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Comment by slg | Hacker News Reader

Am I the only one who sees the interest in NFTs as an indictment of the whole crypo scene? NFTs abandon all the arguments that crypto people have usually used to argue why cryptocurrencies have value. People are dropping all pretext and openly admitting that these things only have value because they are artificially scarce and therefore maybe someone else will pay you more for it in the future. There is no other value. And now that we see that alone is enough to drive up prices, I start to wonder if anyone really believed all those arguments for cryptocurrencies or they were just too scared to admit that this was always all about trying to ride the artificial bubble for as long as possible.

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I'm pretty sure the end game is either exerting social or even legal pressure to KEEP the value going up, simply because so much money is involved.

It's like 'because this is ridiculous, it is therefore obvious that it's only about the money invested in it, not in any sense what it's 'about'. Therefore, the money has to keep getting more valuable. Because money, that's why.

If that argument holds, then it is money, full stop. No matter what else it is or isn't. The entire difference between it being a weird speculative prank, and it being money in the weightiest possible sense of the word, is how it's treated by society and any governments that have jurisdiction.

How would that pressure work exactly? Markets can remain irrational for a long time, but over a sufficiently long period they eventually revert to fundamental value. There is a limited supply of "greater fools" and they don't have infinite cash. Market values for other types of collectibles like ceramic figurines or stuffed animals have dropped significantly in recent years; sometimes there are no buyers at any price.

My hope, personally, is that the pressure would NOT work.

Market dynamics are fine in their place, even useful, but nothing about them is inherently free from exploit. Crypto and finance operate in a context that's set by law and custom. We agree 'if your crypto fails, hard luck, you lost money'.

If it was beneficial to literally threaten government until they changed the rule to 'if your crypto fails, but you are entity X, Y or Z, then you are to apply to the government and they will make you whole, printing 'money' if necessary'. This would be pitched in the name of 'stability' but it'd be a straight power play. The benefit to X, Y, and Z is obvious.

Doesn't matter much what kind of pressure they would impose, only the end result matters. It could be negotiation, blackmail, threat of physical harm: view this pressure as stepping outside the rules of the system to rig the rules of the system, secretly or explicitly. The idea is to legislate that markets can't be irrational, because (if you're X, Y, or Z) markets will be guaranteed to do what you want. No risk. Therefore, rational.

>I'm pretty sure the end game is either exerting social or even legal pressure to KEEP the value going up, simply because so much money is involved.

This just reminds me of how society screwed over future generations once the decision was made to treat housing as an investment. There is now a tremendous amount of social, political, and legal pressure to keep values going up in order to protect the financial health of a good percentage of people which is diametrically opposed with the financial health of a separate group of people who cannot afford those rising costs.

NFTs have value because people who have been into crypto are rich now and any activity surrounding them is now a rich persons game.

“How can you have money,” demanded Ford, “if none of you actually produces anything? It doesn't grow on trees you know.”

“If you would allow me to continue..."

Ford nodded dejectedly.

“Thank you. Since we decided a few weeks ago to adopt the leaf as legal tender, we have, of course, all become immensely rich.”

-Douglas Adams, The Restaurant at the End of the Universe

https://www.goodreads.com/quotes/685739-if-the-management-co...

Artificial scarcity has always been a key part of the argument.

NFTs are just a new name for a concept that's been around in bitcoin since the very early years: Colored coins https://en.bitcoin.it/wiki/Colored_Coins

Well, I'm a firm believer in cryptocurrency but I have yet to find legit use cases for NFTs, so you can be pro-currency and nft-skeptical.

I think the previous poster's point is that if an NFT is useless but is still worth a boatload of money, shouldn't that make us skeptical of the fact that a Bitcoin is worth a boatload of money also? Like perhaps Bitcoin's value is actually as detached from its utility as the NFT's.

Exactly. NFTs seem to be an admission that the utility of cryptocurrencies was not the driver of either prices or excitement.

I cannot come to that conclusion, because NFT came after the cryptocurrency upsurge. People saw the monetary value of crypto go up, and that same value has been associated with NFTs. To me, just because people are aiming for a second lucky ticket, doesn't mean the first was a fake.

It certainly don't demonstrate that the value of bitcoin is similarly baseless, it just suggests that the contrapositive - the idea the high value of bitcoin shows that bitcoin is useful - is not a solid argument.

NFT's represent a rather beautiful but whacky idea: that money supply is controlled by the critical reception of new artwork. Not the opinion of the snobby art world, but a completely democratic market for art populi - where the aesthetic leans meme - think less MOMA and more favorite contestant on American Idol.

This means NFT's have the ability of dynamically change the money supply based on the prevaliling Keynsian animal spirits across society, versus bitcoins pre-determined money supply schedule. This is a novel feature to the crypto ecosystem: in a way it's moving the activity of mining for block rewards from a robotic and silicon-based process into a creative human process of mining for memetic uptake.

Another interesting opportunity is for patronage to sponsor our society's artists. Just like Florentine status competitions of religious paintings supported Da Vinci's works, our crypto merchants could be supporting the man who will still be going viral five hundred years later. Let me know if you find him.

The best use case for NFT, and possibly all crypto, is money laundering. But, yes, it's not legit.

I’m unsure either way.

On the one hand, I regard crypto-foo in general as a failure to grok foo for all foo other than “graphy” and “nomicon”.

On the other, NFTs seem to fit into the same category as all other collectibles: I have no interest in used stamps, my dad collected them; original paintings and sculptures from famous artists fetch high prices, if I wanted one I’d get a (2D or 3D) print; autographs fetch vast sums and have zero valence for me.

Pretty much the only thing I care to collect are achievement badges in games and gamified educational services.

Which of these NFTs represent — magical thinking or collectibility — I do not know.

I'm really tempted to take one of these famous NFTs and use it as a Twitter avatar, without owning it. I guess I could have copyright issues with it, but I doubt I would (why would the original artist care anyways? did s/he even package up the copyright rights to travel along with the NFT token as it's traded? maybe...).

You can own it and say it's rare, but it's not actually rare.

Go ahead, the people who own the NFT don’t have copyright over the underlying image, and afaict usually don’t have any special rights to the image at all.

Nobody would care anymore than the owner of a Van Gogh would care about you printing a copy of the painting and hanging it up on your wall. The value isn’t in the raw image, it’s in the status and prestige of socially recognized ownership.

If I buy a Van Gogh, I have a Van Gogh hanging in my living room. You don't (not the same one, anyways).

People buy NFT JPEGs and then put them as their Twitter avatars. Anyone can do that.

Digital replications of paintings are perfect. So it’s just as easy to say:

If I buy an NFT, I have a monkey as my Twitter avatar. You don’t (not the same monkey, anyway).

Everyone can have the exact same monkey down to each bit, it’s just that you have a note on a blockchain that says you bought the monkey and no one else did.

It’s like if we had matter replicators from the Star Trek universe and anyone could print a van goh copy down to the same molecular structure and hang it on their wall, but you bought an impractical-to-forge piece of paper that says yours is the original.

I could write "I bought the monkey picture" on a piece of paper and put it in a sealed envelope and hide it in a drawer - same effect.

It only matters to people that it matters to. Anyone unconnected to the blockchain that stores this information doesn't give a monkey's about it.

Imagine that I and the monkey-picture-owner use the monkey picture as an avatar. They say "you can't use that, I bought it - look at this blockchain". I say "no I bought it - look at this piece of paper in the drawer". In general in society we would then have a court case and a judge would decide, and the police would enforce it. In this case - nothing. There's literally nothing the "owner" can do. If you can't enforce your ownership, in what sense do you own anything?

Similarly, you can get a reproduction of a Van Gogh which would functionally be the same painting hanging on the wall. One of the fundamental value propositions in art is the history, in that discrete examples of art are representations of cultural history and historical artifacts themselves. By purchasing a piece of history the buyer becomes part of the history through its provenance. That is the difference between owning an original and a copy that is attempted to be emulated by art nfts.

Whether or not it will be successful is a different question, though the most prominent ones will probably remain collectable to some degree purely because they represent the first iteration of a historical precedent (digital scarcity in art).

There's an interesting documentary on Netflix called Made You Look that deals with a lot of similar issues to this subthread.

Basically a scammer hired a master forger to create new/"original" paintings in the style of a few abstract expressionists (Rothko, Pollack, Motherwell). They came up with a fake provenance and sold them to a prestigious New York gallery for 25 years, making millions of dollars. The gallery then resold them to rich people for even more money.

They consulted the top experts in the world to authenticate them and no one raised any doubts.

Everyone was happy for a long time until the scam fell apart. They interviewed one of the people who purchased a fake painting and had hung it on her wall for years. She was furious.

As a nice little kicker, one of the attorneys on the case has a bunch of these paintings (which had been sold for millions a piece) hanging in his office.

There's a little blurb here https://en.wikipedia.org/wiki/Knoedler#Art_fraud_scandal_and...

In 2021, I don't think you can treat NFTs and GME and other confusing/contrived aspects of the economy as separate in any way.

The reality is that money, on the whole, is becoming more and more meaningless.

The world still needs something that fulfills the promise of cryptocurrency, even if it's a little distracted right now.

> The reality is that money, on the whole, is becoming more and more meaningless.

Probably because of low interest rates, huge QE and now the public knows the system is rigged against them.

Yes! All crypto people are 100% behind NFTs. Therfore i can say: 'Am I the only one who sees the interest in NFTs as an indictment of the whole crypo scene?'

You are not even trying. Lets change crypto to apples and NFTs to thieving.

"Thieves were caught eating apples ==> All apple eater are behind thievery."

> things only have value because they are artificially scarce

Of course scarcity can (rightly) influence value, on the other hand, think of tulip bulbs and the year 1637.

Or housing

> Or housing

You can live in an over-priced house that you've bought.

I'm struggling to think of uses for an over-priced tulip bulb, other than one Spring's worth of flowering (maybe)...

The word "value" is wrong.

E.g. oxygen has value, even if not scarce.

I wish economists refrained from using the word "value" for concepts that are not that.

> oxygen has value, even if not scarce

Q: How much did you pay for the oxygen you personally used in the last 24h?

> Economic value is not the same as market price, nor is economic value the same thing as market value. If a consumer is willing to buy a good, it implies that the customer places a higher value on the good than the market price. The difference between the value to the consumer and the market price is called "consumer surplus". It is easy to see situations where the actual value is considerably larger than the market price: purchase of drinking water is one example.

https://en.wikipedia.org/wiki/Value_(economics)

> It is easy to see situations where the actual value is considerably larger than the market price

Unless you are poorly and/or in hospital, there is no price for (breathing) oxygen? If there's zero price how would one propose to determine the value?

If I am deprived of oxygen I'd spend all of my available resources on getting it. Same for water, food etc.

You're using the word "artificial" in at least two different ways here.

The US dollar is artificially scarce. What inherent value does it have?

The inherent value is that if you pay taxes in the US you need dollars to pay them with.

Not only that, but any debt in the US can be paid in dollars. Like, I can bring a stack of $20s to my landlord and they just have to accept them. They don't have to accept BTC or ETH or even Mastercard.

This is also part of the "artificial" value of the dollar in the sense that it requires enforcement by the US gov and banking systems to remain useful. In-game currency is also useful, but that does not give it inherent value, in any meaningful sense of the word.

I mean, sure. But if we're only saying things are valuable because the US government enforces it, that's a strange bar. So movies and tv shows aren't valuable?

My issue was with the original comment's ambiguous use of artificial, not really value. He was drawing a connection between crypto as "artificially scarce" and an "artificial bubble".

I agree that people can value movies and tv shows, which in some sense therefore actually has more inherent value than the dollar.

I see it differently. Are online casinos an indictment of the internet? NFTs are just an application.

At least crypto kitties was fun

The NFT (Erc721) technology has started and will continue to disrupt so many parts of life that it is nearly unfathomable.

The technology was championed through artistic channels and we're still very early which is why it is the majority of the attention.

Some of these NFTs have intrinsic value simply for being the firsts/help create upon a technology that will continue to permeate through our culture and livelihood.

disrupt how?

There are many ways, right now the media focuses on the artistic disruptions.

https://twitter.com/darrenrovell/status/1435967697913880580

Never before have artists had this much control of their ip.

I'm not following your argument unless your definition of "disrupt" is simply "to make more expensive".

Then you are not interested in finding out answers that do not agree with you. It is very clear that IP ownership has been disrupted with several positive, value-added mechanisms. This is no longer an opinion.

Yeah, I still just don't get it. That whole twitter feeds looks like a hunt for a greater fool.

This doesn't seem like artists controlling their IP, to me it seems like another method of sales that lets them tap into essentially a pineapple fund. Those who made money in crypto, sloshing around the excess, making it look bigger and bigger.

In the most general way I would say NFTs allow for a more granular monetization of things. If you look at the history of finance it's a step by step progression to monetize smaller and more abstract things. It went from monetizing parcels of land (farmers paying a tithe), goods (farmers selling their own crops), services (people selling their labour), financial assets (selling future cash flows of a company or person), royalties (ownership rights to art, technology, patents, etc) down to ideas and bits of code (NFTs).

As you say we've been doing this for centuries. Why do we need NFTs? What specific problem(s) do they solve?

They are not solving a problem. They are creating a new market. Maybe in the long term this new type of market will be a benefit to society or maybe people will lose interest.

I bought a house. I paid an escrow company a hefty fee to essentially hold a pile of money in a trusted way while the property was under contract.

Now imagine we transfer ownership of the house to a DAO tied to an NFT. American law allows corporations to be governed by software. So the house is nominally owned by a Wyoming DAO LLC, which gives management rights to whoever holds an NFT on the blockchain.

We’ve legally tied control of the property to an NFT. If you want to sell me the house, we no longer need to transfer control of the property, we just exchange the NFT. Instead of using an escrow company, we can use an off the shelf smart contract which holds the escrow and automatically governs most common cases.

The escrow smart contract can defer any out-of-band disputes to a mutually agreed upon private arbitration entity. We’re not confined to local law, and can choose whatever private legal system we want from anywhere in the world. Simply point the smart contract at the arbitrator’s public address. Imagine being able to use Delaware Chancery Courts instead of a corrupt Louisiana rural parish.

When the property is an NFT, we can now borrow against it by directly accessing a global market of DeFi capital. No more paying the bank and mortgage services 1%+ of spread. Simply construct the mortgage as a smart contract, which controls ownership over the NFT. No more worrying about local judges interfering with foreclosures. Default on the mortgage is now a much simpler and faster eviction process since the homeowner is legally just a tenant of the DAO.

Those individual mortgage smart contracts can now be packaged and pooled, with the risk tranches in such a way to maximize capital efficiency. Again none of the massive frictions that existed n 2008, where foreclosures went slow as molasses because formal title and liens got lost in byzantine county clerks across the country. No fraud where banks and mortgage brokers stuff structured credit pools with crap. Every mortgage pool is instantly auditable but anyone using on-chain data. Foreclosures can be executed in real time and capital rebalanced instantly. That drastically reduces the risk of a cascading series of failures from a hidden pool of risk that we saw in 2008. It also allows for much higher leverage in the financial system, as margin calls can be made much faster and 24/7.

>No more worrying about local judges interfering with foreclosures.

What stops the judge from just saying "this smart contract is unenforceable, the NFT doesn't decide who owns the house"?

Said judge would be overturning 50 years of American corporate law, which gives LLCs extremely wide leeway in determining their bylaws.

Could some two bit local judge try it? Sure, but it would ultimately get taken to the Supreme Court. And given the current composition of SCOTUS it’s very unlikely they’d vote to weaken corporate property rights.

If you’re worried about legally recognized LLC DAOs losing their rights to residential property, than you should also be worried about private equity firms who are buying residential SFHs also having their property appropriated. Seems like a pretty big long shot to me. This is America, property rights are pretty sacrosanct.

Sure, but if I'm worried about a "corrupt Louisiana rural parish", it doesn't seem like an NFT shields me much. I can get relief by taking my case to a higher court, but that's the same thing I can do with a regular mortgage. That corrupt judge isn't going to be like "oh, you have an NFT, my hands are tied" - if he wants to mistreat you, an entry in a distributed ledger isn't going to stop him.

A judge is a lot more likely to twist the language in a legal contract than he is to outright appropriate property that's not even being legally transferred. The latter would be immediately reversed by an injunction in a higher court, and the lower judge would be remanded, possibly removed from office.

I can't find a single instance in American history of real property being outright appropriated by a court outside eminent domain.

But won't there also be a legal contract in the NFT case, defining who is allowed to live in the house, what their obligations are, and under what circumstances they can be evicted?

No. There's only an LLC who's bylaws state that the managing member is whoever the holder of record on the blockchain is. Effective transfer of the property is affected purely in crypto space through transfer of the NFT, possibly within a smart contract.

(Of course the smart contract can be coded with the option to defer to a human arbitrator in the case of dispute, but that doesn't even have to be a duly appointed judge. It's just an address on the blockchain that we point to. Almost certainly we'd pick an arbitrator that respects crypto title.)

The only way for the fiat legal system to pierce this scheme is to either invalidate the LLC in the Wyoming court system or to directly appropriate title to the real property from the LLC in the local county. Both are pretty unlikely.

> it would ultimately get taken to the Supreme Court

If the SCOTUS takes your case. Which it doesn't do often.

This falls into the central conceit of crypto "I can avoid laws" I think you'll find that laws are harder than you think, and less forgiving of clever loopholes like this.

Frankly, I don't know why less regulation on most people's largest purchase is considered a good thing.

You also don't really understand the cost drivers. The escrow company should have cost maybe 1%. You didn't have to do that at all. You could have offered to skip escrow, given cash directly to the seller and recover from them if the contract goes sideways.

You also don't understand real estate law. >Default on the mortgage is now a much simpler and faster eviction process since the homeowner is legally just a tenant of the DAO.

It is easier to evict a foreclosee than a tenant in most jurisdictions.

> one of the massive frictions that existed n 2008, where foreclosures went slow as molasses because formal title and liens got lost in byzantine county clerks across the country.

2008 moved slowly for two main reasons. 1, politically, no one wanted to move fast. 2, the mortguages were all chopped up, sub contracted, etc, and it was unclear who had rights to forclose on the house because of teh mounds of subsequent obligations.

Sending some people to jail, probably.

None of them have intrinsic value. The word "intrinsic" has meaning, and this ain't it.

My guess is you will be able to look back at this comment in a couple of years and see why it was clear that some NFTs do have intrinsic value.

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