Although not as crucial to their understanding of the world as the yield curve "talk", this is something the wee munchkins should be prepared for.
From Tech StartUps, April 2:
NFT Bubble will soon burst after people find out they are paying millions of dollars to buy only bits of code that “point” to an artwork on the internet
Dr. Albert Einstein, who was considered to be one of the greatest scientists ever lived, once said, “Compound interest is the eighth wonder of the world. He who understands it earns it; he who doesn’t, pays it.” If Einstein were to be alive today, he probably would say that NFT is the eighth tech bubble of the world.
Non-fungible tokens (NFTs) are all the rage. Celebrities, artists, influencers, and NBA stars are riding the NFT hype and cashing in millions of dollars as the crypto-collectibles craze sweep through the art world.
In early March, Elon Musk’s partner Grimes made $5.8 million in just 20 minutes selling digital art as NFT. Then three days later, Twitter founder Jack Dorsey also auctioned off his first tweet as an NFT, which already drew a $2.5 million bid. Then about two weeks ago, Christie’s Auction sold digital artist Beeple’s NFT for a record-setting $69.3 million, making it the most expensive digital art ever sold.
So what exactly are NFTs?
NFT is a type of cryptographic token on a blockchain network that represents a unique digital asset. This asset can either be entirely digital or tokenized versions of real-world assets. Because NFTs are not interchangeable with each other, they may function as proof of authenticity and ownership within the digital realm, for example as proof of the authenticity of rare art.
However, the above explanation of NFT is not good enough. Today, millions of people around the world still have a distorted view of what NFT really is. The best way to understand NFT is to start with the idea of what a token really is.
What is a token?
In a very simple term, a token represents a thing or bits of code. A blockchain token is a digital asset created on a blockchain network as part of a decentralized software protocol and every token belongs to a blockchain address. At the same time, there are also many different types of blockchain tokens, which we will not discuss in this article.
So, why is the concept of token important? Every time someone buys an NFT, they aren’t really buying an artwork itself on the blockchain, but a token (a piece of code) that represents the artwork. This is very important because most descriptions about NFTs are that you are buying artwork — unfortunately you aren’t. Instead, you are buying a token (bits of code on a blockchain network) that points to a URL of a media or an artwork somewhere on the internet.
Unlike digital images with embedded metadata, NFT-based artworks are not embedded with tokens. Instead, the token only references or points to the URL of a piece of media located somewhere else on the internet.
NFT Implementation Examined
We’ve written over a dozen articles on the subject of NFT and we still don’t fully grasp the concept until yesterday after we came across an eye-opening tweet from Jonty Wareing about NFT is implemented. After careful examination, it seems that the NFT implementation is actually far worse than we originally thought.
It turns out that the implementation of NFT on the blockchain network doesn’t make it as trustless and decentralized as everyone was made to believe. Unlike bitcoin, which is a fully decentralized and based peer-to-peer network, NFT authentication and certification require a third-party company like Rarible or OpenSea. Special thanks to Jonty Wareing for investigating how NFT works behind the scene. Below is what Jonty said:
“The NFT token you bought either points to a URL on the internet, or an IPFS hash. In most circumstances it references an IPFS gateway on the internet run by the startup you bought the NFT from. Oh, and that URL is not the media. That URL is a JSON metadata file”....
....MUCH MORE
...“Petruchio: Come, come, you wasp; i' faith, you are too angry.
Katherine: If I be waspish, best beware my sting.
Petruchio: My remedy is then, to pluck it out.
Katherine: Ay, if the fool could find where it lies.
Petruchio: Who knows not where a wasp does wear his sting? In his tail.
Katherine: In his tongue.
Petruchio: Whose tongue?
Katherine: Yours, if you talk of tails: and so farewell.
Petruchio: What, with my tongue in your tail? Nay, come again, Good Kate; I am a gentleman.”
—The Taming of the Shrew via No Fear Shakespeare
