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 Big Problem What Are They
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FULL VIDEO TRANSCRIPT
00:00
did you know that thanks to nfts people
00:02
have managed to sell a recording of them
00:03
farting for over 400 a picture of homer
00:06
simpson combined with pepe the frog for
00:08
320 000
00:10
and even a simple five word tweet for
00:12
2.9 million dollars in my entire 11
00:15
years of making youtube videos i have
00:17
not seen a single trend catch on in the
00:19
way that nfts are doing right now so
00:22
here’s what the fuss is all about why
00:24
nfts are both a phenomenal invention and
00:26
becoming a problem and then the right
00:28
way to invest in nfts i’m even gonna
00:31
unbox one myself
00:32
so
00:33
it starts with this the way that our
00:35
economy has always worked is we earn
00:37
money and then we use that money to buy
00:39
goods but the more time that we’re
00:41
spending on digital apps like instagram
00:43
and the more time we’re spending on
00:44
digital games like fortnite the more our
00:46
purchases are shifting away from
00:48
physical goods
00:50
and more towards digital goods but that
00:53
poses a problem digital goods are harder
00:55
to monetize like let’s say that i make a
00:58
beautiful physical painting and i try to
01:00
sell it to people at a market now even
01:02
if someone tries to copy my painting or
01:04
even if they go as far as to take a
01:06
photo and then make a print of my design
01:08
it doesn’t really affect me too badly
01:11
because you’ll be able to tell from the
01:12
brush strokes that i have the original
01:16
but if i was a digital artist who
01:17
painted that same piece on my ipad for
01:19
example then the second i released that
01:21
art publicly as a jpeg image i would
01:24
lose almost all control over that asset
01:26
it can be copied with something as
01:27
simple as a right click and those copies
01:30
will look 100 identical to my original
01:33
so my art will no longer be a scarce
01:35
resource and thus its value drops
01:37
dramatically
01:39
this is what nfts are trying to change
01:41
see the word itself stands for
01:42
non-fungible token if something is
01:45
fungible it means it’s interchangeable
01:48
like cash where your ten dollar note can
01:50
be completely interchanged with my ten
01:52
dollar note
01:55
and so if something is non-fungible it
01:57
means it cannot be interchanged nfts are
01:59
using blockchain technology to be able
02:01
to indisputably verify who has the
02:03
original of a digital product there are
02:06
a one-of-a-kind token of ownership that
02:09
has a value and so when people are
02:11
buying and selling nfts what they’re
02:13
really doing is buying and selling their
02:15
virtual ownership over something
02:17
and to be honest there are five distinct
02:19
advantages to these tokens like if
02:22
you’re a designer you’ve got a new way
02:23
to earn and for fans of your art they’ve
02:25
got a new way of supporting you instead
02:27
of just transferring you a donation by
02:29
paypal they’re actually getting a piece
02:31
of your history in exchange nfts put an
02:34
end to really long-written boring
02:36
contracts replacing them with smart
02:37
contracts which in a really streamlined
02:40
way define the rules by which the nft
02:42
operates so for example a designer can
02:44
set a rule such that every time their
02:46
item is bought or sold they get a 20 cut
02:50
nfts are a dream for a lot of collectors
02:53
i get the fact that they don’t really do
02:55
anything might sound kind of dumb but
02:57
there are plenty of people who gain
02:58
pleasure just from knowing that they
03:00
have something rare i mean just think of
03:02
trading cards why did this charizard
03:04
pokemon card sell for 220 000
03:07
it wasn’t because it was good at
03:08
battling it’s just hard to find and so
03:11
through nfts the fact that you can be
03:13
the sole owner of the token for a
03:15
digital piece authenticated via a system
03:17
that’s completely fraud proof
03:19
you can see how it might give collectors
03:21
a similar thrill
03:22
and then four it’s not just creators
03:25
anyone can make money off nfts because
03:27
they can be traded each nft has a market
03:30
value and we’ve seen plenty of cases
03:32
like the one of this crypto punk face
03:34
over here which was originally bought
03:35
for less than 30
03:37
and has recently sold for 11.75 million
03:40
and i guess even more importantly is
03:42
that the nft market is seen as a fairly
03:44
accessible place to invest it’s not like
03:46
the stock market which can be
03:47
intimidating for a lot of people and
03:49
it’s not like the housing market where
03:50
you might need hundreds of thousands of
03:52
dollars to just get started and then
03:54
finally nfts give people a sense of
03:56
belonging i think a big part of why
03:58
people buy them is to feel like they’re
04:00
in a club for example there’s one
04:02
collection of nfts called the board ape
04:04
yacht club 10 000 unique ape images
04:07
for which the cheapest one is actually
04:08
going for over 200 000 right now but the
04:11
point is you’ll regularly find that the
04:12
people who own these nfts will use these
04:15
photos everywhere kind of like a symbol
04:17
of pride that they’re part of this
04:18
exclusive group and then on top of that
04:20
the creators of this board ape yacht
04:22
club they even organize physical
04:24
get-togethers for people who own board
04:26
ape nfts although this is the exception
04:29
more than the rule though
04:30
but this leads me on to the problem
04:33
the extremely problematic problem and
04:36
hey if you are finding this useful then
04:37
a sub to the channel would be
04:39
fun
04:40
to i totally believe in the core
04:43
technologies and the potential benefits
04:45
of vanities but the more i’ve learned
04:47
about how they’re actually being used
04:49
the more i’m genuinely scared about
04:51
what’s to come so just to start with
04:53
nfts are not what a lot of people think
04:55
they are if you own the nft of a piece
04:58
of work whilst you do have ownership
05:00
you’re still not the owner having an nft
05:03
of something isn’t giving you rights
05:04
over that design it doesn’t mean you can
05:06
then start printing t-shirts with it on
05:08
and selling them all it does is just
05:10
proves that it’s your property but just
05:13
through one specific way of measuring
05:15
what counts as your property usually for
05:16
a little more than bragging rights so
05:19
this is pretty much what you can expect
05:20
your nft unboxing experience to look
05:22
like you’ve got a nice shiny box and uh
05:25
[Music]
05:26
nothing
05:27
and even though nfts may have started
05:30
out being all about respecting the
05:31
artists as of right now the majority of
05:34
them are not being made by the lone
05:35
creator pouring their heart and soul
05:37
into their work they’re actually being
05:39
made by opportunistic business people
05:41
who just see them as a very quick way of
05:43
making money like just as an example
05:45
take the lazy lions another collection
05:48
of 10 000 unique unbelievably expensive
05:50
avatars just as ugly as the apes but now
05:53
in lion form and if you look closely at
05:55
this collection you’ll start to notice
05:57
something that certain facial features
06:00
keep reappearing and that’s because lazy
06:02
lions are not the work of a passionate
06:04
individual who’s genuinely trying to
06:06
design creatures with real character
06:08
their mass-produced computer-generated
06:11
cash grabs someone has realized that nft
06:13
apes are selling like crazy so they’ve
06:15
just picked another animal drawn 50 or
06:17
so individual pieces and then used a
06:19
simple piece of code that says make me
06:21
10 000 unique avatars using a
06:23
combination of these pieces there’s no
06:25
soul here at all it’s just how do we
06:28
take advantage of this trend to make
06:30
piles of cash or another example one of
06:33
the most ridiculous concepts i’ve seen
06:35
people talk about recently is this idea
06:37
of buying digital land there’s a real
06:40
site you can go to called next earth
06:41
who’ve mapped out the entire planet and
06:43
for the right price will allow you to
06:45
buy any area of land you want and no
06:48
joke hundreds of thousands of people
06:49
have swarmed to this platform with the
06:51
simple logic that well physical land is
06:53
worth so much now and if the world is
06:55
moving digital then digital land is
06:57
going to be worth loads
06:59
right
07:00
but
07:01
they’re forgetting a very simple fact
07:03
physical land has a purpose you might
07:05
want to live there you might want to set
07:06
up a factory or a server what exactly am
07:09
i going to do with my digital land go
07:12
online camping
07:13
it doesn’t make any sense and i mean
07:16
these next earth people
07:18
who are they do they own the earth is it
07:20
really in their power to sell other
07:22
people’s plots of land
07:24
no anyone can set up one of these
07:26
platforms as a matter of fact there are
07:28
already loads of them and so if you’re
07:30
buying let’s say the taj mahal on next
07:32
earth which by the way would cost me
07:34
close to twenty thousand dollars that
07:36
doesn’t mean you own the taj mahal it
07:37
doesn’t mean you even virtually own the
07:39
taj mahal all it means is that you have
07:41
a token that proves it’s your property
07:44
on one of these unlimited number of
07:46
platforms it’s the literal equivalent of
07:48
paying an entire year’s worth of savings
07:50
to buy land in a video game except
07:55
it’s not even a game
07:56
and things get far worse when you see
07:58
the way that some celebrities have used
08:00
and been used by
08:02
nfts twitter is full of thousands of
08:05
famous people dropping nfts left right
08:07
and center offering incentives to fans
08:09
who buy the super expensive ones like
08:11
getting to meet them for example and
08:13
that might sound fine but you can tell
08:15
that it’s coming from a place of just
08:17
trying to cash in almost all of these
08:19
celebrity nfts are little more than just
08:21
repurposed photographs from the past and
08:23
the perks that come with them are really
08:25
things that should be worth hundreds but
08:27
through the current hype of nfts they’re
08:29
trying to get fans to pay tens of
08:31
thousands for
08:32
but this is nothing compared to what i
08:34
saw the other week so stan lee the now
08:37
deceased creator of marvel apparently
08:40
came back from the dead
08:42
to promote an nft collection and at this
08:45
point it is just sad this guy died in
08:48
2018. i highly doubt his final words
08:50
were please sell this stupidly expensive
08:52
set of jpeg images to extort my closest
08:55
fans people are trying to use nfts to
08:57
get rich off the fact that he’s dead and
09:00
they’re always trying to make it seem
09:01
like because stan lee loved embracing
09:04
new tech that this is what he would have
09:06
wanted
09:07
yeah fun fact stanley also loved charity
09:10
to the point where he set up his own
09:11
foundation how about raising money for
09:13
that it would definitely be a better way
09:15
of preserving his legacy that’s for sure
09:18
the exact same thing happened with the
09:19
painter bob ross he was known as the guy
09:22
who inspired the joy of painting with
09:24
his beautiful sweeping landscape art and
09:26
would you believe it his legacy is now
09:28
being honored with
09:30
well
09:32
this by the funko figure company and to
09:35
be honest i think this goes against
09:37
everything the guy stood for the company
09:39
claims his legacy was about investing in
09:40
paintings no it wasn’t he wanted people
09:43
to buy paint and make the art he would
09:45
openly say that he didn’t want his name
09:47
to be used for mindless generation of
09:49
profit and yet after his death they’re
09:51
using every bit of goodwill that his
09:52
name had left to effectively print money
09:55
and most importantly he was a huge fan
09:58
of nature and the environment and nfts
10:01
are not helping that and this is my next
10:04
thing
10:04
so you might know that there’s a whole
10:06
load of different cryptocurrencies that
10:08
you can own there’s bitcoin litecoin
10:10
ethereum well almost all nft
10:13
transactions are made using ethereum and
10:15
ethereum is pretty bad for the
10:17
environment it uses a security mechanism
10:19
called proof of work which is incredibly
10:22
thorough and is a big part of what makes
10:24
nfts so fraud proof but the problem is
10:26
that this kind of security requires a
10:28
lot of computers around the world to be
10:30
contributing their power to this network
10:32
and that uses a lot of energy
10:35
however
10:36
there’s an even more fundamental
10:38
question around nfts as you’ve seen
10:40
they’re basically just a way to create
10:42
artificial scarcity for something to
10:44
make something that was previously
10:45
unlimited
10:46
limited but in the vast majority of
10:49
cases is that really a good thing i’ll
10:51
give you an example so a few months ago
10:53
the gaming company ubisoft came out with
10:55
a brand new scheme ubisoft quartz
10:58
they’re telling players that in their
10:59
future titles they’ll be able to earn
11:01
one-of-a-kind in-game items that are
11:03
also tradable nfts and you could say
11:06
well that’s great that gives me
11:08
something really tangible to aim for
11:09
while playing and that’s awesome i can
11:12
sell that nft for money because it is a
11:14
completely unique item that no one else
11:16
will have
11:17
but if you think about it there’s two
11:19
possible outcomes here either these nft
11:21
items are really limited and they do
11:23
become valuable at which point you’re
11:25
basically dangling a carrot in front of
11:27
millions of players to encourage them to
11:29
play for an unhealthy amount of time
11:32
just for a chance to win and making the
11:34
games less inclusive and fun for the
11:36
people who can’t afford to do that now
11:39
the other alternative situation is if
11:40
there’s tons of these nft items to go
11:42
around for everyone and they’re all kind
11:44
of similar just with one slight unique
11:46
change which i think will be the more
11:47
likely outcome but then the nft aspect
11:50
of it becomes meaningless now i get that
11:53
there’s a brag factor of owning an nft
11:55
for let’s say an in-game weapon and if
11:57
this nft made you the owner of that
11:59
weapon and it meant that you could take
12:01
that weapon from this game to the next
12:03
game and still keep ownership of it
12:06
that’s a legitimate value add
12:09
but it won’t do that as much as
12:10
companies try to make it seem like it
12:12
owning an nft is not like owning a
12:14
physical product if i own a real hoodie
12:16
i can wear that hoodie at home i can
12:18
wear that hoodie while playing sports i
12:20
can wear that hoodie on holiday but the
12:22
complex nature of different games using
12:24
different engines and physics systems
12:25
and bases of code means that there’s no
12:27
way in hell that i’d be able to take my
12:29
gun that i earned from playing ten
12:31
thousand hours of one call of duty game
12:32
for example into the next call of duty
12:34
game it’s value will live and die in the
12:37
game that i’ve earned it from just like
12:40
if it wasn’t an nft item and was just a
12:42
normal in-game one the reason it’s an
12:44
nft is just so that ubisoft can make
12:46
more money by taking a percentage cut
12:48
every time the nft is bought and sold
12:50
and it’s not just unethical tactics nfts
12:53
are also riddled right now with illegal
12:55
activity for every nft you see from a
12:57
legitimate artist you’ll find 10 from
12:59
people who’ve never made a drawing in
13:01
their entire life and who’ve basically
13:03
just taken an already copyrighted piece
13:05
of work and tokenized it maybe
13:07
pixelating it on the way to try and sell
13:09
it off as retro art like i found a
13:11
marvel collection the other day where
13:13
you can buy a one-of-a-kind superhero
13:15
from the avengers there’s only one of
13:17
each and so you can end up paying the
13:19
equivalent of three million dollars just
13:21
for one character
13:22
except
13:24
marvel didn’t make these these aren’t
13:26
officially licensed products so if i
13:28
actually bought this gif for three
13:30
million dollars not only would i be
13:32
immediately bankrupt but i would also be
13:34
breaking copyright infringement law
13:36
all that said if you do still want to
13:38
buy nfts but just have no idea where to
13:40
start this is not financial advice by
13:42
the way but
13:44
this is the way i look at it i think
13:46
that for a lot of nfts right now the
13:48
majority of their perceived value is
13:49
coming from the technology they’re based
13:51
on as opposed to what they actually are
13:54
i think people are buying these nfts
13:55
because they’re trending right now and
13:57
because there’s a good chance that the
13:59
future of web and the potential
14:00
metaverse we’re moving towards we’ll use
14:02
this technology to be able to prove who
14:04
owns what digital goods but in the exact
14:07
same way that it’s difficult to transfer
14:09
an in-game item from one game to the
14:10
next game i think there’s an extremely
14:13
slim chance that any nft you own now
14:15
will still have a use at all in these
14:17
theoretical future worlds there will
14:19
likely be a point soon where nfts are
14:21
not trending people might get bored
14:23
there might be a next thing they move on
14:24
to these nfts of jpeg images might just
14:27
reach a saturation point because of the
14:29
sheer amount of people making them right
14:30
now and assuming that that does happen
14:33
at some point all of that value that’s
14:35
coming from the cool factor that
14:37
speculative perception of what an nft
14:39
should be worth just because it is an
14:40
nft will fall by the wayside and you
14:43
will be left with your virtual ownership
14:45
of a jpeg image so as of right now i am
14:48
personally staying well away people do
14:51
make money off nfts don’t get me wrong
14:53
but the sheer volatility of them makes
14:55
buying them right now much more akin to
14:57
gambling than investing what most art
15:00
experts would say is buy an nft if you
15:03
like a piece of art and you specifically
15:04
want to support that artist if you’re
15:06
going to buy something buy something
15:08
that if the whole market crashed
15:09
tomorrow you’d still be glad to own as
15:11
it made you a part of that community and
15:13
that history
15:15
but seriously i mean in an age where you
15:17
can literally pay someone 20 on fiverr
15:19
to design any art that you want and then
15:21
the art actually belongs to you as
15:23
opposed to paying 20 million just to be
15:25
able to say that you have technical
15:27
ownership but not even be the real owner
15:29
of a piece of art that is just one of
15:31
ten thousand similar pieces
15:33
this nft craze definitely feels like a
15:35
bubble that is about to pop
15:38
now while i don’t necessarily think that
15:40
nfts are the right thing to shop for
15:42
right now if you are just generally
15:44
finding yourself shopping online more
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