NFTs Explained - The BIG Problem.

did you know that thanks to nfts people have managed to sell a recording of them farting for over 400 a picture of homer simpson combined with pepe the frog for 320 000 and even a simple five word tweet for 2.9 million dollars in my entire 11 years of making youtube videos i have not seen a single trend catch on in the way that nfts are doing right now so here's what the fuss is all about why nfts are both a phenomenal invention and becoming a problem and then the right way to invest in nfts i'm even gonna unbox one myself so it starts with this the way that our economy has always worked is we earn money and then we use that money to buy goods but the more time that we're spending on digital apps like instagram and the more time we're spending on digital games like fortnite the more our purchases are shifting away from physical goods and more towards digital goods but that poses a problem digital goods are harder to monetize like let's say that i make a beautiful physical painting and i try to sell it to people at a market now even if someone tries to copy my painting or even if they go as far as to take a photo and then make a print of my design it doesn't really affect me too badly because you'll be able to tell from the brush strokes that i have the original but if i was a digital artist who painted that same piece on my ipad for example then the second i released that art publicly as a jpeg image i would lose almost all control over that asset it can be copied with something as simple as a right click and those copies will look 100 identical to my original so my art will no longer be a scarce resource and thus its value drops dramatically this is what nfts are trying to change see the word itself stands for non-fungible token if something is fungible it means it's interchangeable like cash where your ten dollar note can be completely interchanged with my ten dollar note and so if something is non-fungible it means it cannot be interchanged nfts are using blockchain technology to be able to indisputably verify who has the original of a digital product there are a one-of-a-kind token of ownership that has a value and so when people are buying and selling nfts what they're really doing is buying and selling their virtual ownership over something and to be honest there are five distinct advantages to these tokens like if you're a designer you've got a new way to earn and for fans of your art they've got a new way of supporting you instead of just transferring you a donation by paypal they're actually getting a piece of your history in exchange nfts put an end to really long-written boring contracts replacing them with smart contracts which in a really streamlined way define the rules by which the nft operates so for example a designer can set a rule such that every time their item is bought or sold they get a 20 cut nfts are a dream for a lot of collectors i get the fact that they don't really do anything might sound kind of dumb but there are plenty of people who gain pleasure just from knowing that they have something rare i mean just think of trading cards why did this charizard pokemon card sell for 220 000 it wasn't because it was good at battling it's just hard to find and so through nfts the fact that you can be the sole owner of the token for a digital piece authenticated via a system that's completely fraud proof you can see how it might give collectors a similar thrill and then four it's not just creators anyone can make money off nfts because they can be traded each nft has a market value and we've seen plenty of cases like the one of this crypto punk face over here which was originally bought for less than 30 and has recently sold for 11.75 million and i guess even more importantly is that the nft market is seen as a fairly accessible place to invest it's not like the stock market which can be intimidating for a lot of people and it's not like the housing market where you might need hundreds of thousands of dollars to just get started and then finally nfts give people a sense of belonging i think a big part of why people buy them is to feel like they're in a club for example there's one collection of nfts called the board ape yacht club 10 000 unique ape images for which the cheapest one is actually going for over 200 000 right now but the point is you'll regularly find that the people who own these nfts will use these photos everywhere kind of like a symbol of pride that they're part of this exclusive group and then on top of that the creators of this board ape yacht club they even organize physical get-togethers for people who own board ape nfts although this is the exception more than the rule though but this leads me on to the problem the extremely problematic problem and hey if you are finding this useful then a sub to the channel would be fun to i totally believe in the core technologies and the potential benefits of vanities but the more i've learned about how they're actually being used the more i'm genuinely scared about what's to come so just to start with nfts are not what a lot of people think they are if you own the nft of a piece of work whilst you do have ownership you're still not the owner having an nft of something isn't giving you rights over that design it doesn't mean you can then start printing t-shirts with it on and selling them all it does is just proves that it's your property but just through one specific way of measuring what counts as your property usually for a little more than bragging rights so this is pretty much what you can expect your nft unboxing experience to look like you've got a nice shiny box and uh [Music] nothing and even though nfts may have started out being all about respecting the artists as of right now the majority of them are not being made by the lone creator pouring their heart and soul into their work they're actually being made by opportunistic business people who just see them as a very quick way of making money like just as an example take the lazy lions another collection of 10 000 unique unbelievably expensive avatars just as ugly as the apes but now in lion form and if you look closely at this collection you'll start to notice something that certain facial features keep reappearing and that's because lazy lions are not the work of a passionate individual who's genuinely trying to design creatures with real character their mass-produced computer-generated cash grabs someone has realized that nft apes are selling like crazy so they've just picked another animal drawn 50 or so individual pieces and then used a simple piece of code that says make me 10 000 unique avatars using a combination of these pieces there's no soul here at all it's just how do we take advantage of this trend to make piles of cash or another example one of the most ridiculous concepts i've seen people talk about recently is this idea of buying digital land there's a real site you can go to called next earth who've mapped out the entire planet and for the right price will allow you to buy any area of land you want and no joke hundreds of thousands of people have swarmed to this platform with the simple logic that well physical land is worth so much now and if the world is moving digital then digital land is going to be worth loads right but they're forgetting a very simple fact physical land has a purpose you might want to live there you might want to set up a factory or a server what exactly am i going to do with my digital land go online camping it doesn't make any sense and i mean these next earth people who are they do they own the earth is it really in their power to sell other people's plots of land no anyone can set up one of these platforms as a matter of fact there are already loads of them and so if you're buying let's say the taj mahal on next earth which by the way would cost me close to twenty thousand dollars that doesn't mean you own the taj mahal it doesn't mean you even virtually own the taj mahal all it means is that you have a token that proves it's your property on one of these unlimited number of platforms it's the literal equivalent of paying an entire year's worth of savings to buy land in a video game except it's not even a game and things get far worse when you see the way that some celebrities have used and been used by nfts twitter is full of thousands of famous people dropping nfts left right and center offering incentives to fans who buy the super expensive ones like getting to meet them for example and that might sound fine but you can tell that it's coming from a place of just trying to cash in almost all of these celebrity nfts are little more than just repurposed photographs from the past and the perks that come with them are really things that should be worth hundreds but through the current hype of nfts they're trying to get fans to pay tens of thousands for but this is nothing compared to what i saw the other week so stan lee the now deceased creator of marvel apparently came back from the dead to promote an nft collection and at this point it is just sad this guy died in 2018. i highly doubt his final words were please sell this stupidly expensive set of jpeg images to extort my closest fans people are trying to use nfts to get rich off the fact that he's dead and they're always trying to make it seem like because stan lee loved embracing new tech that this is what he would have wanted yeah fun fact stanley also loved charity to the point where he set up his own foundation how about raising money for that it would definitely be a better way of preserving his legacy that's for sure the exact same thing happened with the painter bob ross he was known as the guy who inspired the joy of painting with his beautiful sweeping landscape art and would you believe it his legacy is now being honored with well this by the funko figure company and to be honest i think this goes against everything the guy stood for the company claims his legacy was about investing in paintings no it wasn't he wanted people to buy paint and make the art he would openly say that he didn't want his name to be used for mindless generation of profit and yet after his death they're using every bit of goodwill that his name had left to effectively print money and most importantly he was a huge fan of nature and the environment and nfts are not helping that and this is my next thing so you might know that there's a whole load of different cryptocurrencies that you can own there's bitcoin litecoin ethereum well almost all nft transactions are made using ethereum and ethereum is pretty bad for the environment it uses a security mechanism called proof of work which is incredibly thorough and is a big part of what makes nfts so fraud proof but the problem is that this kind of security requires a lot of computers around the world to be contributing their power to this network and that uses a lot of energy however there's an even more fundamental question around nfts as you've seen they're basically just a way to create artificial scarcity for something to make something that was previously unlimited limited but in the vast majority of cases is that really a good thing i'll give you an example so a few months ago the gaming company ubisoft came out with a brand new scheme ubisoft quartz they're telling players that in their future titles they'll be able to earn one-of-a-kind in-game items that are also tradable nfts and you could say well that's great that gives me something really tangible to aim for while playing and that's awesome i can sell that nft for money because it is a completely unique item that no one else will have but if you think about it there's two possible outcomes here either these nft items are really limited and they do become valuable at which point you're basically dangling a carrot in front of millions of players to encourage them to play for an unhealthy amount of time just for a chance to win and making the games less inclusive and fun for the people who can't afford to do that now the other alternative situation is if there's tons of these nft items to go around for everyone and they're all kind of similar just with one slight unique change which i think will be the more likely outcome but then the nft aspect of it becomes meaningless now i get that there's a brag factor of owning an nft for let's say an in-game weapon and if this nft made you the owner of that weapon and it meant that you could take that weapon from this game to the next game and still keep ownership of it that's a legitimate value add but it won't do that as much as companies try to make it seem like it owning an nft is not like owning a physical product if i own a real hoodie i can wear that hoodie at home i can wear that hoodie while playing sports i can wear that hoodie on holiday but the complex nature of different games using different engines and physics systems and bases of code means that there's no way in hell that i'd be able to take my gun that i earned from playing ten thousand hours of one call of duty game for example into the next call of duty game it's value will live and die in the game that i've earned it from just like if it wasn't an nft item and was just a normal in-game one the reason it's an nft is just so that ubisoft can make more money by taking a percentage cut every time the nft is bought and sold and it's not just unethical tactics nfts are also riddled right now with illegal activity for every nft you see from a legitimate artist you'll find 10 from people who've never made a drawing in their entire life and who've basically just taken an already copyrighted piece of work and tokenized it maybe pixelating it on the way to try and sell it off as retro art like i found a marvel collection the other day where you can buy a one-of-a-kind superhero from the avengers there's only one of each and so you can end up paying the equivalent of three million dollars just for one character except marvel didn't make these these aren't officially licensed products so if i actually bought this gif for three million dollars not only would i be immediately bankrupt but i would also be breaking copyright infringement law all that said if you do still want to buy nfts but just have no idea where to start this is not financial advice by the way but this is the way i look at it i think that for a lot of nfts right now the majority of their perceived value is coming from the technology they're based on as opposed to what they actually are i think people are buying these nfts because they're trending right now and because there's a good chance that the future of web and the potential metaverse we're moving towards we'll use this technology to be able to prove who owns what digital goods but in the exact same way that it's difficult to transfer an in-game item from one game to the next game i think there's an extremely slim chance that any nft you own now will still have a use at all in these theoretical future worlds there will likely be a point soon where nfts are not trending people might get bored there might be a next thing they move on to these nfts of jpeg images might just reach a saturation point because of the sheer amount of people making them right now and assuming that that does happen at some point all of that value that's coming from the cool factor that speculative perception of what an nft should be worth just because it is an nft will fall by the wayside and you will be left with your virtual ownership of a jpeg image so as of right now i am personally staying well away people do make money off nfts don't get me wrong but the sheer volatility of them makes buying them right now much more akin to gambling than investing what most art experts would say is buy an nft if you like a piece of art and you specifically want to support that artist if you're going to buy something buy something that if the whole market crashed tomorrow you'd still be glad to own as it made you a part of that community and that history but seriously i mean in an age where you can literally pay someone 20 on fiverr to design any art that you want and then the art actually belongs to you as opposed to paying 20 million just to be able to say that you have technical ownership but not even be the real owner of a piece of art that is just one of ten thousand similar pieces this nft craze definitely feels like a bubble that is about to pop now while i don't necessarily think that nfts are the right thing to shop for right now if you are just generally finding yourself shopping online more and more recently i've just found the perfect tool for you karma this video sponsor for those of you who don't know karma is a free app and browser extension that ensures that you never miss a price drop or coupon code when shopping online i've actually just used it to get this fancy ergonomic keyboard that fixes some wrist strain i've been having karma alerted me that the keyboard was on sale and was running out first so i had to jump at the opportunity a long story short karma streamlines the entire shopping experience for starters karma lets you save items from your favorite brands across multiple sites and devices which allows you to keep track of all price alerts in one global shopping cart it scans the entire web for all available coupon codes and then automatically applies the best one for you at checkout it gives you cashback from select brands that you can choose to either cash out or donate but my number one favorite thing is that you can mark an item that you want and then karma will notify you when it next comes back in stock if it's out of stock or when it next goes on sale so you can make sure that you always get it for the lowest possible price so hit the link in the description to try it karma has both a browser extension and an app for android or ios both completely free to see the very unusual package i just received from the escobar's click here or for 21 heavenly inventions that are saving the planet click here my name is aaron this is mr who's the boss and i'll catch you in the next one

Channel: Mrwhosetheboss

Views: 3,361,688

Keywords: nft, explained, what is nft, what are nfts, nfts, crypto, cryptocurrency, expensive, invest, tech, technology, mkbhd, marques brownlee

Id: 0pWTRsztTtY

Length: 17min 7sec (1027 seconds)

Published: Wed Feb 02 2022