- Now to the latest trend
that's sweeping the internet. - So called NFT. - [Reporter] They're now
selling for huge bucks. 69 million dollars. - So what's behind this latest craze? - That is the question to ask. - Okay, so there's some
super strange stuff happening online right now, and I need to tell you about it. First, look at this tweet. The first tweet ever tweeted
in the history of Twitter. The tweet was by Jack Dorsey. - I'm one of the co-founders of Twitter. - And this tweet was
somehow just purchased for $2,915,835.47. - (laughing) You serious? - And it's not just a tweet. Just last month a single jpeg
sold for 69 million dollars. The NBA is selling little
moments of basketball games for hundreds of thousands of dollars. This is all sorts of digital things that people are purchasing
a version of them for lots of money. There are three simple letters
that you need to understand to understand what's going on here. Those letters are NFT. - Now to the latest trend
that's sweeping the internet. - What is exactly is an NFT? - So called NFT. - Do you all in the chat
understand what an NFT is? - Does that stand for not safe for work? What does this mean? - Why would you pay for an NFT when you can look at it for free? - Is this a gigantic bubble
just waiting to burst? - I believe in this space
with my whole heart. - I'm just fascinated by it, all of it. - This story is much bigger than a $600,000 cat gif. Or a three million dollar tweet. It's a story about human psychology and how the way we
value things is shifting because of technology. A technology that some people think may revolutionize our society, while at the same time
accelerating the climate disaster. It's really nuts, it's all
of these things together and I wanna explain it
to you, so let's do this. ♪ Now what the hells an NFT ♪ ♪ Apparently cryptocurrency ♪ ♪ Everyone's making some money ♪ - [Announcer] Oh that was insane officially insane Lebron James. - NFT stands for non fungible token. Okay, there it is, that's the explanation. Non fungible token, makes sense right? The video's over now. No, one of my issues with this topic is that people throw around
things like blockchain, crypto art, ledger, NFT, and they just expect me to understand what they're talking about, and I didn't. Okay, I'm gonna talk about
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to find out more. So, fungible, let's talk about the word fungible. It's this very specific word that economists use, it has a very precise definition. I wanna use a different word
for fungible for a second. Let's just use the word replaceable. Non-fungible means non-replaceable, you can't replace it, there's
only one of them, it's unique. Non fungible. Let me give you an example of something I feel very strongly about. Let's say you want to
buy an orange jacket. This is really absurd, I've actually never counted these before. - Stop it, get some help. - You wanna buy an orange
jacket from Uni Qlo. You go on the internet,
and a jacket costs $39. If you purchase one of
these jackets for $39, you don't care what specific
jacket they send to you, they're gonna make thousands
of jackets in your size, send them to stores, send them to people, and they will send one to you, you don't care which one it is. The jacket is fungible, it's replaceable. As long as you get one
that's identical to the rest, it's worth the same to you,
they're interchangeable. However, let's talk about
one Uni Qlo orange jacket that has been with me
for a very long time. This is the original, and for those of you who don't know I sort of have a strange
attachment to this jacket. I just love it, I love the color, I feel like an identity with this thing. And it's sort of starting to disintegrate, but I love it. And I kind of fell in love. This jacket is not replaceable. If I went onto the website and paid $39 for a Uni Qlo orange jacket that was this exact same model, it would not be this jacket. This jacket is non-fungible. It is the only one on
the planet that exists. It has emotional value. It has significance. It is a very valuable
thing because it is scarce. There is only one of them, it's valuable to me at least. And I kind of fell in love. Okay, we can put these down for a second. Everything in our economy
is one or the other, fungible or non-fungible. A sack or rice is fungible, you just want a sack of rice, you don't care which one it is. The Mona Lisa, non-fungible,
there's only one. Unsurprisingly, non-fungible things are way more valuable
than fungible things. To that's the NF in NFT, non-fungible. Now let's talk about
the T, which is token. This is a very internet-y word. And to explain this, I
have to explain something I have avoided explaining
for a very long time, the blockchain. Luckily, there's a way to understand this, and I'm going to make it
as painless as possible. Let's say I want to buy
three slices of pizza from my friend Anna. She charges me six dollars
for these three slices. I don't use cash anymore, so I pull out my debit card, my bank card, and I swipe on her little terminal. As soon as I swipe this card
a message is sent to my bank and it says hey, Johnny, who
has an account at your bank wants to spend six dollars on pizza, and that money needs to go to Anna's bank. This is like the bread and
butter of what a bank does, all day, they document every transaction that comes in from all their customers, they send out money to the other banks, and at the end of the day they have a tally of all the money that went out of your
account and into your account and they can give you a number. They can say based on all
of these transactions, you have $50 in your bank account. And so when that request
comes in as I swipe my card my bank is like okay, based on all of your transactions you have $50 in your account, I can send six dollars
to Anna's bank, approved. And they approve the transaction. Once that money comes into Anna's bank, Anna's bank is doing the same thing. They're like oh cool, she had $80 and now she has $86, and they add it to her record. More and more your money is
just a number on a screen. It's the result of a
bunch of transactions. You don't barter with physical things, you don't use cash as much. So the bank keeping meticulous records of every transaction
becomes really important. We trust the bank to do this correctly. So thank you banks. Banks and other middle men have been keeping stuff
like this running smoothly for centuries. I mean kind of smoothly. - [Reporter] The NASDAQ,
everything and more has been completely wiped out. - [Reporter] It was the
worst day on Wall Street. - What in the world is
happening on Wall Street? - There have been a few bumps in the road. With the rise of the internet,
people started to wonder. Is there a way that we
could do this same thing, coordinate this same transaction of transfer of money between
two people without the bank? The result is a very clever
concept called the blockchain. The blockchain. The blockchain fulfills the
same thing the bank was doing, but instead of doing this
privately on my bank account and talking to Anna's bank, all of the transactions
are actually recorded publicly on the internet. ♪ You're going surfing on the internet ♪ So let's redo this
example in a crypto world. Anna charges me six crypto coins for my three slices of pizza. I go to swipe my proverbial bank card to say yes, I want to pay you six coins. Instead of the bank seeing
that request for a transaction and trying to validate it, it goes on to this public record where a bunch of people's computers all around the world are keeping track of every single transaction
of everyone always. If I don't indeed have the
six coins in my account to pay Anna, all of the people's computers who are keeping track of
every single transaction will notice that there's a discrepancy. They'll be like whoa whoa whoa dude, you don't have six coins. We're looking at every transaction ever and you don't have six coins. Your transaction is rejected. If I do have six coins, all of the computers
looking at the public record will see that request for a transaction and they'll be like yep, approved. You have six coins and
now Anna has six coins. And they'll write that transaction
into the public record. Now Anna having those six extra coins is now the business of everybody, everybody now knows that. The point here is that the group verifies the legitimacy of every transaction by keeping an eye on every transaction to make sure that it adds up. Okay I'm getting hot at this point, so I'm taking off my orange jacket. Okay, so you're wondering what does the blockchain
and this public record have anything to do with cat gifs that sell for $600,000? Well I'm about to tell you. So in my pizza example we
talked about blockchain as a way to verify currency transaction. I pay you this much, you pay me this much and everybody knows how much everybody has because it's all public. But this is where it starts to bend my mind a little bit, what if we apply this to something that isn't money or currency? Let's say one day you're
just looking at the ledger and the ledger's like Johnny wants to give Anna six coins. Okay he's got six coins, approved. And then a transaction comes up that's like a Malaysian businessman wants to give three million dollars worth of coins to Jack Dorsey in exchange for a little token, or digital certificate that says that the tweet is now somehow owned by the Malaysian businessman. The only thing that the
blockchain cares about is does the Malaysian businessman have three million dollars worth of coins? And so a bunch of computers
all around the world look at the whole entire
list of transactions and say like yeah, this guy has more than three million dollars
worth of coins, approved. They approve the transaction, and now it is written in a public record that is unalterable that says that this Malaysian
businessman owns this tweet. The token has been
transferred to somebody new, non-fungible token, NFT. And if there's anything
that gets human psychology to value something, it's if an entire group
validates that it's real and that there's only one of them. There are tens of thousands
of NFTs of all kinds. Some music is being given tokens, lots of art is being minted as tokens and being bought and sold, and then of course there's. - NBA Top Shot. - Who's taking advantage of this. - These highlight moments, these Top Shot moments from
your favorite NBA players have been turned into non-fungible tokens. - Jesse made headlines the other day when he paid $208,000 for
a Lebron James Top Shot. - It's the weirdest thing. As soon as humans have enough abundance to have their basic needs met, food, shelter, warmth, et cetera, the next frontier is to create value in things that have no inherent value. The value turns into psychological hype. Excitement around a certain thing. We've been doing that forever, I mean the whole art industry is based on the idea of a bunch of people deciding that this painting, this little bit of
canvas and wood and paint is valuable, and thus it is valuable. The only different about now is we now have the technology to do this in a non-physical way using this very sophisticated
internet technology that is maturing very quickly. Okay, so this is a lot of hype, and I know you're thinking like cool, there's a bunch of rich people online buying and trading digital art, and there's millions of
dollars worth of cards, I thought you said that this was gonna have the potential
to change the world. And I'm getting there, but first I need to talk about the crazy
flip side to the NFT fad. The reality is that the technology that is the backbone for all of this, the blockchain stuff that
we've been talking about relies on the public ledger
thing that I talked about. That is the sort of heart
and soul conceptually, but mechanically, like physically what it relies on is computers doing a bunch of little calculations all day and night forever. These computers aren't real computers, they don't have any memory,
or screens, or anything. All they do is just make
little micro-calculations all day, all night. Most NFTs are stored on a
blockchain called Ethereum. And as of now, in early April
2021 when I'm filming this, the Ethereum blockchain is using 33 terawatt hours of electricity. And you're like what's a
terawatt hour of electricity? That's the same amount of power as the country of Serbia. A reminder that generating electricity usually comes from power plants that are burning
fossil-fuels, that are putting carbon into the atmosphere which is a big freaking problem. - [Narrator] Facing a manmade
disaster on a global scale. - The power consumption
of the Ethereum blockchain is exploding, it quadrupled
in the like eight months, and it is showing no sign of slowing down. It is a lot of energy. And to think that that much energy is not being used to
like, move people around or produce things, it's used to crunch numbers in a weird computer warehouse somewhere so that somebody can buy a fake token of a thing that we only, oh man, I can't, it's mind blowing. It's such an ironic moment where it's like this is all digital, it's all fake, it's not real, but it's having deeply real world effects. I just wanna finish this video now, talking about what this might mean for our world going forward. This is definitely hype,
and that's the whole point. I mean these speculation
markets are all about hype. We see this all the time
with new technologies and new things that
people get excited about. And they swarm it with their investments and the price goes up, and then something happens, for example. - Come on Uncle Phil,
this is the '90s man. - What's a web page,
something ducks walk on? - How nice of you to join us. - On equal value, so cash
in on today's new economy. - It's the '90s, it's hammer time. - In the '90s the internet was taking off and people were just realizing that you could make money on the internet. You could make big
businesses on the internet. The stock market was
surging, 400% in five years mainly fueled by so much
hype and excitement around these new internet companies. - [Reporter] Break the record
as America's longest boom. - The new economy, is a boom without end? - This rise peaked in March of 2000, and then the bubble burst, and a lot of these
companies either went under or completely lost all of
this excitement valuation that they had. - Saw it didn't you, it was down some. - But, did that mean that
the internet went away? Did that mean that internet
businesses didn't come back? No, companies went on
to reshape our world. Right now I think we are probably in that stage of NFTs. It's hype, it's novel, it's exciting, but what it's doing is
it's pushing our minds to think differently about how we validate and verify things. If I buy a house, there is a whole thick stack of paperwork
and a bunch of middlemen to make sure that it is very clear who owns the house, and how that money gets transferred from one person to another. It is a nightmare of an experience. If suddenly technology
existed that took away the centralized middle man and made transactions between people able to be authenticated, verifiable, and much smoother, that
could change our world. I'm not here to say if
the bubble's gonna burst, or whatever, I don't know. I just know that this is a crazy moment where we're getting our
heads around a new technology and what it means, and eventually will adapt. This won't be crazy, this
won't be novel anymore, prices will go down, but the technology that
allowed it all to happen will probably stick around. (soft music)
NFTs are the next Beanie Babies, change my mind
Anything can have value as long as enough people think it has value.