Artificial scarcity for infinite supply
Disclaimer: I’m not invested into NFTs (Non-Fungible-Tokens) in any way, shape or form — I just find this fascinating. NFTs have been in the news in the last few weeks, I’ve seen them come up in a few different conversations. The name is obscure and the meaning is too… so let’s break it down. Fungible just means a true commodity, replaceable by something identical.
Examples of fungible things are: bitcoin, dollars, water
Examples of non-fungible items: art, land, people
The core of Non-Fungible-Tokens is to take the blockchain technology used in Crypto Currencies to create unique tokens that represent “ownership” of some other property or content. It’s a little like buying a ticket to a concert, your ticket is a token that represents your right to use the seat for the show.
I first ran into NFTs a few months ago, the first introduction for me was https://earth2.io. Imagine Google Maps where you can pay to assert claim on a websites representation of earth — let’s say we want to own a piece of Independence Hall in Philadelphia, well darn, someone else beat us to it — so we can either buy it from them, or settle for this nice piece of sidewalk across the street from it (highlighted in white below). Pricing is in Euros, so as of today claiming this piece of virtual side walk will cost us ~$60. For that hard earned cash, the Earth2.io blockchain records that we “own” the token representing that white square. Hurray, we’re now NFT investors. Want to buy it from me for $61?
Sure would be a shame if I launched a competing domain, http://earth3.io and sold the same sidewalk pixels for $40… and that’s what I don’t get, the beauty of digital is that scarcity goes away — copying bits is nearly free (see Pirate Bay). The value to digital property is intellectual property rights, copyright, patents, that sort of thing — without those being attached, NFTs are just a digital version of trading cards where the cost to print more is nearly zero.
I found it fascinating last week when a member of an on-line community I’m in posted that he had just put down $208,000 to purchase a clip of Lebron James dunking, the NFT purchase even made the news:
TopShots is an interesting model because it’s sponsored by the NBA so players and the league get a cut of any sales ($200M in sales at this point)— but you as the TopShot owner get zero intellectual property or licensing rights from your purchase — purely just the joy of saying you “own” one of the…~16,000 tokens the NBA sells of every clip. Because the NBA does own copyright to the clips, they can assure true scarcity if they choose, unlike earth2.0, but it’s still just virtual scarcity. Look, we can watch the same clip for free on YouTube here: https://www.youtube.com/watch?v=mdD3x8AbJTA. Unless the NBA is going to pull it’s content off every other platform and given the token owner control of the clip — what’s really being purchased here?
The screenshot above ties into the general defense of NFTs that goes something like this:
“Why is a photo of a baseball player and some stats printed on worth $$$? Same deal, just different medium. People think digital is somehow less valuable because we’re used to everything being easy to copy. But blockchain allows authenticity and ownership to be verified. Could you copy a GIF of one of these Top Shot moments and save it on your hard drive? Sure! Could you take a nice color photo copy of that Mickey Mantle rookie card? Sure could! In either situation, the fact you can reproduce the item doesn’t detract from the value of the original.”
But even for something NBA supported, what stops them from launching NBA_HighDef_TopShots next year? or NBA_VR_TopShots the following? If the value in NFTs is owning something exclusive, we can always make something just a bit more exclusive. The entire value proposition on all of the current NFT forms seems to be around “someone else will buy this from me later for more”…but.. why? This post may age like spoiled milk, but I just don’t see how there is a rational basis for the current form of NFTs.
Someone please let me know when I can buy actual intellectual property rights and get paid for it… something like https://www.hipgnosissongs.com/ (which is currently illegal to invest in from the U.S.)
Pretend this Meme says “NFTs explained” and you get my perspective:
https://i.imgur.com/qyVfBlh.mp4
What’s your take on this? Do you have a difference of opinion here? Please leave a comment and share your perspective!
