Explain this to me like I am five years old (NFT)

[disneysteve]

Explain it to you like you are five?

“Get your hands off that! Leave it alone and go outside!”

There ya go.

Nah. The right answer is that a 5-yo probably understands this. It's us 50-yo folks that don't.

 

[disneysteve]

You need to separate the tech from the price.

What is Art?
Why is it worth millions?

Two separate discussions.

What is an NFT?
A digital contract attached to an artwork (or other item). This contract can be written any way you want and include whatever you want. Once written and created the digital ‘token’ that contains the contract can be traded like a stock.

Why would it be worth millions?
Purely for art/investment/marketing reasons. Nothing to do with it being an NFT.

I can generally understand that, but when Da Vinci created the Mona Lisa or Van Gogh painted sunflowers, it wasn't instantly worth millions. What makes a computer graphic that was just made so valuable? Or a copy of a tweet which isn't even artwork or anything unique? Why would that have any value at all, even a few hundred dollars?


At least the Da Vinci is a one of a kind physical painting from a famous artist and it can't ever be exactly recreated.

 

[timbervest]

Best explanation I have gotten regarding what an NFT is:

You're married and everyone in town can sleep with your spouse and there is nothing you can do about it but hey you've got a marriage license so there's that.

 

[clobber]

The jargon surrounding all this is just horrible and leads to confusion. There is almost nothing new here. In short, NFTs are just a new way of owning things.

1) People want to buy/own things
2) People want documentation/proof that they own things
3) People want to sell/dis-own things

What has changed?
1) Someone invented this thing called a blockchain which is just a database
2) Someone else invented a way to store contracts in this new database
3) People started wanting to buy digital things
2) Nothing else really

Lets start with something fairly straight forward. Most people here will have a property/home that they bought that has value. Today, there is generally documentation (a deed) that is recorded with the County office that "proves" you own your property. I assume most people here are happy with this concept. What if - instead of storing the deed to your house at the county office, it was stored on this new blockchain database? Nothing would really change. You would still own the house. If there was ever a dispute, all the police officers and lawyers could still access the deed on the blockchain. This would be considered a NFT for a physical asset. Only difference is where the contract/deed is stored. Ohh - and if we did this there would be no County fees for registering the deed. There are many assets for which there is no registry at all, but maybe there should be. Currently there is a registry for cars, but none for lawnmowers. The blockchain can be a registry for anything.

For the second example, lets take something a bit more wishy washy - baseball cards. What exactly is it? It is a small piece of cardboard with a baseball player picture printed on it. With today's technology, you could make a 100% exact replica of one. You can also look at every baseball card online if you want - and it would probably look better than whatever card you own. But still, many people think they are valuable because some of them are rare. Note the rarity was artificially made by the company who issued the cards. But if you do buy a Mickey Mantle rookie card for $2+ million, all you get is to carry around is a small piece of cardboard. You do not own Mickey Mantle, you do not get any rights to use Mickey Mantle's name in a business, you do not have any rights to the TOPPS name, you can not really do anything with the fact that you own something with Mickey Mantle on it - except sell it later. You can pull it out anytime you like and gush at the fact you own it. You can show it to your friends and hope they gush. I do agree that a baseball card is physical, but still it is just cardboard with a picture which should be worthless except it is not. If you did buy one of these, there is currently no registry where it would be recorded. You would need to always provide documentation (provenance) to prospective buyer to prove it is original and that you own it. Maybe it would be good to have a registry and this new blockchain database can do that. It could do it for anything really. If we stored the ownership for this card on the blockchain then we would have another NFT for a physical asset.

And now we get to where we are today. Digital stuff. No one would argue that Picasso makes weird art. It is skilled and took him a long time and his art is valuable. Beeple makes digital art that is weird and takes him a long time. Some people think it is valuable so he sells them. Let's say Beeple sold you one. He would give you a URL to a jpg file, plus he would give you a physical signed contract (rolled up in a bow) giving you exclusive ownership. Would this be acceptable? Would this not be just like a baseball card? True that anyone could look at it anytime. True that anyone could copy it anytime. But I can go printout a Mickey Mantle card right now and no one would think I own it (I dont have provenance). And if I tried to sell it, I would be busted for fraud. Now what if Mr. Beeple doesn't issue a paper contract, but instead stores it on the Blockchain. Now I have NFT that proves ownership of a digital asset. Anyone else could say they own it, but we could check the blockchain and prove who does.

In my opinion, the confusion craziness surrounding NFTs is more about the value being assigned to digital assets. I do not think a Mickey Mantle baseball card is worth more than $100. I do not think a Picasso is worth more than maybe $1000. I do not think a Beeple is worth more than $100. I do not think the first tweet is worth more than $50. But clearly many people value both physical and digital assets differently than me.

So what does he own? He owns the first tweet. That's it. Like a baseball card, he can pull it out (URL) anytime he wants an admire it. He can show it to all his friends and hope they gush. He can sell it.

 

[disneysteve]

So what does he own? He owns the first tweet. That's it. Like a baseball card, he can pull it out (URL) anytime he wants an admire it. He can show it to all his friends and hope they gush. He can sell it.

Your post actually makes sense and clears up some of this for me at least. But I still lose you at this point.


How can someone "own" a tweet? That is no different than someone saying they "own" a post made to this forum. If someone creates a digital piece of art, sure, you can own that image, but how can you own a post somebody made online or an email message?

 

[cranberryjoe]

If you have a couple of hours, this video by Dan Olson is very educational and somewhat entertaining. He explains how NFTs work, and all the ways that they are a scam, and that you should stay far, far away. Unless you are into money laundering, grifting, losing money on pyramid schemes, ...

If you don't want to watch the video, glance at some of the top youtube comments and you'll get the gist.

Note: That guy in the first post did not buy the first tweet. He did not buy copyright to the first tweet. He doesn't own the tweet and cannot do anything with the tweet that anyone else can't do. Just like anyone who buys an NFT, all he bought was this thing called an NFT that presumably has a reference to the tweet (but as you may understand after watching the video, that might not even be true, and of course Twitter could choose to delete the tweet at any time without consulting the owner of this NFT, in which case what is the point of this NFT). The blockchain records the fact that he bought this particular NFT, so perhaps he has bragging rights that he bought the NFT of the first tweet. He bought it on speculation that he can sell it for more than he bought it for. Looks like he is a loser.

 

[euro]

Ok. So your wife can sell prints of her images. She can sell the use of her images to others like someone who wants to use it in an advertisement. Or she can sell the rights all together and no longer own that image. I understand all of that. But would anyone pay her millions of dollars for one of her images? I’m guessing not.

While I see the similarities between one of her photo files and an NFT, I still don’t get why one is worth maybe a few hundred dollars and the other is worth millions.

Well, I landscape painting by VanGough is worth millions and a landscape painting by Joe Miller is worth $5. Same thing. Many people want the VanGough, nobody wants Miller

 

[euro]

Nah. The right answer is that a 5-yo probably understands this. It's us 50-yo folks that don't.

 

[clobber]

How can someone "own" a tweet? That is no different than someone saying they "own" a post made to this forum. If someone creates a digital piece of art, sure, you can own that image, but how can you own a post somebody made online or an email message?

Don't for get that Jack Dorsey himself originally sold the tweet which can be seen on the blockchain: https://www.bbc.com/news/business-56492358

I'm the furthest thing from a lawyer, but creating a short tweet, or a long paragraph, or a short story, or a digital book, or digital art is no different. It doesn't matter how many bytes it takes, content is content. And it is my understanding that unless otherwise agreed (read the fine print on platforms like Facebook), the content creator owns the content. Therefore Jack Dorsey owned his first tweet and could sell it. If he can sell it, then someone else can own it. You are more than free to take any of your posts from this forum (unless there is some fine print we agreed to) or any of your emails and try to sell them as a NFT. You do currently own them. Probably. Maybe.

FYI - carrying on with the thinking of baseball cards, the NBA started up topshots which essentially makes basketball videos. Instead of baseball "cards", you get videos - how cool is that? Just like cards, if you buy a video of Lebron dunking, you don't own any copyrights or ability to market Lebron James for your company, or any rights with the NBA. You own a video that anyone can see, anytime, but you own it. Of course, MLB are going to do the same thing: https://www.coindesk.com/business/2021/04/12/topps-to-launch-official-mlb-nfts-in-bid-to-best-nba-top-shot/

 

[ls99]

Have no NFT. How about an AOL 1.0 floppy?

 

[MichaelB]

Same question here.


Anyone with a computer can go to Jack Dorsey's twitter feed and view his first tweet. What would owning an NFT of that tweet actually consist of?


Nobody seems to be able to answer that question.

The NFT is a digital certificate that describes the tweet and contains contractual language covering the ownership rights and conditions of sale. So, the NFT is a combination digital artwork and contract. Once the contract is written, exchanged and accepted, it resides on a blockchain.

We don’t know the details of the sales contract so we don’t know what rights were transferred what the Dorsey tweet was sold. If all rights were transferred, the buyer has bragging rights and is the only individual legally able to monetize the tweet.

 

[pb4uski]

But if I have a screenshot of that Jack Dorsey original tweet stored on my phone, what is the difference between that and the NFT?

 

[Fermion]

The only "Sort of NFT" thing I understand some of the value of would be a digital asset in a virtual world (game for instance). I can understand the value of owning, say a storefront in a digital world, where you can monetize it or whatever.

Baseball cards never made a ton of sense to be worth so much, even when rare, but I can sort of get that.

I totally understand owning a rare historical piece. If I had the money, I would 100% love love love to have a original working Enigma code machine, but they are $$$.

I don't get owning a NFT of a tweet, where you don't even own the copyright of the tweet.

I could see owning the digital rights to a book, movie or song, where it was required to pay or get permission from you as the owner for someone to use that media.

I guess I am just old.

 

[SecondCor521]

My son and I have been having some interesting discussions about money and how currencies work.

I think that currencies are fairly easy to create. I also think they have a few basic criteria:

1. They're widely accepted. I can try to use grass clippings from my yard as currency, but my local grocery store and Wendy's won't accept them as payment. This feature of a currency means it can be used as a medium of exchange, which improves the efficiency of trade.

2. They have a stable value. If I take eighteen dollars and one cent today to my local McDonald's, I can get two big Macs, two large fries, a 10 piece of nuggets, and a large Sprite. I could do the same thing three months ago and would likely be able to do the same thing next week. This means the currency can be used as a store of value.

3. They're limited to manufacture and hard to counterfeit. This prevents devaluation and helps preserve the first two features.

The US dollar generally does a really good job of meeting all three of these, which is why it's a pretty widely used and successful currency. Some countries, particularly in the Caribbean, just use dollars, and a number of other countries peg their currency to ours at some ratio. Likewise the major world currencies like the Euro, yuan, and yen.

Gold is decent at #2 and #3, but not particularly good at #1. Bitcoin is marginally better at #1, good at #3, but not so great at #2 IMHO. Stocks, bonds, beanie babies, tulip bulbs...all could be viewed as ersatz currencies, and all work to varying degrees.

NFTs are being proposed as a currency, but they do an absolutely abysmal job at the three criteria above, so my prediction is that they will fail.

 

[easysurfer]

It's like owning the copyright of something in the public domain .

 

[COcheesehead]

I don’t find the concept difficult to grasp, I find the valuations difficult to grasp.

 

[clobber]

I don’t find the concept difficult to grasp, I find the valuations difficult to grasp.

+1 This

 

[disneysteve]

I don’t find the concept difficult to grasp, I find the valuations difficult to grasp.

I'd say a little of both. I understand someone could own a piece of digital artwork. I don't quite get how someone could own a post that a person made to a public forum like Twitter. As I said, any of us can go to Twitter right now and see that tweet. Even if someone did "own" it, that doesn't keep us from going and seeing it so what's the point or, more importantly, the value in having this digital contract saying you own it?

 

[clobber]

I'd say a little of both. I understand someone could own a piece of digital artwork. I don't quite get how someone could own a post that a person made to a public forum like Twitter. As I said, any of us can go to Twitter right now and see that tweet. Even if someone did "own" it, that doesn't keep us from going and seeing it so what's the point or, more importantly, the value in having this digital contract saying you own it?

I dont understand the correlation between being able to see something and ownership. In fact, these days, the more something is seen publicly, the more valuable it is.

Its all bragging rights.

 

[Masquernom]

As I understand it, owning the NFT of say a digital image, does not grant you similar protections that a copyright does. I believe someone can create a digital work of art, sell you the NFT for that creation, but anyone else can have the image on their phone for instance.

 

[COcheesehead]

Another example from the analog world is a share of stock bought and held at a brokerage. You only have a digital record of it, but it’s yours and it has value. Anyone can see it, have an image of it on their phone, but it belongs to you. It has value.
What some have a challenge of grasping is how a public post can have value. I agree. The valuation is my challenge not the concept of a digital, block chain tracked, asset. Value is market driven so if someone wants to own a tweet and someone wants to sell it, it has value, I guess.

 

[aja8888]

I realize you're joking, but what if you were serious? Does that mean you would take a digital photograph of each pin and sell that file, the same way a photographer sells one of their images? If so, what is the difference between an NFT and a photograph?

Yes a digital photograph with my guarantee there will never be another EXACTLY like it. It's priceless and you are the owner. The photo (NFT) will have embedded info of the the time taken and details of the image. One of a kind!

 

[jurgs01]

NFTs don't have to be a claim to a picture. They can be a title to your house, season tickets, a subscription, a will, etc.

NFT future is in replacing costly processes to verify or assign ownership or access.

 

[FLSUnFIRE]

I've bought one piece of art. A painting on canvas 40" x 30" directly from a local artist for $500, it hangs in my living room and brings me joy every time I look at it. An NFT would bring me no joy -actively having to go to my computer and pull it up on whatever monitor I have and or my phone would not bring me much joy.



If there is an EMP attack or solar storm and I survive, I still have my painting (and it might bring me comfort as the world burns) but the NFT would be gone.


I see NFT's being useful for contracts and such that are now exclusively digital but to tie it to other things is just silly and a fad IMO. I will grant that WRT art, the initial sale gives artists a way to make some money from their craft but I'd view that as more of a donation and only if I'm the original purchaser. Perhaps an NFT that transfers along with a physical or other asset with ownership rights to provide evidence of the provenance (rather than a paper trail) could be useful as well but I would think that would be tied to the sale contract so back to contracts vice greater fools.

 

[donheff]

When I first heard of NFTs I thought they were a good idea. The concept sounded like a way for digital artists and musicians to sell their images. The NFT would be a contract for ownership of the digital work or a specific instance of it (limited edition) issued by the creator. I assume there would be some way to document provenance and identity of the creator. The NFT would be equivalent of the document that "proves" the provenance of something like a baseball signed by Mickey Mantle. That baseball doesn't have much value without the documentation "proving" that it was really one signed by MM. Same deal with the NFT.

As I followed the hype it begins to look like most NFTs have become diluted to the point that many of them don't offer much proof of anything. Or are proof of ownership in some silly graphical item (e.g. a cartoon character) that no rational person would want. So a balloon full of nothing.

Still, to the extent that a particular NFT does document proof of full or limited ownership in something that others may want, it will have value. YMMV.