NFTs Big Problem What Are They
NFTs Explained And Their Problems
NFTs are explained in an entertaining way along with the drawbacks to NFTs
NFTs Explained – The BIG Problem.
2,757,391 viewsFeb 2, 2022
9.86M subscribers
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NFTs Big Problem What Are They
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FULL VIDEO TRANSCRIPT
00:00did you know that thanks to nfts people00:02have managed to sell a recording of them00:03farting for over 400 a picture of homer00:06simpson combined with pepe the frog for00:08320 00000:10and even a simple five word tweet for00:122.9 million dollars in my entire 1100:15years of making youtube videos i have00:17not seen a single trend catch on in the00:19way that nfts are doing right now so00:22here’s what the fuss is all about why00:24nfts are both a phenomenal invention and00:26becoming a problem and then the right00:28way to invest in nfts i’m even gonna00:31unbox one myself00:32so00:33it starts with this the way that our00:35economy has always worked is we earn00:37money and then we use that money to buy00:39goods but the more time that we’re00:41spending on digital apps like instagram00:43and the more time we’re spending on00:44digital games like fortnite the more our00:46purchases are shifting away from00:48physical goods00:50and more towards digital goods but that00:53poses a problem digital goods are harder00:55to monetize like let’s say that i make a00:58beautiful physical painting and i try to01:00sell it to people at a market now even01:02if someone tries to copy my painting or01:04even if they go as far as to take a01:06photo and then make a print of my design01:08it doesn’t really affect me too badly01:11because you’ll be able to tell from the01:12brush strokes that i have the original01:16but if i was a digital artist who01:17painted that same piece on my ipad for01:19example then the second i released that01:21art publicly as a jpeg image i would01:24lose almost all control over that asset01:26it can be copied with something as01:27simple as a right click and those copies01:30will look 100 identical to my original01:33so my art will no longer be a scarce01:35resource and thus its value drops01:37dramatically01:39this is what nfts are trying to change01:41see the word itself stands for01:42non-fungible token if something is01:45fungible it means it’s interchangeable01:48like cash where your ten dollar note can01:50be completely interchanged with my ten01:52dollar note01:55and so if something is non-fungible it01:57means it cannot be interchanged nfts are01:59using blockchain technology to be able02:01to indisputably verify who has the02:03original of a digital product there are02:06a one-of-a-kind token of ownership that02:09has a value and so when people are02:11buying and selling nfts what they’re02:13really doing is buying and selling their02:15virtual ownership over something02:17and to be honest there are five distinct02:19advantages to these tokens like if02:22you’re a designer you’ve got a new way02:23to earn and for fans of your art they’ve02:25got a new way of supporting you instead02:27of just transferring you a donation by02:29paypal they’re actually getting a piece02:31of your history in exchange nfts put an02:34end to really long-written boring02:36contracts replacing them with smart02:37contracts which in a really streamlined02:40way define the rules by which the nft02:42operates so for example a designer can02:44set a rule such that every time their02:46item is bought or sold they get a 20 cut02:50nfts are a dream for a lot of collectors02:53i get the fact that they don’t really do02:55anything might sound kind of dumb but02:57there are plenty of people who gain02:58pleasure just from knowing that they03:00have something rare i mean just think of03:02trading cards why did this charizard03:04pokemon card sell for 220 00003:07it wasn’t because it was good at03:08battling it’s just hard to find and so03:11through nfts the fact that you can be03:13the sole owner of the token for a03:15digital piece authenticated via a system03:17that’s completely fraud proof03:19you can see how it might give collectors03:21a similar thrill03:22and then four it’s not just creators03:25anyone can make money off nfts because03:27they can be traded each nft has a market03:30value and we’ve seen plenty of cases03:32like the one of this crypto punk face03:34over here which was originally bought03:35for less than 3003:37and has recently sold for 11.75 million03:40and i guess even more importantly is03:42that the nft market is seen as a fairly03:44accessible place to invest it’s not like03:46the stock market which can be03:47intimidating for a lot of people and03:49it’s not like the housing market where03:50you might need hundreds of thousands of03:52dollars to just get started and then03:54finally nfts give people a sense of03:56belonging i think a big part of why03:58people buy them is to feel like they’re04:00in a club for example there’s one04:02collection of nfts called the board ape04:04yacht club 10 000 unique ape images04:07for which the cheapest one is actually04:08going for over 200 000 right now but the04:11point is you’ll regularly find that the04:12people who own these nfts will use these04:15photos everywhere kind of like a symbol04:17of pride that they’re part of this04:18exclusive group and then on top of that04:20the creators of this board ape yacht04:22club they even organize physical04:24get-togethers for people who own board04:26ape nfts although this is the exception04:29more than the rule though04:30but this leads me on to the problem04:33the extremely problematic problem and04:36hey if you are finding this useful then04:37a sub to the channel would be04:39fun04:40to i totally believe in the core04:43technologies and the potential benefits04:45of vanities but the more i’ve learned04:47about how they’re actually being used04:49the more i’m genuinely scared about04:51what’s to come so just to start with04:53nfts are not what a lot of people think04:55they are if you own the nft of a piece04:58of work whilst you do have ownership05:00you’re still not the owner having an nft05:03of something isn’t giving you rights05:04over that design it doesn’t mean you can05:06then start printing t-shirts with it on05:08and selling them all it does is just05:10proves that it’s your property but just05:13through one specific way of measuring05:15what counts as your property usually for05:16a little more than bragging rights so05:19this is pretty much what you can expect05:20your nft unboxing experience to look05:22like you’ve got a nice shiny box and uh05:25[Music]05:26nothing05:27and even though nfts may have started05:30out being all about respecting the05:31artists as of right now the majority of05:34them are not being made by the lone05:35creator pouring their heart and soul05:37into their work they’re actually being05:39made by opportunistic business people05:41who just see them as a very quick way of05:43making money like just as an example05:45take the lazy lions another collection05:48of 10 000 unique unbelievably expensive05:50avatars just as ugly as the apes but now05:53in lion form and if you look closely at05:55this collection you’ll start to notice05:57something that certain facial features06:00keep reappearing and that’s because lazy06:02lions are not the work of a passionate06:04individual who’s genuinely trying to06:06design creatures with real character06:08their mass-produced computer-generated06:11cash grabs someone has realized that nft06:13apes are selling like crazy so they’ve06:15just picked another animal drawn 50 or06:17so individual pieces and then used a06:19simple piece of code that says make me06:2110 000 unique avatars using a06:23combination of these pieces there’s no06:25soul here at all it’s just how do we06:28take advantage of this trend to make06:30piles of cash or another example one of06:33the most ridiculous concepts i’ve seen06:35people talk about recently is this idea06:37of buying digital land there’s a real06:40site you can go to called next earth06:41who’ve mapped out the entire planet and06:43for the right price will allow you to06:45buy any area of land you want and no06:48joke hundreds of thousands of people06:49have swarmed to this platform with the06:51simple logic that well physical land is06:53worth so much now and if the world is06:55moving digital then digital land is06:57going to be worth loads06:59right07:00but07:01they’re forgetting a very simple fact07:03physical land has a purpose you might07:05want to live there you might want to set07:06up a factory or a server what exactly am07:09i going to do with my digital land go07:12online camping07:13it doesn’t make any sense and i mean07:16these next earth people07:18who are they do they own the earth is it07:20really in their power to sell other07:22people’s plots of land07:24no anyone can set up one of these07:26platforms as a matter of fact there are07:28already loads of them and so if you’re07:30buying let’s say the taj mahal on next07:32earth which by the way would cost me07:34close to twenty thousand dollars that07:36doesn’t mean you own the taj mahal it07:37doesn’t mean you even virtually own the07:39taj mahal all it means is that you have07:41a token that proves it’s your property07:44on one of these unlimited number of07:46platforms it’s the literal equivalent of07:48paying an entire year’s worth of savings07:50to buy land in a video game except07:55it’s not even a game07:56and things get far worse when you see07:58the way that some celebrities have used08:00and been used by08:02nfts twitter is full of thousands of08:05famous people dropping nfts left right08:07and center offering incentives to fans08:09who buy the super expensive ones like08:11getting to meet them for example and08:13that might sound fine but you can tell08:15that it’s coming from a place of just08:17trying to cash in almost all of these08:19celebrity nfts are little more than just08:21repurposed photographs from the past and08:23the perks that come with them are really08:25things that should be worth hundreds but08:27through the current hype of nfts they’re08:29trying to get fans to pay tens of08:31thousands for08:32but this is nothing compared to what i08:34saw the other week so stan lee the now08:37deceased creator of marvel apparently08:40came back from the dead08:42to promote an nft collection and at this08:45point it is just sad this guy died in08:482018. i highly doubt his final words08:50were please sell this stupidly expensive08:52set of jpeg images to extort my closest08:55fans people are trying to use nfts to08:57get rich off the fact that he’s dead and09:00they’re always trying to make it seem09:01like because stan lee loved embracing09:04new tech that this is what he would have09:06wanted09:07yeah fun fact stanley also loved charity09:10to the point where he set up his own09:11foundation how about raising money for09:13that it would definitely be a better way09:15of preserving his legacy that’s for sure09:18the exact same thing happened with the09:19painter bob ross he was known as the guy09:22who inspired the joy of painting with09:24his beautiful sweeping landscape art and09:26would you believe it his legacy is now09:28being honored with09:30well09:32this by the funko figure company and to09:35be honest i think this goes against09:37everything the guy stood for the company09:39claims his legacy was about investing in09:40paintings no it wasn’t he wanted people09:43to buy paint and make the art he would09:45openly say that he didn’t want his name09:47to be used for mindless generation of09:49profit and yet after his death they’re09:51using every bit of goodwill that his09:52name had left to effectively print money09:55and most importantly he was a huge fan09:58of nature and the environment and nfts10:01are not helping that and this is my next10:04thing10:04so you might know that there’s a whole10:06load of different cryptocurrencies that10:08you can own there’s bitcoin litecoin10:10ethereum well almost all nft10:13transactions are made using ethereum and10:15ethereum is pretty bad for the10:17environment it uses a security mechanism10:19called proof of work which is incredibly10:22thorough and is a big part of what makes10:24nfts so fraud proof but the problem is10:26that this kind of security requires a10:28lot of computers around the world to be10:30contributing their power to this network10:32and that uses a lot of energy10:35however10:36there’s an even more fundamental10:38question around nfts as you’ve seen10:40they’re basically just a way to create10:42artificial scarcity for something to10:44make something that was previously10:45unlimited10:46limited but in the vast majority of10:49cases is that really a good thing i’ll10:51give you an example so a few months ago10:53the gaming company ubisoft came out with10:55a brand new scheme ubisoft quartz10:58they’re telling players that in their10:59future titles they’ll be able to earn11:01one-of-a-kind in-game items that are11:03also tradable nfts and you could say11:06well that’s great that gives me11:08something really tangible to aim for11:09while playing and that’s awesome i can11:12sell that nft for money because it is a11:14completely unique item that no one else11:16will have11:17but if you think about it there’s two11:19possible outcomes here either these nft11:21items are really limited and they do11:23become valuable at which point you’re11:25basically dangling a carrot in front of11:27millions of players to encourage them to11:29play for an unhealthy amount of time11:32just for a chance to win and making the11:34games less inclusive and fun for the11:36people who can’t afford to do that now11:39the other alternative situation is if11:40there’s tons of these nft items to go11:42around for everyone and they’re all kind11:44of similar just with one slight unique11:46change which i think will be the more11:47likely outcome but then the nft aspect11:50of it becomes meaningless now i get that11:53there’s a brag factor of owning an nft11:55for let’s say an in-game weapon and if11:57this nft made you the owner of that11:59weapon and it meant that you could take12:01that weapon from this game to the next12:03game and still keep ownership of it12:06that’s a legitimate value add12:09but it won’t do that as much as12:10companies try to make it seem like it12:12owning an nft is not like owning a12:14physical product if i own a real hoodie12:16i can wear that hoodie at home i can12:18wear that hoodie while playing sports i12:20can wear that hoodie on holiday but the12:22complex nature of different games using12:24different engines and physics systems12:25and bases of code means that there’s no12:27way in hell that i’d be able to take my12:29gun that i earned from playing ten12:31thousand hours of one call of duty game12:32for example into the next call of duty12:34game it’s value will live and die in the12:37game that i’ve earned it from just like12:40if it wasn’t an nft item and was just a12:42normal in-game one the reason it’s an12:44nft is just so that ubisoft can make12:46more money by taking a percentage cut12:48every time the nft is bought and sold12:50and it’s not just unethical tactics nfts12:53are also riddled right now with illegal12:55activity for every nft you see from a12:57legitimate artist you’ll find 10 from12:59people who’ve never made a drawing in13:01their entire life and who’ve basically13:03just taken an already copyrighted piece13:05of work and tokenized it maybe13:07pixelating it on the way to try and sell13:09it off as retro art like i found a13:11marvel collection the other day where13:13you can buy a one-of-a-kind superhero13:15from the avengers there’s only one of13:17each and so you can end up paying the13:19equivalent of three million dollars just13:21for one character13:22except13:24marvel didn’t make these these aren’t13:26officially licensed products so if i13:28actually bought this gif for three13:30million dollars not only would i be13:32immediately bankrupt but i would also be13:34breaking copyright infringement law13:36all that said if you do still want to13:38buy nfts but just have no idea where to13:40start this is not financial advice by13:42the way but13:44this is the way i look at it i think13:46that for a lot of nfts right now the13:48majority of their perceived value is13:49coming from the technology they’re based13:51on as opposed to what they actually are13:54i think people are buying these nfts13:55because they’re trending right now and13:57because there’s a good chance that the13:59future of web and the potential14:00metaverse we’re moving towards we’ll use14:02this technology to be able to prove who14:04owns what digital goods but in the exact14:07same way that it’s difficult to transfer14:09an in-game item from one game to the14:10next game i think there’s an extremely14:13slim chance that any nft you own now14:15will still have a use at all in these14:17theoretical future worlds there will14:19likely be a point soon where nfts are14:21not trending people might get bored14:23there might be a next thing they move on14:24to these nfts of jpeg images might just14:27reach a saturation point because of the14:29sheer amount of people making them right14:30now and assuming that that does happen14:33at some point all of that value that’s14:35coming from the cool factor that14:37speculative perception of what an nft14:39should be worth just because it is an14:40nft will fall by the wayside and you14:43will be left with your virtual ownership14:45of a jpeg image so as of right now i am14:48personally staying well away people do14:51make money off nfts don’t get me wrong14:53but the sheer volatility of them makes14:55buying them right now much more akin to14:57gambling than investing what most art15:00experts would say is buy an nft if you15:03like a piece of art and you specifically15:04want to support that artist if you’re15:06going to buy something buy something15:08that if the whole market crashed15:09tomorrow you’d still be glad to own as15:11it made you a part of that community and15:13that history15:15but seriously i mean in an age where you15:17can literally pay someone 20 on fiverr15:19to design any art that you want and then15:21the art actually belongs to you as15:23opposed to paying 20 million just to be15:25able to say that you have technical15:27ownership but not even be the real owner15:29of a piece of art that is just one of15:31ten thousand similar pieces15:33this nft craze definitely feels like a15:35bubble that is about to pop15:38now while i don’t necessarily think that15:40nfts are the right thing to shop for15:42right now if you are just generally15:44finding yourself shopping online more15:45and more recently i’ve just found the15:47perfect tool for you karma this video15:49sponsor for those of you who don’t know15:51karma is a free app and browser15:52extension that ensures that you never15:54miss a price drop or coupon code when15:56shopping online i’ve actually just used15:58it to get this fancy ergonomic keyboard16:00that fixes some wrist strain i’ve been16:02having karma alerted me that the16:03keyboard was on sale and was running 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