NFTs- even if you don’t quite know what they are, you definitely know of them. I won’t try to explain the mechanics of the blockchain or how NFTs work, because it’s not only stupidly hard to do for the layman but also pointless for the purposes of discussion. The problem with NFTs and cryptocurrency doesn’t really have much to do with the blockchain itself (other than transactions being too long for many cryptos to really function as an everyday purchase power) but more with what it needs in order to actually be a currency. For those interested, Folding Ideas has made an extremely comprehensive but very well-put video on the problems with cryptocurrency, but in the interest of time I’m only going to address Folding’s biggest issue with crypto: the “greater fool” scam.
You’ve probably heard of a greater fool scam, or seen a relative or neighbor fall prey to it once or twice: pushy Avon saleswomen, dusty boxes of Isagenix smoothies, Younique bumper stickers. The “greater fool” part of a Ponzi scheme or multi-level-marketing pitch is that whatever the golden ticket is- weight loss shakes, makeup, kitchenware sets- it doesn’t have any real value until somebody else buys it from you using real money. You don’t have $5,000 worth of smoothies in your garage unless you actually manage to sell every single smoothie- until then, it's just crap taking up space. The smoothies have a value- what you bought it at- but that value doesn’t actually exist until you rope someone in and it gets converted into cash, and then somebody else buys the smoothies from that person, until the “greatest” fool is stuck with a bunch of smoothies and nobody willing to buy.
At this stage, this is what many cryptocurrencies are. Say someone buys 1 million dollars of a crypto that is obscure and not really accepted as barter anywhere but is going up in price. Tomorrow comes around, it’s worth 2 million. Catch is, unless that buyer sells everything in their wallet, they don’t have 2 million dollars, they have boxes upon boxes of smoothies- in fact, they’re 1 million dollars in debt until somebody comes around to buy it. To fix this issue, the NFT was summoned- a way to get people to buy crypto so that they can then spend it on something, say, unique ownership of a picture or a video. Problem is, unless that NFT (that they've not minted) or that crypto sells, they’ve spent a lot of money for no reason. And in order to sell, they need greater fools to buy, buy, buy.
There isn’t anything inherently wrong with this- it’s how a tertiary currency works. But crypto and most NFTs have no intrinsic value tied to a physical object, and it isn’t widespread enough to be actually equivalent to a dollar, which is a scammer’s wet dream. Take the infamous “Squid Game” crypto scam- developers created a cryptocurrency, promised a bunch of stuff that you’d be able to do with it, said they’d come up with things to give it value, let people buy it for a bit, took their real money, and vanished. Those left with the “squid game” currency don’t have anything of value because they effectively purchased a bunch of inert ones and zeroes that doesn’t have a purpose.
Until cryptocurrency establishes a real liquidity (which would likely require government oversight, undermining their whole purpose in the first place) holders and investors will use anything at their disposal to get those greater fools in- commercials, NFTs, prizes, raffles- because in the end, they don’t have millions of dollars worth of smoothies unless somebody else buys those smoothies with a real-world currency.
Thank you for explaining NFT's more. I definitely think the last paragraph sums up more of the economics and how things work in simple terms which helps people like myself understand this grand illusion of the stock market. In order for stock to have value, there has to be an influx of money in it which makes sense to me now. I remember watching the Wolf of Wall-street movie and actually found it helpful in explaining some aspects of it. I'm someone who is still learning about the stock market and economics and articles like these help me understand it better
This is the best description of NFTs and Crypto I have read. Honestly, I have never thought about it this way before, but they really are a pyramid scheme. I really liked the analogy of the smoothies being crypto and NFTs and someone is just left with this worthless receipt at the end of the day.
NFTs are just the new multilevel marketing scheme, making the rich richer and the poor poorer. This article was a great way to summarize such a lengthy and comprehensive video, and the comparison to weight loss smoothies is very accurate. Influencers and celebrities push a useless product to easily influenced fans, and get richer the more they buy.
This was a nice way to write about NFTs and Crypto. For someone who knows nothing about that world, it has always been confusing and daunting to think about. Put this was a really good explanation for it. The scary and daunting part is these terms get pushed around left and right, but rarely when you ask someone to explain it do they actually know what it is. Again, I think someone people when they throw around these buzz words it is almost like a power trip.