nfts

src/_posts/2021-05-02-nfts.md

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+---
+title: >-
+    NFTs
+description: >-
+    Some thoughts about.
+tags: tech crypto
+---
+
+NFT stands for "non-fungible token". The "token" part refers to an NFT being a
+token whose ownership is recorded on a blockchain. Pretty much all
+cryptocurrencies, from bitcoin to your favorite shitcoin, could be called tokens
+in this sense. Each token has exactly one owner, and ownership of the token can
+be transferred from one wallet to another via a transaction on the blockchain.
+
+What sets an NFT apart from a cryptocurrency is the "non-fungible" part.
+Cryptocurrency tokens are fungible; one bitcoin is the same as any other bitoin
+(according to the protocol, at least), in the same way as one US dollar holds as
+much value as any other US dollar. Fungibility is the property of two units of
+something being exactly interchangeable.
+
+NFTs are _not_ fungible. One is not the same as any other. Each has some piece
+of data attached to it, and each is recorded separately on a blockchain as an
+individual token. You can think of an NFT as a unique cryptocurrency which has a
+supply of 1 and can't be divided.
+
+Depending on the protocol used to produce an NFT, the data attached to it might
+be completely independent of its identity, even. It may be possible to produce
+two NFTs with the exact same data attached to them (again, depending on the
+protocol used), but even so those two NFTs will be independent and not
+interchangeable.
+
+## FUD
+
+Before getting into why NFTs are interesting, I want to first address some
+common criticism I see of them online (aka, in my twitter feed). The most
+common, and unfortunately least legitimate, criticism has to do with the
+environmental impact of NFTs. While the impact on energy usage and the
+environment when talking about bitcoin is a topic worth going into, bitcoin
+doesn't support hosting NFTs and therefore that topic is irrelevant here.
+
+Most NFTs are hosted on ethereum, which does have a comparable energy footprint
+to bitcoin (it's somewhat less than half, according to the internet). _However_,
+ethereum is taking actual, concrete steps towards changing its consensus
+mechanism from proof-of-work (PoW) to proof-of-stake (PoS), which will cut the
+energy usage of the network down to essentially nothing. The rollout plan for
+Ethereum PoS covers the next couple of years, and after that we don't really
+have to worry about the energy usage of NFTs any longer.
+
+The other big criticism I hear is about the value and nature of art and what the
+impact of NFTs are in that area. I'm going to talk more about this in this post,
+but, simply put, I don't think that the value and nature of art are immutable,
+anymore than the form of art is immutable. Perhaps NFTs _will_ change art, but
+change isn't bad in itself, and furthermore I don't think they will actually
+change it all that much. People will still produce art, it's only the
+distribution mechanism that might change.
+
+## Real, Useful, Boring Things
+
+Most of the coverage around NFTs has to do with using them to represent
+collectibles and art. I'd like to start by talking about other use-cases, those
+where NFTs are actually "useful" (in the dull, practical sense).
+
+Each NFT can carry some piece of data along with it. This data can be anything,
+but for a practical use-case it needs to be something which indicates ownership
+of some internet good. It _cannot_ be the good itself. For example, an NFT which
+contains an image does not really convey the ownership of that image; anyone can
+copy the image data and own that image as well (intellectual property rights be
+damned!).
+
+A real use-case for NFTs which I'm already, if accidentally, taking advantage
+of, is domain name registration. I am the proud owner of the
+[mediocregopher.eth][ens] domain name (the `.eth` TLD is not yet in wide usage
+in browsers, but one day!). The domain name's ownership is indicated by an NFT:
+whoever holds that NFT, which I currently do, has the right to change all
+information attached to the `mediocregopher.eth` domain. If I want to sell the
+domain all I need to do is sell the NFT, which can be done via an ethereum
+transaction.
+
+Domain names work well for NFTs because knowing the data attached to the NFT
+doesn't actually do anything for you. It's the actual _ownership_ of the NFT
+which unlocks value. And I think this is the key rule for where to look to apply
+NFTs to practical use-cases: the ownership of the NFT has to unlock some
+functionality, not the data attached to it. The functionality has to be digital
+in nature, as well, as anything related to the physical world is not as easily
+guaranteed.
+
+I haven't thought of many further practical use-cases of NFTs, but we're still
+in early stages and I'm sure more will come up. In any case, the practical stuff
+is boring, let's talk about art.
+
+[ens]: https://nfton.me/nft/0x57f1887a8bf19b14fc0df6fd9b2acc9af147ea85/7558304748055753202351203668187280010336475031529884349040105080320604507070
+
+## Art, Memes, and All Wonderful Things
+
+For many the most baffling aspect of NFTs is their use as collectibles. Indeed,
+their use as collectibles is their _primary_ use right now, even though these
+collectibles procur no practical value for their owner; at best they are
+speculative goods, small gambles, and at worst just a complete waste of money.
+How can this be?
+
+The curmudgeons of the world would have you believe that money is only worth
+spending on goods which offer practical value. If the good is neither consumable
+in a way which meets a basic need, nor produces other goods of further value,
+then it is worthless. Obviously NFTs fall into the "worthless" category.
+
+Unfortunately for them, the curmudgeons don't live in reality. People spend
+their money on stupid, pointless shit all the time. I'm prepared to argue that
+people almost exclusively spend their money on stupid, pointless shit. The
+monetary value of a good has very little to do with its ability to meet a basic
+necessity or its ability to produce value (whatever that even really means), and
+more to do with how owning the shiny thing or doing the fun thing makes us
+stupid monkeys very happy (for a time).
+
+Rather than bemoan NFTs, and our simple irrationality which makes them
+desirable, let's embrace them as a new tool for expressing our irrationality to
+the world, a tool which we have yet to fully explore.
+
+### A Moment Captured
+
+It's 1857 and Jean-François Millet reveals to the world what would become one of
+his best known works: _The Gleaners_.
+
+{% include image.html dir="nfts" file="gleaners.jpg" width=5354 %}
+
+The painting depicts three peasants gleaning a field, the bulk of their harvest
+already stacked high in the background. The [wikipedia entry][gleaners] has this
+to say about the painting's eventual final sale:
+
+> In 1889, the painting, then owned by banker Ferdinand Bischoffsheim, sold for
+> 300,000 francs at auction. The buyer remained anonymous, but rumours were
+> that the painting was coveted by an American buyer. It was announced less than
+> a week later that Champagne maker Jeanne-Alexandrine Louise Pommery had
+> acquired the piece, which silenced gossip on her supposed financial issues
+> after leaving her grapes on the vines weeks longer than her competitors.
+
+I think we can all breathe a sigh of relief for Jeanne-Alexandrine.
+
+I'd like to talk about _why_ this painting was worth 300k francs, and really
+what makes art valuable at all (aside from the money laundering and tax evasion
+that high-value art enables). Millet didn't merely take a picture using paints
+and canvas, an exact replica of what his eyes could see. It's doubtful this
+scene ever played out in reality, exactly as depicted, at all! It existed only
+within Millet himself.
+
+In _The Gleaners_ Millet captured far more than an image: the image itself
+conveys the struggle of a humble life, the joy of the harvest, the history of
+the french peasantry (and therefore the other french societal classes as well),
+the vastness of the world compared to our little selves, and surely many other
+things, each dependant on the viewer. The image conveys emotions, and most
+importantly it conveys emotions captured at a particular moment, a moment which
+no longer exists and will never exist again. The capturing of such a moment by
+an artist capable of doing it some justice, so others can experience it to any
+significant degree far into the future, is a rare event.
+
+Access to that rare moment is what is being purchased for 300k francs. We refer
+to the painting as the "original", but really the painting is only the
+first-hand reproduction of the moment, which is the true original, and proximity
+to the true original is what is being purchased. All other reproductions must be
+based on this first-hand one (be they photographs or painted copies), and are
+therefore second and third-hand.
+
+Consider the value of a concert ticket; it is based on both how much in demand
+the performance is, how close to the performance the seating section is, and how
+many seats in that section there are. When one purchases the "original" _The
+Gleaners_, one is purchasing a front-row ticket to a world-class performance at
+a venue with only one seat. That is why it was worth 300k francs.
+
+I have one final thing to say here and then I'll move onto the topic at hand:
+the history of the work compounds its value as well. _The Gleaners_ conveys an
+emotion, but knowing the critical reaction of the french elite at its first
+unveiling can add to that emotion.
+
+Again, from the [wiki entry][gleaners]:
+
+> Millet's The Gleaners was also not perceived well due to its large size, 33
+> inches by 44 inches, or 84 by 112 centimetres. This was large for a painting
+> depicting labor. Normally this size of a canvas was reserved for religious or
+> mythological style paintings. Millet's work did not depict anything
+> religiously affiliated, nor was there any reference to any mythological
+> beliefs. The painting illustrated a realistic view of poverty and the working
+> class. One critic commented that "his three gleaners have gigantic
+> pretensions, they pose as the Three Fates of Poverty...their ugliness and
+> their grossness unrelieved."
+
+Now scroll back up and see if you don't now have more affinity for the painting
+than before you knew that. If so, then the face value just went up, just a
+little bit.
+
+[gleaners]: https://en.wikipedia.org/wiki/The_Gleaners
+
+### The Value of an NFT
+
+With this acknowledgement of _why_ people desire art, we can understand why they
+would want an NFT depicting an artwork.
+
+A few days ago an NFT of this image sold for almost $500k:
+
+{% include image.html dir="nfts" file="disaster-girl.jpg" width=2560 %}
+
+Most of the internet knows this image as _Disaster Girl_, a meme which has been
+around since time immemorial (from the internet's perspective, anyway, in
+reality it was taken in 2007). The moment captured is funny, the girl in the
+image smiling as if she had set the fire which blazes in the background. But, as
+with _The Gleaners_, the image itself isn't everything. The countless usages of
+the image, the original and all of its remixes, all passed around as memes on
+the internet for the past 14 years, have all worked to add to the image's
+demand. _Disaster Girl_ is no longer just a funny picture or a versatile meme
+format, it's a piece of human history and nostalgia.
+
+Unlike physical paintings, however, internet memes are imminently copyable. If
+they weren't they could hardly function as memes! We can only have one
+"original" _The Gleaners_, but anyone with a computer can have an exact, perfect
+copy of the original _Disaster Girl_, such that there's no true original. But if
+I were to put up an NFT of _Disaster Girl_ for sale, I wouldn't get a damned
+penny for it (probably). Why was that version apparently worth $500k?
+
+The reason is that the seller is the girl in the image herself, now 21 years old
+and in college. I have no particular connection to _Disaster Girl_, so buying an
+NFT from me would be like buying a print of _The Gleaners_ off some rando in the
+street; just a shallow copy, worth only the material it's printed on plus some
+labor, and nothing more. But when Disaster Girl herself sells the NFT, then the
+buyer is actually part of the moment, they are entering themselves into the
+history of this meme that the whole world has taken a part in for the last 14
+years! $500k isn't so unreasonable in that light.
+
+### Property on the Internet
+
+I don't make it a secret that I consider "intellectual property" to be a giant
+fucking scam that the world has unfortunately bought into. Data, be it a
+physical book or a digital file, is essentially free to copy, and so any price
+placed on the copying or sharing of knowledge is purely artificial. But we don't
+have an alternate mechanism for paying producers of knowledge and art, and so we
+continue to treat data as property even though it bears absolutely no
+resemblance to anything of the kind.
+
+Disaster Girl has not, to my knowledge, asserted any property rights on the
+image of herself. Doing so in any real sense, beyond going after a handful of
+high-value targets who might settle a lawsuit, is simply not a feasible option.
+Instead, by selling an NFT, Disaster Girl has been compensated for her labor
+(meager as it was) in a way which was proportional to its impact on the world,
+all without the invocation of the law. A great success!
+
+Actually, the labor was performed by Disaster Girl's father, who took the
+original image and sent it into a photo contest or something. What would have
+happened if the NFT was sold in his name? I imagine that it would not have sold
+for nearly as much. This makes sense to me, even if it does not make sense from
+a purely economical point of view. Disaster Girl's father did the work in the
+moment, but being a notable figure to the general public is its own kind of
+labor, and it's likely that his daughter has born the larger burden over time.
+The same logic applies to why we pay our movie stars absurd amounts even while
+the crew makes a "normal" wage.
+
+Should the father not then get compensated at all? I think he should, and I
+think he could! If he were to produce an NFT of his own, of the exact same
+image, it would also fetch a decent price. Probably not 6 figures, possibly not
+even 4, but considering the actual contribution he made (taking a picture and
+uploading it), I think the price would be fair. How many photographers get paid
+anything at all for their off-hand pictures of family outings?
+
+And this is the point I'd like to make: an NFT's price, like in all art, is
+proportional to the distance to the moment captured. The beauty is that this
+distance is purely subjective; it is judged not by rules set down in law by
+fallable lawyers, but instead by the public at large. It is, in essence, a
+democritization of intellectual property disputes. If multiple people claim to
+having produced a single work, let them all produce an NFT, and the market will
+decide what each of their work is worth.
+
+Will the market ever be wrong? Certainly. But will it distribute the worth more
+incorrectly than our current system, where artists must sell their rights to a
+large publisher in order to see a meager profit, while the publisher rakes in
+the vastly larger share? I sincerely doubt it.
+
+### Content Creation
+
+Another interesting mechanism of NFTs is that some platforms (e.g.
+[Rarible][rarible]) allow the seller to attach a royalty percentage to the NFT
+being solde. When this is done it means the original seller will receive some
+percentage of all future sales of that NFT.
+
+I think this opens some interesting possibilities for content creators. Normally
+a content creator would need to sell ads or subscriptions in order to profit
+from their content, but if they instead/in addition sell NFTs associated with
+their content (e.g. one per episode of their youtube show) they can add another
+revenue stream. As their show, or whatever, begins to take off, older NFTs
+become more valuable, and the content creator can take advantage of that new
+increased value via royalties set on the NFTs.
+
+There's some further interesting side-effects that come from using NFTs in this
+way. If a creator releases a work, and a corresponding NFT for that work, their
+incentive is no longer to gate access to that work (as it would be in our
+current IP system) or burden the work with advertisements and pleas for
+subscriptions/donations. There's an entirely new goalpost for the creator:
+actual value to others.
+
+The value of the NFT is based entirely and arbitrarily on other's feelings
+towards the original work, and so it is in the creator's interest to increase
+the visibility and virality of the work. We can expect a creator who has sold an
+NFT for a work, with royalties attached, to actively ensure there is as
+little gatekeeping around the work as possible, and to create work which is
+completely platform-agnostic and available absolutely everywhere. Releasing a
+work as public-domain could even become a norm, should NFTs prove more
+profitable than other revenue streams.
+
+### Shill Gang
+
+While the content creator's relationship with their platform(s) will change
+drastically, I also expect that their relationship with their fans, or really
+their fan's relationship with the creator's work, will change even more. Fans
+are no longer passive viewers, they can have an actual investment in a work's
+success. Where fans currently shill their favorite show or game or whatever out
+of love, they can now also do it for personal profit. I think this is the worst
+possible externality of NFTs I've encountered: internet fandom becoming orders
+of magnitude more fierce and unbearable, as they relentlessly shill their
+investments to the world at large.
+
+There is one good thing to come out of this new fan/content relationship though,
+and that's the fan's role in distribution and preservation of work. Since fans
+now have a financial incentive to see a work persist into the future, they will
+take it upon themselves to ensure that the works won't accidentally fall off the
+face of the internet (as things often do). This can be difficult currently since
+work is often tied down with IP restrictions, but, as we've established, work
+which uses NFTs for revenue is incentivized to _not_ tie itself down in any way,
+so fans will have much more freedom in this respect.
+
+[rarible]: https://rarible.com/
+
+### Art
+
+It seems unlikely to me that art will cease to be created, or cease to be
+valuable. The human creative instinct comes prior to money, and we have always
+created art regardless of economic concerns. It's true that the nature of our
+art changes according to economics (don't forget to hit that "Follow" button at
+the top!), but if anything I think NFTs can change our art for the better. Our
+work can be more to the point, more accessible, and less encumbered by legal
+bullshit.
+
+## Fin
+
+That crypto cat is out of the bag, at this point, and I doubt if there's
+anything that can put it back. The world has never before had the tools that
+cryptocurrency and related technologies (like NFTs) offer, and our lives will
+surely change as new uses of these tools make themselves apparent. I've tried to
+extrapolate some uses and changes that could come out of NFTs here, but I have
+no doubt that I've missed or mistook some.
+
+It's my hope that this post has at least offered some food-for-thought related
+to NFTs, beyond the endless hot takes and hype that can be found on social
+media, and that the reader can now have a bigger picture view of NFTs and where
+they might take us as a society, should we embrace them.