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I've been getting a lot of people asking me questions about NFTs,
Blockchain, and Bitcoin. I generally give the unhelpful advice:
Never invest in a business you cannot understand — Warren Buffett
It's great advice, but, in technology, I think it's becoming less useful
over time. In 2022, it is difficult to fully understand a lot of what is out
there. I mean, I am very interested in quantum computing and machine
learning, but I wouldn't say I fully understand it - and I've already
invested quite a bit of my time in those subjects.
However, we are here about Blockchain Technology™. I've decided to put
this up as a place to point family members when they ask me about these
things. Hopefully others might find this helpful, but please know that this
contains a lot of my own opinions, and it is written for an audience who are
not super nerdy. I'll be using analogies that are rough, should be taken
with a grain of salt, and should only be used as a gateway to your own
understanding.
Ç'est parti.
There is some neat underlying technology used by the Blockchain, but you
don't really need to understand those things for our first litmus test. Most
of the time people start talking about _proof of work_ or _distributed
architecture_ to either muddy the water or to sound cool.
The basic first pass you should do in your head when someone tells you about
_something_ using the Blockchain, think _Quickbooks_ (or if, you're more
accounting savvy, think a double entry accounting database).
![[general-ledger-example-account.png]][General Ledger]
So when someone says "I have a funding opportunity for a startup - it's a
new social network built on the Blockchain!"... think to yourself, "Why
would you run Twitter on Quickbooks?". In fact, the idea is mostly nonsense.
I am not saying slam the door and walk away, there could be something to the
idea. It's almost always cool to listen to new ideas, but you should
generally start out with the position it's nonsense and try to understand
why an accounting workflow is useful in context X.
If you get to step 2, and the idea does make sense using a double entry type
of workflow, ask _who cares if it's public_?
Most of the time, most companies _do not_ want payment transactions public.
That's why big auditing firms exist. If you invest in companies, maybe you
can get access to the financial information, but does this _being public_
feature help in any way shape or form? Would Disney want Disney dollar
transactions public? Almost always, the answer here is no.
To counter any perceived negativity you may be getting from this post, here
are some ideas where a publicly visible ledger might be useful:
- An online Credit Union; where the members own the bank
- A school board voting system
- Some kind of home owners association collaboration system
- A lot of things with a government
Even those, however, are tenuous at best. Some of those you would only want
members to have access to the data not the general public.
If it doesn't need to be public, there is very little use for a blockchain
style transaction log - they could just use a normal relational database.
I am just throwing this in here, because this just isn't true at all. I hear
this often as "the great use case". In reality if you wanted to transfer
money, you'd have to:
1. In the country of origin you'll need a broker (an _exchange_). You'll
have to change real money for some crypto currency. This *will have a
transaction fee(s)*. The exchange will also (depending on the country)
report large transactions by law (which may have tax implications).
2. (optional) depending on what you are doing, you may also have to pay a
[gas fee](https://ethereum.org/en/developers/docs/gas/) (more about this in
the NFT section)
3. When you pull the money back out, you will again have to go through an
_exchange_ and, likely, again, pay another fee to turn the crypto back into
real money. Additionally, you may have to pay taxes on the money.
| fee | ~gas | fee / tax
€€ -> [exchange] -> [wallet] -> [contract] -> [wallet] -> [exhange] -> $
Now, there may or may not be ways around some of that. However that is more
or less the process. I am only including this section because one of the
talking points of crypto is you can move money around without fees. For
normal people, that is just simply not true.
I have been inundated with questions about NFTs. The marketing campaign
behind these things has been second to none. Hat's off to whomever is
running this marketing campaign.
Since you now know that the Blockchain is just Quickbooks, you can think of
"an NFT" as the _memo field_ on one of those transactions.
| date | acct | to acct | credit | debt | asset |
| -------- | -------- | -------- | ------ | ----- | -------------------- |
| 20220101 | 6560ebc5 | 75cd8368 | | $4.00 | |
| 20220101 | 75cd8368 | | $4.00 | | http://s.com/gif.gif |
The important thing to understand here, is the only thing you are paying for
is to have an entry in the ledger that points to a URL - that is all. There
is no data stored in the ledger, there is only a link to where data was - at
one point.
You're not buying the rights to that file (unless indicated somewhere), you
are not buying the actual bits of the file, you are often not even buying an
md5 hash of the original file - you are buying a text field with a URL in
it.
You might ask, well what happens if the server hosting that link goes away,
or someone just changes what that link is pointing to - and you would be
right to ask those questions.
I don't want to sound too pessimistic here, because I think the underlying
idea of an artist being able to mint something and sell it online is a great
idea. Personally, though, I don't think this 2022 version is quite there
yet.
This makes me sad. I am a firm believer in AR/VR, and I think an actual Snow
Crash style metaverse would be amazing. I think it would be an utterly
fantastic tool for teaching. Can you imagine:
- Being immersed in a foreign language learning game where you are literally
transported to another country (try Google Earth in VR it's mind blowing)
- History lessons where you are _in_ the history lesson
- Exploring Mars with interactive drones that are physically on the planet
or going into outer space with a 360 satellite to see what it's like in
actual outer space
- Learning chemistry or physics inside a simulator
- Physically playing with 4d objects
- Doing math equations that come alive before your eyes
[a la 3brown1blue](https://www.youtube.com/c/3blue1brown)
Sadly, the metaverse has been co-opted by this NFT craze. I am not sure how,
but the two things are vastly different. Where people are trying to
intersect them is by saying: "you can own digital video game assets that
exist in the metaverse".
This doesn't make sense, because nothing like the metaverse exists.
Let's use one example. Let say you bought an `NFT digital sword`. You might
expect that you could now use that sword in, what people are selling as, the
metaverse.
- How powerful is the sword? When you use it against a deer in Valhiem how
much damage does it do? How about when you use it in Call of Duty - what
does it do there?
- What format is the sword in? Obj? gltf? How does it get loaded? Where is
it hosted? Is there a parental rating on it?
The problem is, there is no protocol, not way to share assets, nothing.
Would everything run in Unreal Engine, or Unity, or WebGL? Or all of them?
Would it share some kind of protocol? How would you jump from the Apple
Metaverse to the Highschool Metaverse?
I don't think anyone, anywhere is working on this (there may be some Web
Working group I don't know about), but I can say, from what I can tell, the
people that selling _digital land_ are not trying to solve this - they just
want you to buy an asset in their video game.
I think NFTs are going to hurt conversations around the idea of a
"metaverse". Have a look at the history of
[VRML](https://en.wikipedia.org/wiki/VRML) or
[GohperVR](https://en.wikipedia.org/wiki/GopherVR) to see how long people
have been trying to work on this. Many, many unsung people have spent their
lives trying to build a 3D web, and it makes me sad to see it getting lumped
in with cryptocurrency.
2022 seems to be like right before the dotcom bubble burst. Where
[pets.com](https://www.youtube.com/watch?v=NHu_PFKIJxw) and
[webvan.com](https://www.youtube.com/watch?v=os66TTScS1o) were the darling
companies. They had huge investments, but very weak business models and
seemingly no idea how they were going to turn a profit. There was a lot of
smoke and mirrors.
Back then, if you knew HTML and had a copy of Microsoft's
[frontpage](https://en.wikipedia.org/wiki/Microsoft_FrontPage), you could
get lots of funding. Now, it is [Javascript libraries and smart
contracts](https://trufflesuite.com/). It was a crazy time back then, and
scams (intentional and unintentional) were everywhere.
However, out of that crazy time, there were some real companies that did
some real things. Amazon, PayPal, Google, etc all come out of that time. And
some of the ideas that were bunk - like webvan.com - [are now things that
exist](https://www.amazon.com/fmc/learn-more).
I can't deny there are people making lots of money off of cryptocurrency. I
personally know people who have become wealthy off it. However, aside from a
way of just taking money from people, I don't see any technical benefit from
it... yet.
[General Ledger]: https://www.double-entry-bookkeeping.com/bookkeeping-basics/general-ledger-accounting/