What are NFTs and why they have value?

What are NFTs and why they have value? Here is a small post on NFT’s. You can buy into the concept or not, but there is some logic in it.

So here goes:

Moreover, what is the difference between a person owning a Monet versus.. A large high resolution poster (or very carefully recreated clone) of a Monet?

I would say that this question has 3 answers on 3 levels.

1) A person who looks at a painting as purely visual. For them the light rays coming from the original and the light rays from the poster are indistinguishable. Hence this person will say “No, there is no difference”

2) A person who looks at art as a physical/historical/archaeological artifact. Maybe with some emotional metaphysical aspects like “Oh the artist actually touched this” – will say

“Yes there is a difference – art is a physical artifact, and a visual clone is not the same”

3) People who look at art as a status symbol, some of whom have have even resorted to stealing. Or buying stolen art, would say “Yes there is a difference, real is real, fake is fake. Even if you clone the material, the paint composition etc”

The NFT community falls into the group of 2 & 3.

In digital art, there are perfect clones.

In the real world there are no perfect clones. But still there have been art fakes made in history. Moreover, ones that needed extreme scientific evidence, to tell that they were not genuine. 

One prime example is the infamous clone of Mona Lisa that was very carefully recreated. Using wood, pigments and techniques dating to the 16th century.

Digital art collectors are not foolish. They know that images are not physical objects and they can be cloned 100%.

An NFT is not just an image or artwork – the image can easily be copied. Used as wallpaper, printed and profited from – you can do that with any art even today.

What people buy and sell as NFTs is a signed piece of immutable data on a blockchain. A transaction that has been signed by the creator. And the buyer and by cryptography. And cannot be forged or cloned on the blockchain it resides on. That transaction points to an immutable file somewhere (typically on IPFS) and declares who the owner is. An NFT is simply like a uniquely minted coin that lives on a cryptocurrency blockchain.

NFT trading and creation is a walled garden. Within that blockchain (and community) you can buy and sell them, for that cryptocurrency. Outside that they don’t have value. 

This may sound silly, but think about it from an economics perspective.

In a prison, cigarettes  (and even half smoked ones) are valuable, outside – they are cheap or worthless.

In India Rupees are valuable – but what can you do with Rupees in the USA. Unless you trade for dollars or goods with someone who will go to India to spend it?

Value is subjective – people have traded materials, artifacts, words, music, and lots of intangible things. In fact any sort of betting is essentially trading a prediction which is somewhere recorded. As being genuinely made by you.

Even ideas – patents – are sold. Which in some ways may feel ridiculous. Because it’s easy to reinvent an idea 100% independently (which is unlikely or impossible with physical art)

All of these things are only owned based on some “receipt”, “certificate” or “registration”.

None of which stop anyone from cloning it (except enforced laws)

In conclusion, in the NFT community, the unwritten law is that cloning is forbidden. So the community blacklists people who do this. All NFT communities insist on identity verification. It’s not so easy to thwart this, especially if you list art for high value. 

Artists, styles and pieces are well recognized. The walled garden needs to be protected by the people who live in it, so they do self policing.

Lastly, to think that cryptocurrency is not currency, or that NFTs aren’t “real” is to commit a fallacy. Furthermore, the same one that probably people who first encountered paper currency committed.

Ultimately, ownership of any artifact physical or otherwise is based on an authoritative record. NFTs happen to use a blockchain as the authority rather than human run governments, banks, certifiers etc. etc.

What are NFTs and why they have value?

Death of Nathan Bedford Forrest’s Brother.

What are NFTs and why they have value?