Twitter allows users to use NFT tokens in their avatars. This form is another public triumph… but there’s a problem. What is NFT?
This question can be answered in many ways. Twitter describes them as “unique digital items like works of art”, and the blockchain stores the proof of ownership. The definition of the new feature is also shorter in promotional materials: “digital objects you own.” This combination with an increase in capital inflow to the cryptocurrency markets where NFT tokens can be traded has triggered a real gold rush. The artist Beeple sold NFT tokens at auction last March for $69.5million. Refick Anadol is a digital sculptor who was one of The Alantic’s chosen artists to create the COVID-19 Memorial. He has made millions selling NFT editions from his studio’s work. Jonathan Mann lost his job in 2008 due to the financial crisis. He decided to create a song every day and started selling them online as NFT. This made it a profitable income.
NFTs have become popularized with memes over time and have become a marketing tool. Taco Bell sold “unique and iconic artwork that was inspired by our tacos.” Gap has released NFT images for its hoodies. The Wikipedia edit that was the first has been converted to NFT, and is now up for auction. Images of bizarre monkeys taken by Bored Ape Yacht Club from NFT native collections have been so popular that they are now valued at millions of Dollars.
NFT is incorrectly presented as a new type of digital art or unique technology. NFT ownership does not grant any rights to the intellectual properties underlying the belonging thing and it does not prevent anyone from downloading it onto their computer. NFT buyers get nothing other than a digital record, a type of “receipt”, for the object. This can be copied freely and without consequences.
Let’s not get too excited about crypto. We can also forget the legitimate question of why we should spend a fortune to see a monkey. These thoughts and questions distract from the important things. Let’s call them what they are: NFT is the first step towards securitizing digital assets. They transform digital data into speculative finance instruments. This paradigm shift is huge because computers are everywhere and everything is becoming digital assets – bank records, fitness bracelet data as well as analysis of the tone in work email texts. People began to live an online life. Next came the possibility to monetize all the attention this online lifestyle generates. Finally, all the digital results of this online existence can be monetized to create the same asset class as stocks, commodities, and mortgages for speculative investment.
NFT, a crypto-equivalent of Beanie Babies (a collection of plush toys made in 1990-2000) can go bankrupt. However, most Beanie Babies are now worth nothing. A stock market for digital data is a more frightening scenario. Digital assets are likely to become a new investment for the same reasons that financial professionals used to make bets on hurricanes, loans and payroll data. However, ordinary people can also become novice traders or financiers using computer data. This is, in some ways, the most honest turn of Internet age. Online business was a cultural phenomenon from the beginning. However, it was only interested to make money.
At least now, the real goal, the pursuit of wealth, is out.
You have a collection or art and want to insure it. You can create a list of the items that you want to insure. This could include a limited edition signed and signed by the author, or a grandmother’s brooch with jewels. A record of a brooch does not mean that it is a brooch. The entry is for a brooch. You can attach a photograph to the record to clarify the situation. NFT, as a value carrier, is similar to a record of grandmother’s brooch stored in an insurer’s safe. NFT is stored on blockchain. This allows anyone to verify and find it.
Let’s take the example of NFT Bipla which cost $69 million. The NFT has nothing to do the work of art, or what is traditionally considered to be it – a photograph that can be seen. The NFT points to where it can be viewed. This can lead to some problems. If the URL of an image file, a work of art, is moved or the server hosting it “falls”, then that file can be lost. Anyone with the URL can also view and download the image. Anyone who has access to the server where it is stored can modify, delete or add it.
NFT can sometimes be compared with receipts. You’ve probably seen Antiques Roadshow and know that vintage Rolexes with original packaging and sales receipts cost more. The receipt confirms the watch’s authenticity. To prove damages, you can present a certificate or assessment of the grandmother’s brooch to support your claim for authenticity in case of a house fire. NFT, on the other hand is a receipt. Buying such a receipt is similar to purchasing a packing list that describes the contents of the Rolex box without being able to actually get the watch.
Both have their benefits: while paying thousands of dollars to receive a receipt is ridiculous, receipts have always been an important part of the cultural sphere. Art, horse breeding, real property, and many other areas of human activity have always been subject to bureaucracy. You own a house because the contract of sale specifies that you are, and these documents confirm your ownership. Although it is somewhat disappointing to apply this principle, for example, to computer-generated images illustrating ugly monkeys, it may be because these images are unusual and new. There are stocks of companies. The possession of shares was previously confirmed with paper certificates. However, all records are now stored electronically. The ownership of shares is only formal. Investors cannot claim any inventory or office space at the company headquarters.
NFTs, in this sense, are not unusual or new. They appeal to value, origin and property rights through collective fantasies of paper documents. This is not surprising. These seem unusual and new because it is not common for a simple reference of an object to cost money, regardless of whether it is a thing or computer data.
In the financial sector, however, such belief is normal. A security is an instrument that grants ownership. It can be purchased or sold, and it has a monetary value. Shares are a type or securities that grant the right to a percentage of ownership in a company. The company purchases a portion of its assets and divides them into shares. Shares are then sold to the public as equity securities. The new owners have limited rights to participate in the company’s activities. They can vote, for instance, after the purchase. However, shares are mostly bought as speculation. Investors hope to sell them later at a profit. Same goes for bonds. These securities are not based on property, but debt. Commodity securities are financial instruments that are tied to the raw material’s market value.
Each case refers to ownership of the asset that underlies the security, e.g. a commodity or company interest, and not the security itself. These proxy relationships enable financiers to manipulate the value of agricultural products and companies without needing to store them. A futures contract, for example can help a commodity trader bet on a decline in demand for corn, pork, or oil.
The security’s asset usually has an intrinsic value. This is the company’s material and technical base, cash and stocks, as well as future sales. Oil, corn, pork and pork have consumer value as fuel and food. In the 1970s, however, financiers started inventing securities that had less obvious intrinsic value. Mortgage pools are the most well-known of these securities. They were used as the foundation for “mortgage backed securities”. This type of financial instrument was the primary cause of 2008’s financial crisis. It contained high-risk loans and was therefore in danger of collapse.
Even mortgages can have an obvious benefit to the world. The rapid rise in securities has been marked by the securitization mortgage loans. Securities are any kind of assets that provide security. Weather derivatives are available to shippers to protect them against storm damage and delays. Goldman Sachs issued a bond that is guaranteed by future royalties from Bob Dylan’s song catalogue. The first box office futures for films were on the market. However, they were later banned because of concerns about insider manipulation. Whatever regulation is in place, any asset that can be considered an asset can be used as the basis of a security. If any asset could be used as the basis of a security, why don’t you use images? The world was a feast for financiers long before programmers even thought of it.
Some techies today believe that NFT could become an integral part the third-generation Internet, Web 3.0. It’s a promising pseudonym and a “call-and-pretend” theology for the brave new world crypto applications – The Securitized Internet.
Let’s compare Web 1.0 and Web 2.x from a financial perspective. The era that saw marketization is the first era in the Internet’s history. The World Wide Web was created as a non-commercial distributed publishing platform that researchers, professionals, hobbyists, and others could use to communicate. In the middle of the 1990s, companies were able to use the Internet to expand their business and to sell products online. It was possible to sell familiar products and services in a totally new way. Many people took advantage of the opportunity and started to speculate about its potential. We got Amazon, eBay, Craigslist, Pets.com and HomeGrocer, and also the dot-com crash.
Online life was becoming a way of life by the middle of 2010. Blogger and WordPress make it easy to publish text. Flickr and YouTube do the same with photos and videos. MySpace, Facebook, and Twitter all offer social diversity. Smartphones have moved the Internet from tables to pockets, handbags, and everywhere in between. Everyone can use it if they need it (and even permanently). These Web 2.0 companies were often free to use their services. How did they make their money?
It is easy to see why: Web 2.0 companies have built a platform for selling ads and charging small fees for engagement and attention. The Internet was “monetized”. The act of monetization was once a mysterious goal for bankers but has now become an everyday activity and a natural goal to ordinary “creators” such as you and me.
The Web 2.0 giants’ huge success shifted America’s center of interest from Wall Street to Silicon Valley. Microsoft was the sole software company in the top 10 global firms at the time of Web 1.0. Large investment banks also assisted with the introduction of start-up tech companies to the stock market. Now, all five of the top five technology companies have been in existence for over two decades. Although some were concerned about the industry’s decline, few were particularly concerned that financial institutions had lost the monumental status they enjoyed. Although financiers and bankers have had a bad reputation for being fraudsters, techies have made them idle parasites who produce little and seek out other people’s inventions. The web entrepreneurs are builders who create tools for leisure and work, and completely new ways to live online.
Although search engine and social media moguls may have been able to make money off the popularity and utility of their products, their true goal was to gain wealth and power, just like bankers and hedge fund investors before them. The only difference is that they constantly claim that they want to “change the planet for the better.”
This cover, or facade, is falling apart. Web 3.0, the third era of the Internet’s internet, is a return to the ideallism of Web 2.0 and the brazen, undisguised greed that Wall Street displays. There are still hints of the old web that is focused on content and self-expression. Individual creators of NFT have found ways to make good money from their work, even if it doesn’t last very long. However, the general trend is that both technologists creating crypto platforms and tools and users trading and buying blockchain assets are trying to make money, despite a rapidly increasing speculative value.
The uniqueness of digital content was boosted by Jack Dorsey, Twitter founder and former CEO. As with all securities, the NFT’s value is determined not by its underlying asset but by how much it could potentially be worth. An NFT buyer may not be interested in the utility, symbolic or symbolic value of a monkey in the same way a futures trader does not want to supply pork meat. NFT buyers don’t just bet on data at tokens’ heart, they also have a stake in the asset class – the idea of a lot of people wanting to purchase securities that are digitally backed, rather than tangible goods or corporate stocks. They expect blockchain and cryptocurrency technologies to have huge value potential.
The “sellers” of blockchain create clever, esoteric names for their structures and designs that require special knowledge. Technically, the digital asset record can be stored in a regular database. Web 3.0 advocates insist that blockchain is required for public accounting records that aren’t controlled by anyone. Smart contracts and autonomous decentralized organizations perform a similar function by using computer code that ensures compliance to the rules. This desire for decentralization is slowly becoming centralized control. This is largely due to NFT markets such as OpenSea, which is responsible for NFT avatars in Twitter, and cryptocurrency wallets such as MetaMask that are expanding at a pace characteristic of Web 2.0. The decentralization of Web 3.0’s Web 2.0 is not important as long as enough people believe in its speculative value.
This value will continue to increase and Web 3.0 will grow in size and impact, so it is important to keep in mind the fate of securitization within financial markets. The history of securitization in financial markets shows that the level of abnormality increases over time. First, shares in corporations, then loans, mortgages, weather, and finally Bob Dylan. Most NFT today are based on digital art, including pictures and music. Sometimes, even small programs that run on the blockchain. Other forms include NFT on colors and national parks, stars (the ones that are in the sky), references or recorded songs, as well as NFT related to chicken wings.
This is only the beginning. Every single thing has a “digital” side. Every tweet, every text message, every photograph, and every email have it. All banking transactions, all orders given to Alex/Alice etc., every scan and email of the parcel on its way to the addressee. Every record of the COVID-19PCR test in your State Services account, every box of chicken wings purchased from the relevant eminent producers. Every item we own or use can have a digital response. Digitization can make even things you don’t own or give access to digitally. It’s amazing that a group of Olive Garden enthusiasts started selling NPTs tied with the locations of individual restaurants within this chain.
Digital assets can be exciting or frightening. The absurdity of digital assets will only increase in any case. All this will lead to the inevitable result – Web 3.0, the golden age of Web.0 – which will see the securitization and recording of every aspect human life. Imagine how scared or excited you will be when that happens.