Not to mention that it sounds like he has no realized loss. My impression from the article was that he didn’t intend to “store his net worth in a rock picture,” as some here are saying.
It sounds like he had near zero net worth, bought an NFT that was probably worth nothing (in weird NFT terms, as we know they’re all worth nothing), then this bizarre NFT bubble blew up, and he suddenly had a large (make-believe) net worth. But the difference between what he paid for it and what he sold it for is a very small loss, if at all.
Or basically (and ironically) anything else being seen as “collectible” when it’s still new - especially if it’s being sold that way (because it indicates plentiful supply, a lack of demand for the thing as a desirable object in itself, and a guarantee a whole lot of these things will be preserved in storage).
NFTs fail in all regards - they’re digitally immortal and thus the supply doesn’t change (except you can create further, infinite NFTs using the same source material), and literally no one actually wants the NFTs themselves - if NFTs were not seen as having any value, they wouldn’t even have novelty value (only the linked media would be of interest). Thinking about it, it feels a bit unfair to even allude to Beanie Babies when talking about NFTs - at least people actually wanted those, even if the supply greatly outstripped the demand.
Well, I’d say that’s a pretty clear indicator that you do understand it.
I was just skimming through the New York Times’ The Latecomer’s Guide to Crypto, just so I could roll my eyes at it and point out its mistakes, and sure enough
If it helps, you can think of NFTs as like the certificate of authenticity you might get if you bought an expensive sculpture. The sculpture could be copied or forged — or someone could break into your house and steal it — but because you have the certificate of authenticity, you can prove that you are the owner of the original.
I’m starting to get it. So NFTs are basically a way to claim ownership of a digital file?
Yes.
Goddamnit, no. You don’t have ownership over any goddamn jpg of a rock. You don’t even have ownership over a URL, as many seem to think. You have ownership over a tiny piece of the blockchain that happens to contain text that happens to be the same as a URL that currently points to an a jpg of a rock.
It gives you no ownership or rights over any urls, any jpgs, or any rocks.
Is that part even the case? Does one actually “own” anything there in any meaningful legal sense?
As I understand it all you have is an entry in a ledger (you don’t own the ledger) stating that you are in some way associated with a URL which may or may not point to a .jpg of a rock.
It’s theoretically evidencing some other agreement which you have entered into with someone else.
Judging by the few NFT offerings I’ve looked at, they are woefully deficient in explaining what legal rights they are actually offering. I’ve seen some vague references to granting some kind of license but nothing that any halfway competent lawyer would advise paying several cents for let alone several million dollars - even leaving aside the question of what the subject of the licence is supposedly worth, the agreements themselves are essentially useless.
Which is hardly surprising since as plenty of people have already pointed out, it’s all bollocks.
ETA:
The article does go into that - well down into the TLDR section of the article:
It still skirts over the issue by saying the buyer “got” an official copy of the image. What does that mean? Who knows…
Yeah, it’s still not clear wether you even legally “own” a token, or if you just happen to be the person with the cryptographic key to it. (The ledger, FYI, doesn’t even associate “you” with a token, just a wallet address.)
As far as I know, there has never been a court case to say what would happen if I just guessed your keyphrase and took your bitcoin or NFT.
There have been cases of people stealing keys, but that may be treated more as a hacking/stealing secrets case than resolving the question of whether you actually own the tokens themselves.
I would wager, though, that eventually it will be settled law that you “own” your token, only because money talks in the legal system, and some rich people have a lot of money in this.
But for an NFT, the token you may or may not own is definitely nothing more than some plain text that happens to match a url that happens to point to an image.
Yeah, it’s still not clear wether you even legally “own” a token, or if you just happen to be the person with the cryptographic key to it. (The ledger, FYI, doesn’t even associate “you” with a token, just a wallet address.)
I think it’s clear that you don’t own anything, but it’s also worth mentioning that “ownership” is not as clear-cut as people like to believe. Legal academics are still arguing and coming up with theories over what it means to “own” something. Ownership looks different between different kinds of assets. And it looks different between different jurisdictions. And even in situations where there is a legal regime which might apply, crypto bros will go out of their way to try and make it not apply (sup securities law).
I think you’re right that when lawsuits happen and where significant financial loss can be proven, courts will find a way to provide some kind of remedy. But I don’t think we’ll ever get a coherent, generally accepted, legally sound concept of property right in an NFT.
If I’ve licked it, I own it. (With some limitations as this applies to living beings.) I cannot lick an actual NFT, as even the image is merely a representation of the entity in question, therefore it cannot be owned.
Eh, too simplistic, even after accounting for facetiousness. Money can be owned that’s just records in a digital bank ledger, stocks ditto. Patents and trademarks too.
I think eventually the courts are more likely to find that opening a Bitcoin is like owning a stock – even though it’s different, the courts won’t bother to make a fine distinction. Someone paid for something.
This doesn’t mean the horrible things are worth anything, though.
The biggest and best use for crypto-anything has been its utility in teaching my kid about hysteria and asset bubbles.
He worked his first ‘real’ job last summer and saved up a bit of money. He was fully aware of the crypto ‘boom’ and wanted to be a part of it, despite my overt and detailed disdain. He asked me to help him buy some Ether. I made it very clear that if he spends all his money, then he won’t have any money - dad isn’t going to backstop his losses. He is not too big to fail.
Nonetheless he bought $500 ‘worth’ of it in the fall. My warnings gave him enough caution that he held back the rest of his savings for spending through the winter. The price promptly fell and has stayed low and lower ever since.
We are now at the point where he is out of cash, his ‘crypto’ investment is worth not much, and the school year is not over. I’m curious to see what he does next.*
*He’s a kid, he will eat, be housed and remain clothed regardless. What better time to lose your shirt in a bogus ‘investment’ scheme than when you are an underaged kid who lives with his parents? Much better than when you are a middle aged schlub who has kids to feed and a mounting sense of desperation - which I suspect is a large percentage of the crypto community…
Indeed. I can pick up a rock on the beach and claim it is worth a million dollars. If you also have a rock that you claim is worth a million, we can sell them to each other and put a million dollar transaction on our books. If we are clever enough and have a few lawyers, we can then borrow against our million dollar rocks to buy other things. Do that a few thousand times and in ways most people don’t really understand and then we have ourselves a ‘market’ for our financial instruments. Rinse, repeat, spin and twist and we’ll both have billion dollar companies. At which point those rocks become priceless and should probably be hidden somewhere. I suggest a beach filled with similar rocks so that thieves don’t know which one is worth money.
That above accounts for a disturbingly large percentage of what Wall Street does, especially in fucked up areas like the bond market which are deliberately complex and largely meant to obscure what they are actually doing. Crypto takes it to outrageous levels, and feeds on the desperate hopes of all the latest crop of suckers.
Thanks - have grabbed this text to use in future discussions.
Then this intrigues me from the same article:
So… is this another nonsensical example from the article? Or have some NFT creators been providing signed images as well as the text in the blockchain - or is the blockchain being bloated with scrambled image bits?
The NYT article is trying to describe owning an NFT as owning an “original, signed edition” of an image — like if Da Vinci signed your poster of the Mona Lisa. The analogy they’re trying to make is that you don’t own the Mona Lisa, but you do own a rare collector’s item. But the trouble is they’re wrong, you don’t even own that. You don’t own any cryptographically signed version of the image at all. You own a reference to an image. It’s as if you owned a piece of paper that Da Vinci signed that said “the Mona Lisa.” (Or, actually, most strictly of all, a piece of paper that said “The Louvre, Paintings Department, Denon wing, room 6, east wall” and you’d better hope the staff don’t swap it out.)
Some people think such a piece of paper would still be worth something. Perhaps they’re right although I don’t think so. But the NYT’s analogy is wrong, and misleading.
More like you own a piece of paper that nobody has signed at all and that simply reads, “The Mona Lisa, available for viewing at the Louvre. This certificate entitles the bearer to view the Mona Lisa (non-exclusively) and grants the bearer the exclusive right to brag about his or her entitlement to view the Mona Lisa.”
Since we’re really nerding-out on these analogies, I had been editing my post while you wrote yours to say that, most strictly, it’s a piece of paper that just names the wall on the Louvre where the Mona Lisa happened to be hanging when you bought the paper, and doesn’t mention the Mona Lisa at all.
