NFTs: Not Fully Thought-out

NFTs?

For those unfamiliar with NFTs, they are tokenized, digital certificates attesting to ownership of a digitized collectible. That definition is pretty packed with nuance and we’ll unpack it below. But for those who would like a less “digital” description: Imagine that I had a collectible, such as a sketch created by Gary Larson. Imagine, further, that Gary Larson provided me with a certificate of ownership over the sketch. It is this certificate of authenticity that is the “NFT”. If we now carry this over into the digital realm, that digitized sketch can be copied and used by many, several times over. However, the information on the certificate attesting to my ownership remains the same and is the object of value in the world of NFTs. It can be traded and broken up into fractions.

Are Collectibles and Certificates Valuable? Yes!

I want to make clear from the outset that both collectibles and certificates of authenticity/ownership can have value — even digital ones. I am the last one to argue that value is objective and I believe that proponents of NFTs spend much time arguing against a giant strawman when they argue in favor of NFTs by making a case for the value of intangibles and “digital art”. Indeed, I have spent much time and energy using Subjective Value Theory to explain to “intrinsic value” folks why Bitcoin has value. There is no doubt in my mind that Michael Jordan’s signature has value, a certificate of ownership for The Mona Lisa has value, a fraction of such a certificate has value and — yes — even a certificate from the artist of a digital work that can be endlessly replicated can have value. Any object of human action has value and any such object that constitutes a “rivalrous good” (as explained here, by Stephan Kinsella) can be traded and, thus, also have a market price attached to it.

“Blockchain” Means Trusting Nobody

So what’s the problem?

“Blockchain” Means Trusting Nobody

This Is Why We Can’t Have Nice Things

All of the above conclusions are a given without requiring any examination of how most NFTs are actually implemented. However, the implementation is where things get worse.

“Move Over Sotheby’s! I Want a Certificate from THAT Startup!”

Michael Jordan’s autograph is valuable in it’s own right. Why would I want its value to be dependent on the ability of some fly-by-night tech platform — as opposed to, say, Sotheby’s — to produce a certificate of authenticity? Wouldn’t that only introduce risk/cost and actually reduce its value? What could I possibly stand to gain by doing that?

The Hope Diamond: A Killer Bar Mitzva Gift

Yes, fractional pieces of ownership are a total game changer. The ability to digitize and then endlessly divide a physical object, like The Hope Diamond or the Michael Jordan Rookie Card, allows anyone to own a piece of it and benefit from an increase in its price.

Sandcastles of Demand

But you continue to protest:

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B.J. Dweck

B.J. Dweck

Bitcoin Coding, Custody Solutions & Seminars | Austrian Econ | Voluntarism | Authentic Parenting | NVC | PET | Project-Based Learning | Recovering Carb Addict