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I came across an Urbit group this morning for a company branding itself as a creators' collective. The company sells NFTs, and owning one of their NFTs is currently a requirement for being invited to their platform.
I find such a requirement to run counter to their purported goals. They claim to want to lower barriers of entry to their platform, but their NFT at time of writing costs about $150 USD. They claim to want to allow discovery of content without having to compete with paid promotions, but one must purchase a token from them in order to even access the content. They claim to want to protect consumers from invasive tracking, identification, and privacy violations, but the non-fungibility of NFTs inevitably ties the ownership of a given token to a uniquely-identifiable wallet.
There is still a lot of buzz about NFTs these days, but this company is an example of why I don't engage with NFTs myself. I see a lot of people buying into--or trying to sell--the hype, but I see very few examples of the uniqueness of NFTs translating into practical utility.
In the real world, given two objects, it's almost always possible to define a set of criteria such that those two objects are fungible, and it's almost always possible to define a set of criteria such that those two objects are not fungible. For example, two US 1-dollar bills are fungible in that each can be used interchangeably to buy a piece of candy. However, if those two 1-dollar bills are cut in half, each half is not fungible: if the bill is to be reassembled or replaced, the serial number on the right half must match the serial number on the left half.
Cryptocurrency is much closer to being perfectly fungible. While transactions on the Bitcoin blockchain are certainly not fungible, each individual Bitcoin is not uniquely traceable. As an example, if one received half a Bitcoin in 2013 and another half a Bitcoin in 2021, then spent half a Bitcoin in 2022, the blockchain makes no distinction between which half Bitcoin was sent in the transaction.
Serial numbers are a form of non-fungibility in real life. Two television sets of the same model are fungible in that they can accept the same inputs and will display them in the same way, but for purposes of claiming a warranty, these two television sets are not fungible. Similarly, automobiles in the United States are equipped with a vehicle identification number (VIN), used in everything from insurance identification to repair tracking to stolen vehicle reports.
In my view, NFTs, if they play any real role in society or commerce, should be used similarly. Ownership of something is meaningless unless that ownership can be enforced, and NFTs could serve as sufficient proof of ownership to trigger enforcement. As an analogue, one can prove using a vehicle's VIN that one is the owner of a given car; if that car is then stolen, police are justified in forcible taking the car back to its owner. How such a system would play out on the Internet, with its proclivities for piracy and other forms of copying that can't effectively be mitigated, however? I don't know.
What I tire of, however, is the myriad of claims NFT sellers make about their tokens. NFTs do not promote privacy and especially not anonymity: proof of ownership requires a unique identity to which to tie that ownership, which necessarily contradicts anonymity, and records of which wallets own which NFTs are easy picking for any company specializing in social analytics such as Facebook or Twitter. NFTs do not lower barriers to entry: they are by nature finite and usually priced (artificially) high, necessarily excluding those who do not have the discretionary income to afford them. Nor do NFTs currently seem to provide a means of enforcement of ownership outside a very limited scope, which to me makes the utility of unique ownership questionable.
I do not believe NFTs have no use at all, nor do I believe they're a fundamentally bad idea. Rather, I feel that NFTs are being dishonestly promoted as a panacea for several problems that NFTs do not actually solve, and their actual strengths do not receive enough attention. The fact that many people use NFTs for pyramid schemes, which has triggered many crypto crashes in recent months, doesn't help.
Maybe NFTs will find their proper place someday. But in the meantime, I don't believe their current use cases are actually very useful.
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[Last updated: 2022-06-12]