position to benefit from NFT trading "becoming a thing". Either because they already own stock, or they expect themselves to become extraordinarily successful in speculation, or they consider themselves future creators, or they own/run a market where they will be traded. No matter which it was, they'd have a very real interest in bootstrapping the market into existence.

Pass around ownership in an effectively zero sum series of transactions with exponentially growing price, get media attention, stop being zero sum as soon as the first outsider steps in.

That sounds like people burning money. I have this vision of a large bonfire on a tranquil beach with people having soft casual conversations where that fire is burning large stacks of large denomination cash purely for aesthetics.

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

Just to be clear: “ownership” in this context means a pinky promise from the creator to not create more NFTs of the same work.

It does not include any copyright assignment, or other aspects of ownership one might think of with physical items.

I wonder how this compares to "limited edition" prints of classic artworks, which are also far more expensive than a "normal" print in exchange for being uniquely identifiable.

Wouldn't that be fairly trivial to verify on the blockchain? I'd expect someone willing to spend millions would - or have someone - do some due diligence to confirm that the NFT they are buying is the first, unique NFT for this particular item.

Yes. The issue is that the NFT isn’t actual ownership, and in the case of memes there is no actual owner who can sell it.

You can verify that the NFT is unique, probably. But it doesn’t get you anything else.

I'm still a bit hazy on all this as well but I think that's the idea?

The NFT itself is basically some payload (any collection of bytes), a checksum of that payload, and some metadata. What's to stop someone from perturbing the payload by one byte and minting a second NFT? Nothing, really, other than "it's not the first". So yeah it's down to performing due diligence on the vendor and payload to make sure you aren't being snookered.

I think. I get the whole crypto aspect. I don't get the social/contract aspects.

So, if I understand correctly, it's just an evolution of the cryptocurrency itself? In the sense that instead of having a token you have an unique token? And going back to the currency analogy it just means you have a banknote with an autograph?

Worse than that: you have an autographed photo of a banknote.

When you phrase it like that, it reminds me of the explanation of CDOs from The Big Short:

https://www.youtube.com/watch?v=AUM59Eh6vTw

And it's equally disturbing...

"fungible; it can be copied at near zero cost."

That's not what "fungible" means. The "non-fungibility" of NFTs means that each one is a unique token, it doesn't have an "exchange rate".

Fungible means "able to replace or be replaced by another identical item; mutually interchangeable," it doesn't have any meaning about the price of making a copy/reproduction/another instance.

An ordinary quarter is "fungible", if you're paying me a quarter for a piece of candy, it doesn't matter to each of us which quarter you use, they are all interchangeable. (and that doesn't mean either of us can make a copy of a quarter for free!) An ounce of gold is fungible. A bushel of the same kind of and age of wheat is fungible if you're a commodities trader.

Every bitcoin is worth the same as every other bitcoin, at any given time they have an exchange rate with other currency. That's what "fungible" means. An NFT is just a unique token on it's own, and is not worth the same as any another NFT.

(I don't actually think the market in NFT's makes any sense, not trying to explain it as something sane, just the word "fungible").

Bitcoin is technically non-fungible because the transaction history of a coin is public information (I imagine if someone got ahold of Satoshi's coins they would be worth more than regular Bitcoins -- even just in terms of sentimental value). But for most practical purposes it is basically fungible.

Sure, good clarification. And fungibility can definitely be contextual, depending on context and requirements. Fungibility is really always about "enough people think it's fungible for their purposes and have agreed to treat it as fungible, so it is."

You’re right, I got my wires somewhat crossed there; I was trying to describe fungible as a lack of inherent uniqueness. That was a poor example.

It's a url of an image written on an array inside a smart contract. Something like

nft_owner["http://cloud.com/meme.jpg"] = address

The owner of that address has the permission to interact with that smart contract, only he can transfer it. Basically a type of ownership written on the blockchain that is all.

Are you allowed to profit off the ownership? Like put the NFT on physical media (shirts, stickers, etc) or license it to others?

No, the copyright doesn't (automatically) go with it, and there's basically zero legal-system recognition of NFTs.

There is an art market, people (dont ask me why) pay a lot of money for art and 'invest' in it, hoping things will go up. Originals have value - e.g. the original Mona Lisa will always be worth more than any copy, even if that copy was accurate down to the atomic level. Or an original banksy spray painted on a wall is worth lots of money ... if you took the exact same stencil he used, and sprayed your own version, it would be worth much less.

NFTs are an attempt to translate that into digital form. An artist will 'mint' an NFT (I think its based on a hash of the actual digital image/video whatever?) and then that 'minted' NFT is embedded in a blockchain and can be bought and sold. It is perceived to have value because its endorsed by the original artist.

Yes NFTs are weird but so is a lot of the real world art market, decades ago Yves Klein could paint a canvas pure uniform blue and people paid crazy money for that stuff.

I quite like the IKB canvases because they're outside the normal colour gamut; if you have an opportunity to see one in person you'll understand, because the colour cannot be accurately represented on screen or in a photograph. A neat trick. But I still can't see how it's worth millions.

You can purchase a signed link that proves you “own” the link. It confers no other rights or capabilities typically part of ownership.

It’s expensive because anything crypto currency related is filled to the brim with fraud, money laundering, and “number go up” groupthink.

It's journal.

  Alice pays Bob 500 000 USD. Alice owns Bob soul. Record checksum: 0x3345dfe3. Journal checksum: 0x3345dfe3
  Charlie pays Bob 500 USD. Charlie owns Bob meme. Record checksum: 0x1305eee5. Journal checksum: 0x995faac2

And so on.

The description here https://twitter.com/charlottejee/status/1387722711766650884?... , whilst snarky, seems like a reasonable summary.

It's basically the bastard child of cryptocurrency and modern art.

Technical hype + cultural hype + FOMO = $$$$$

Just go find an original meme image, claim it to be yours and sell it as an NFT. Profit!

Imagine I have a bit of paper and I tell you in 3 years time, someone will want to buy this piece of paper for 10 million. I will sell it to you for 1 million now. If you believe me, it would be stupid to decline this offer.

Here it's explained in comedy form: https://www.youtube.com/watch?v=ZiJa9diJOMk

You can also watch the film The Big Short for another view into finance.

The most important thing to grasp is, don't think this can't be true because it's so stupid. It's exactly as stupid as it sounds.

For a more serious look, listen to John Kay: https://www.youtube.com/watch?v=SX3E-CbY1uE Or read the corresponding book Other People's Money.

The buyer likely has lots of the cryptocurrency used in the purchase and is likely either trying to promote use of it or launder money.

It's like a trendy type of signature.

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