Another Magic Bean

Just when you thought that people couldn't be any more stupider, with magic cryptocurrency  (electronically created by 'mining' - although there is no mine), already being stolen by the billion ....

Bored Ape Yacht Club NFT
Collection Sold By Sotheby's

... then along comes the Non-Fungible Token (NFT).

This is even more incomprehensible than the cryptocurrency, and although I vaguely get the concept of electronic currency, after all when someone created paper money, it must have been a hard sell, but they did after all have a historical link to promissory notes used by traders for millennia ....

Bank Notes Are Derived From
Traders Promissory Notes

"I promise to pay the bearer on demand the sum of twenty pounds" is the linkage back to that trading past. In essence its a debt, and the value exists in the fact that everyone accepts that the holder of that note has the right to collect it to the value stated.

But NFT's are just bloody stupid as far as I can see. Fungible items are exchangeable items e.g. a twenty dollar note an be exchanged for two ten dollar notes and they hold the same value, even crypto-currencies such as Bitcoin are fungible. While Non-Fungible items are unique one of a kind things that can't be interchanged with something else .. which has no tangible form of their own. The concept is that you 'buy' an item that is non fungible i.e. unique unto itself e.g. A digital work of art, but as a digital token of ownership. The digital tokens are a certificates of ownership for a virtual or physical asset. 

These tokens of ownership can then be traded, bought and sold like a currency with transactions stored on a shared ledger known as the blockchain .... yep, them again.  In some cases e.g. Artworks, the NFTs can also contain smart clauses that give the artist a percentage  of any future sale of the token. The artist may even retain the copyright ownership of their work, so they can continue to produce and sell copies, while the NFT "token" proves that the owner of the token owns the "original" work (but may not physically have it). You still with me?

$69 Million For Digital Artwork

So as I understand it, you buy a work of art which is probably in digital form only, so you never get it on your wall, but you own the "original", while the artist makes copes and sells them .... hmm, I must be missing something. But no, upon checking I found that a American graphic designer, Mike Winkelmann who markets his work under the name "Beeple" sold a digital-only collage, made up the first 5,000 days (13 years) of his daily work in a Christie's auction for $69m (£50m). The collage only exists in digital form .... there is no physical work. 

This is not the only example of this gold rush by artists ..... there have been some notable examples of the canny cashing in, before the speculative bubble bursts and the unwary speculator finds that they have paid for nothing at all really. Even Mr Winkelmann, the beneficiary of the $69m windfall said a day before the sale of his collage that "I actually do think there will be a bubble, to be quite honest. And I think we could be in that bubble right now." ....while others have described the people actually selling the NFTs as "crypto-grifters", "selling something which isn't there." .... "There are some artists absolutely making bank on this stuff... it's just that you probably won't."

Charles Allsop, a former auctioneer with Christies added "I think people who invest in it are slight mugs, but I hope they don't lose their money." 

The UK Treasury has said it will ask The Royal Mint to create a Non-Fungible Token (NFT) this summer ... I have no idea what for, except maybe selling digital ownership of Government Bonds. But if so, why not just sell the actual bonds? 

Now if you think idiots who buy non corporeal items (NFT's) are mad, then how about the fact that in the metaverse where land, property and goods are infinitely creatable (it is after all just generated by the server), participants are allegedly buying these three items with real world cash. Millions of real dollars (spent within the metaverse naturally), have exchanged hands as participants have bought up desirable land or prime location property! 

Additionally, the process of generating digital coins and tokens via banks of powerful computers, called mining, is also an environmental concern as the so called mining is also highly energy intensive. Recent research suggests Bitcoin mining now generates carbon emissions comparable to the country of Greece.

So the two lessons we should take from the NFT should be Caveat Emptor ("let the buyer beware) ... and that the 'idiocracy' is well and truly with us.