NFTs

[Beorning]

Question: could you guys explain to me what exactly these "NFTs" are? How do they work, where's the (supposed) profit and why are they controversial?

What I gathered when reading online is that they involve paying a lot of money for... nothing, basically? Some form of ownership rights to digital content people can download anyway? Also, you pay for these in cryptocurrencies, which aren't exactly enviroment-friendly (due to generating power usage)?

Help me out, please...

[Oniya]

So, a quick Google of 'Why are NFTs controversial' brought me to this article.  In addition to the climate concerns you mentioned, there's quite a bit of fraud that goes on,  Those versed in NFTs have coined the term 'rug-pulls' to refer to the practice of hyping an NFT (or cryptocurrency) in order to boost the perceived value, so that the promoters can then cash in and disappear.

Then, since all NFT stuff is done online, there's incidents like this one:

In December 2021, a CryptoPunk NFT was sold for US$532 million. In a way, it would have been a record sale in the art world, but it wasn’t. Reports reveal a major issue in the transaction. The value of the NFT was actually pushed up by a single user who was both the buyer and seller.

This would be like someone sending a shill to an auction at Sotheby's while also attending and getting in a bidding war with that shill over the very piece they'd put up for auction.  Crazy, huh?

[Sara Nilsson]

https://www.youtube.com/watch?v=YQ_xWvX1n9g

it is long but is a very good video explaining the whole trainwreck.

[Vekseid]

So, since Bitcoin, it's been possible to store data in the blockchain, and execute things called smart contracts - basically code that gets run on every verifier's copy of the blockchain. Originally on Bitcoin this feature was never taken much advantage of, but on Ethereum it's been taken to whole new level.

For NFTs specifically, you can create 'unique' (from the perspective of the blockchain) tokens that whose value is whatever people are willing to pay for it - thus it is a token (which can be literally anything that can fit inside a single block on the chain) which is non-fungible (its value is dynamic and not necessarily equal to other tokens).

"So what's to stop me from making a duplicate token with the same data?" It might be encrypted, and there might be some value attached to the original piece of data in some manner - the token itself is unique and can't be replicated. That said, I haven't heard of anyone doing this so far. More realistically, you might run afoul of copyright and sometimes trademark laws, depending on the token and its data. Rumor is this is why Yotube Vanced got taken down - supposedly their NFT plans were a joke but lawyers and humor don't always mix.

"So what's to stop me from reading the token and just copying it anyway?" Nothing, except for the encryption post above.

"What stops the original token minter from minting more of the same token?" Nothing. This has happened already and there are lawsuits over this.

"What stops someone minting a token for something that isn't theirs?" Nothing. This is a frequent problem.

"What stops someone from bidding on their own tokens?" Nothing. This is a common tactic to increase the hype behind a token.

"These smart contracts sound complicated. What stops scams?" Nothing. This is an active problem.

"These smart contracts sound complicated. What stops bugs?" Nothing. Minters are often forced to re-mint chains of tokens because of such bugs.

"Storing data on the chain has to be expensive, isn't it mostly links? What guarantees that the person hosting it will continue to host it?" Nothing.



So where does the money come from? Why are they still a thing?

Some people use them as stand-ins for fundraisers of various sorts. It's another pool where a lot of dumb money is available, after all, and it helps legitimize the medium to support these fundraisers.

The overwhelmingly vast majority don't make money at all. You spend money to mint a token, then wonder why no one is buying. It relies on the weight of your own social networking leadership to do so - just like anything else.

Of the fraction that remains, the people earning money in NFTs look to do so by finding the bigger fool. The one who will ultimately be left holding the bag when the interest in that token (or NFTs entirely) collapses.



This goes deeper of course, and there's a lot more to say - NFT gaming for example. This is a big rabbit hole.

Sara beat me to linking "Line Goes Up" - that is an excellent video if you have a couple hours to spend, and it has mostly faced feckless, deceptive criticism.

[greenknight]

could you guys explain to me what exactly these "NFTs" are?

The simplest answer? A scam. NFTs are a scam.

[MiraMirror]

I'd also like to add that from my experience, the people who do these NFTs are willing to use other peoples' hard work to profit themselves.  About three months back, we were seeing NFT-bros auctioning NFTs of Vtubers' Twitch/Youtube links, just to make some quick bucks.  Veibae, Zentreya, Ironmouse, and some of the big indie Vtubers.  Nothing's off-limits in these cases.

[Sara Nilsson]

I'd also like to add that from my experience, the people who do these NFTs are willing to use other peoples' hard work to profit themselves.  About three months back, we were seeing NFT-bros auctioning NFTs of Vtubers' Twitch/Youtube links, just to make some quick bucks.  Veibae, Zentreya, Ironmouse, and some of the big indie Vtubers.  Nothing's off-limits in these cases.

https://esports-news.co.uk/2022/01/17/james-stephanie-sterling-caddicarus-youtubers-criticise-nft-tokens/

https://www.eurogamer.net/gaming-youtubers-have-had-their-likenesses-stolen-and-sold-as-nfts

In one case they even put Alanah Pearce on a cover that made it look like she had done a Blacked porno. All of course without permission.

[Beorning]

Wait, wait, guys. Let's start with the basics.

If I understand correctly, NFTs are encrypted bits of data containing... something. And people pay money for these. So... why do people pay for them? And where do the art, Youtube links etc. come in?

[Oniya]

'Why' is more or less 'because it's shiny, and Influencer X is doing it.'  You might as well ask why people shelled out craptons of money on Beanie Babies or Cabbage Patch Kids - only those things at least had a physical 'thing' that you could point to.  There used to be a joke back in The Day about people buying the Brooklyn Bridge.  Why would they do that?  Because the seller convinced them to do it with some clever patter.

If you read the links in Sara's last post, the art comes from 'where-ever someone can get it' - whether or not they're entitled to it.  Buyer beware and all that.  Art is at least something vaguely tangible, although verification can be an issue.

[TheGlyphstone]

The analogy I saw once was that a NFT is like paying $100 million dollars to have your name engraved on a plate that says 'Official Owner of the Mona Lisa'. You can't actually touch the Mona Lisa, move it, sell it, or do anything with it, but if someone happens to look in the supply closet where that plaque is stored, they will know that you own the painting. Not sure how accurate that is, it seemed a bit convoluted.

[Beorning]

I'm watching that Line Goes Up video. Very interesting, although I'm still not sure I understand everything.

Let's say I put my drawing on DeviantArt. Then, I decide to go into NFTs with that drawing. Can I create multiple tokens with a link to my drawing (having the buyers co-own it) or is it 1 token = 1 thing?

[Vekseid]

Anyone can in theory create a token for anything, as long as it's within the size limit specified by the chain. So you can mint any number of tokens.

[Oniya]

Using DeviantArt for something intended for an NFT would be a bad idea, due to the rights granted to the website by the act of putting art up on it.  Something like Patreon, where you have a bit more control, would be better.

[Beorning]

Just to be clear: I *am* not planning on going into NFTs 

I'm just trying to understand this whole thing. Veks said that there are lawsuits about the same token being minted multiple times - is it the same as minting many tokens for the same piece of digital art (or whatever)?

Another question I have is: how do people sell these tokens after minting? If an artist mints a token, do they sell it by some sort of auction or..?

Anyway, this whole thing seems insane. Paying for NFTs is, basically, paying for a packet of data that's of no actual use - and hoping that, sometime in the future, somebody else will buy it off you for more? Am I correct? If so, it's... just stupid. It's like, I don't know, buying somebody's soul on eBay (I think one person created such an auction a few years ago)...

[Regina Minx]

If you don't have two hours to kill:

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

[Regina Minx]

I'm watching that Line Goes Up video. Very interesting, although I'm still not sure I understand everything.

Let's say I put my drawing on DeviantArt. Then, I decide to go into NFTs with that drawing. Can I create multiple tokens with a link to my drawing (having the buyers co-own it) or is it 1 token = 1 thing?

I don't think so...and I have no idea for certain because I barely understand this myself but I think that each entry in the NFT database has to be represented by a unique image. But if you had dozens or hundreds of variants of the image on your DeviantArt...say a different hat on the portrait...that would be unique enough for the purposes of the blockchain.

[MiraMirror]

Ah right, I should also mention that NFTbros have been making a habit of stealing bigger accounts on Twitter to promote their own stuff.  The most recent example of this happened earlier today, with Butch Hartman's account getting yoinked.

[Vekseid]

I don't think so...and I have no idea for certain because I barely understand this myself but I think that each entry in the NFT database has to be represented by a unique image.

A given marketplace may block such duplicates, that is its choice. However that is entirely at the discretion of the marketplace. There is no singular 'NFT database' as such.

[Regina Minx]

A given marketplace may block such duplicates, that is its choice. However that is entirely at the discretion of the marketplace. There is no singular 'NFT database' as such.

Within each blockchain doesn’t the associated file have to be unique to reference an individual token?  I know that the same image could be used between different blockchains but within a single block chain database is what I meant. Or is the associated image even more useless than I thought and no uniqueness is required even within a blockchain?

[Vekseid]

The token is the only unique thing about it, but the token is just some cryptographically signed data.

There is nothing preventing multiple tokens from referencing the same picture. There are lawsuits over this.

See the video you posted. When you buy an NFT, you are not buying the picture. You are buying 'the position in the queue' as he puts it. What goes in that position can be anything. 10,000 positions could be 10,000 different images, or 10,000 copies of the same image.

[Regina Minx]

Fair. I thought the image or whatever was a reference to the token and could only reference a unique token but this is why I preface literally everything I post in this thread with “this is how I think it works.”

[Beorning]

When you buy an NFT, you are not buying the picture. You are buying 'the position in the queue' as he puts it. What goes in that position can be anything. 10,000 positions could be 10,000 different images, or 10,000 copies of the same image.

       

So what's the freaking point??? People are paying all this money for nothing?

*mind blown*

[Saria]

       

So what's the freaking point??? People are paying all this money for nothing?

*mind blown*

The point is make crypto “worth something”, so all the bros who bought in early have a new pool of idiots they can offload it onto.

[Regina Minx]

       

So what's the freaking point??? People are paying all this money for nothing?

*mind blown*

As the video I posted puts it, telling people that you're selling them literally nothing is unlikely to generate a lot of sales. However, selling people ownership of a unique database position in which each database position is part of a blockchain and represented by a visual image to give a symbolic association with the purchase and ownership of that position...well that sounds like a bit more than nothing.

[Beorning]

OK, having watched the shorter video, I think I understand the basics now. And yeah... this whole concept is nuts. It's bizarre that people spend their money on these things...