Recently there has been a lot of talk about NFTs (Non-Fungible Tokens) which have taken the world by storm. For some reason, people are spending millions of dollars in Ethereum for perpetually generated images of Monkeys, or even Flurks. Many people are not even sure what an NFT is. In this short essay, I hope to explain what an NFT is, and why it is this generation's Dotcom Bubble.
First, what is an NFT?
An NFT is a usage of blockchain technology. A certificate of Authenticity is stored on the blockchain (and in some cases) its root image data. It makes use of the signing feature in Blockchain Technology that is seldom known outside of its Cypherpunk roots.
In economic terms, consider the value of a copy of Led Zepplin IV signed by all of Led Zepplin. This obviously has a significant collectible value. However, in modern music the entirety of new releases are digital. MP3s, Flacs, and more make up this new-age of Post-CDs and post-tangibility.
Obviously, if you got a limited MP3 file that was digitally signed by Eminem, that would be of significant value. This is now possible with NFTs.
By signing a digital strand of 1s and 0s with the cryptographic signing of Ethereum Wallets, you actually can have an artist digitally sign works which are isolated to a single file!
The work of the NFT already has many practical use cases outside of collectability. For instance, in the upcoming proprietary service Meta —a Virtual Reality experience over Internet" NFTs have been used to sell "Virtual Real Estate" of various parts of the World Map. This is logged forever in Blockchain.
Now, NFTs in the common sense are sold on sites such as OpenAI. These proprietary services are not doing NFTs correctly. They are instead using their own servers to host the digital content, and the NFT is registered to a link on their backend. Thus, the NFT is entirely dependent on the continued existence of OpenAI, and all that is registered to the signature is a link.
Importantly, what NFTs AREN'T
NFTs are NOT:
- An ownership of copyright
- An ownership of royalty
- An ownership of rights over duplication
- An Ethereum Coin
- Any right over the content whatsoever
An NFT market sprung up seemingly overnight, with millions of people spending large sums of money misunderstanding entirely what they are purchasing. Perpetually-Generated Monkey Stickers seems to be the latest craze. Seeing all the people who have bought these NFTs of perpetually-generated monkeys are getting irate at people saving the image files.
The truth is that you don't own any rights over the image whatsoever. What you have bought is a signed copy of someone else's work. The signed copy of that album in the previous example does not mean you suddenly own the rights to distribution for Stairway to Heaven. No, instead you own the rights to the signature!
The certificate for authenticity on an image of a Monkey is the same collectible value as a Beanie Baby. You don't own the likeness of the Beanie Baby.
And now for a little history...
In the 1990's, a new and emerging technology had come about. It had existed for a few decades prior, but all of a sudden following the Personal Computer Revolution and the rise of early connections, the CERN Project of the World Wide Web was finally public. A hypertext concept, the World Wide Web suddenly came to be and was commercialized for the first time.
Hundreds of Technophiles would rush to build their own websites, with web access pretty much reaching its peak in 1997. During the decade which it was established, Hundreds of Thousands of companies would suddenly buy websites and become a Tech Startup.
Soon, random companies would be established, and they would be called things like Dingleberry. "A company with the name like Dingleberry doesn't sound very good. In fact, I can't even tell what it is they do."
Well, Dingleberry put enough money into themselves to get an SEO! They're actually on the New York Stock Exchange now, under the name Dingleberry.com! "Wow, they have a website? That sounds like big bucks. Woah, I just saw its front page. Yeah, this is a good investment. I own a 45% share of Dingleberry.com!"
As this continued, more and more tech startups began, with these people watching the rise of the technology completely misunderstand it. It was their misunderstanding of not only this, but the market, and the methods of Wall Street which led all these men to lose their money.
Tech startups came and went, earliest stages of Flash Animation being hosted, and people from all walks of life purchasing all the companies that had .com in their name.
What is happening now I say is exactly like the Dotcom Bubble. The people are completely misunderstanding what the emerging technology is (NFT), believing not only that there is automatic value in making the purchase, but the collectible nature of it is also of quality.
This really is the Dotcom Bubble merging with the Beanie Babies market.
Be wary, investor, because while this is the future (just like the World Wide Web), understand what you're buying first.