[denisnazarov]

Best explanation of NFTs and virtual goods I heard was from pmarca and bhorowitz on Clubhouse yesterday:

- The Honus Wagner baseball card is $0.50 of physical goods (cardboard/ink) and $3M of virtual goods

- A Basquiat painting is $100 of physical goods (paint and canvas) and $1M of virtual goods

- A rare Nike sneaker is $5 of physical goods (plastic/rubber) and $500 of virtual goods

NFTs are going to take this phenomenon to Internet scale.

We made the conceptual leap from physical gold to digital gold with Bitcoin. We will do the same for all other objects with cultural value with NFTs.

[hn_throwaway_99]

This sounds like "crypto-babble" to me (sorry, but if I had a bitcoin for every time I've heard "take this phenomenon to Internet scale" I'd be a bitcoin billionaire, which I guess would either make me very rich or bankrupt depending on one's point of view).

I fully understand how the value of highly in-demand assets are a function of their restricted supply. And yes, at present, that can apply to crypto as well. I see nothing in your post to make the leap from how rare physical goods are valued that somehow NFTs can replace that.

[pilingual]

What you are missing is authenticity. The point Denis is making is it has nothing to do with the atoms but the sanctity of the item. Topps and MLB issued a piece of cardboard when now they could issue a token verifiable on Ethereum.

Let’s suppose you are a huge Justin Bieber fan. Justin sends you a Signal message. You’d feel a frisson of excitement, wouldn't you? But why? He didn’t shake your hand. He didn’t sign your copy of Justin Bieber: Never Say Never. No, it was just some text that appeared on your screen. And that’s the point: it was sent from Bieber himself. That moment is precious, and when an artist puts their work on the blockchain they capture that same kind of moment.

[kellyreid]

Was this directed at my or the original poster?

I use the term Provenance rather than Authenticity just to be more specific in terminology. However, Authenticity is a very very important subset of Provenance. I'd define Authenticity as "having verifiable facts to support claims of some special provenance".

[kellyreid]

If you can accept that the Honus Wagner rookie card is worth some ridiculous sum, then I think I can explain the NFT version.

Context: Professional gamer-investor for 10+ years, formerly collectible card dealer.

The Wagner baseball card is iconic in our culture, and humans seem to have an irrational attachment to otherwise-worthless physical objects that seem to preserve some relic of our cultures. We can all agree that a worthless 100 year old slice of paper is an irrational thing to value at a price that exceeds most houses. Note that this is not judgment, as I work in this industry - we all accept how ridiculous the whole thing is.

So now let's move to the next most ridiculous example, CryptoPunks, founded in 2017. It was the first NFT, very basic and simple, a barely-functional proof of concept (as compared to the NFT games we have today). In the Crypto world, four years might as well be forty. As context, four years after Magic the Gathering was released in 1993, the original most scarce first-edition cards were already worth an incredible multiple of their original value around release date.

What I'm saying is, four years in a traditional physical game world is a long time. In Crypto-Blockchain-Hightech, four years is an eternity. Therefore, the "oldest" asset in the industry - the silly pixel art Crypto Punks - has intrinsic collectible value as being "first edition" within an -entire genre-.

I should note that the Punk nfts are literally useless, they have no utility whatsoever. Their only value stems from being, essentially, SUPER First Editions of the entire NFT world. Whether you realize this or not, the NFT world is booming and has been for 4 years.

So there are many many many people who "FEEL" about the old original NFTS, the same way traditional collectors feel about baseball cards and magic cards. Why? They didn't grow up in an era where cardboard was a desirable thing. They grew up on games where these collectible items had Utility and were also attached to memories.

I played World of Warcraft semi-competitively and was very focused on economics; my automations dominated our server's auction houses (not in a predatory way - think market-maker, not scalper). I had some items in my characters which I would equip and use to go slay dragons or what-not. Others would remind me of a fun time with my friends where we got a super-lucky treasure chest in a dungeon. Maybe such an item isn't "great" in the game, however the item has sentimental value. A 100% digital item.

The best contemporary example is Mystic Axies in Axie Infinity. [disclosure, i own some. not shilling my bags, they're not for sale, etc] These were special drops from the First Edition of Axies ever created, and the very rare ones can also be quite stunningly beautiful. These are the Honus Wagner Black Lotus Charizards of Axie Infinity - Axie has been around for more than two years and has grown steadily since Day One. It's got an established player base, economy, and metagame. Thus, it has crossed the threshold where the original super-rare stuff is now "old and rare" in the eyes of a new player, and rightfully so! Venture funds and private investors are snapping up physical rarities _AND_ digital rarities.

In short, there is literally no difference between an NFT and a Physical Collectible other than the laws of physics they obey - You own a Honus Wagner card because you possess the physical cardboard. Atoms. You own a Mystic Axie because the blockchain says so; it asserts this by forcing you to verify you own the "password", the private key, and matching it to the "account", the public 0x address.

To trace the logic a bit, the blockchain states that Address 0x123...789 is the owner of Axie #42069. Anyone who can prove that they are the owner of the address 0x...789 is therefore the owner of that Axie.

This is why Private Keys need to be kept secure. With a baseball card, you would know if someone smashed your window and stole the card, right? But you wouldn't know if someone had stolen and replicated your spare key to your vault. Therefore that person can be understood to "have" your card without physically possessing it. Their ownership of the key acts as a proxy for the card, because the key implies immutable access to any assets owned by that account (0x..whatever).

Basically, the Ethereum network (or whichever protocol the NFT is built upon) acts as the Laws of Physics for digital collectibles. It replaces the concept of "I have this collection of Atoms" with "I can assert access to this resource, which therefore makes me its Owner". However, unlike a physical card which cannot be jointly held by two parties (you can't rip it in half, that kind of undermines the objective...) an NFT can be simultaneously owned by multiple people. If I have a rare Monster and I give you the Private Key, then we both own that monster. In a sense that monster's ownership is in Quantum Superposition until one of the key-holders takes action to move it to a new 0x address (therefore associating the Monster with a new Private Key, which is presumably owned by a single entity and not shared/compromised). At this point, the owner of the NFT is once again a single defined entity until that private key is shared again.

[harveynick]

The thing that seems missing from this explanation is that without the physical goods the virtual goods are worthless.

[centimeter]

Two reasons this is not likely to succeed:

1. Reality is a schelling point. Owning a physically, globally unique version of an object is more universally appreciable than owning a virtual title that only has significance insofar as the NFT shitcoin platform you "own" it on has significance. There are probably going to be dozens of these NFT platforms, and I don't see many natural dynamics that would cause one to come out ahead (unlike with money).

2. Owning the physical version of something gives you a meaningful monopoly over certain uses of the item (exhibiting the painting, wearing the shoes, etc.) whereas NFTs only give you access to one monopoly (bragging rights). It's not nothing, but it's not much either.

[kellyreid]

see my post above to understand why I think you need to adjust your definition of Reality. There are entire swaths of society (especially when you get to the under-25 demographic - which I am most certainly _NOT_ a part of) that grew up on Digital, not Physical.

Sincere question, are you old enough to have grown up in an era where, as kids, we coveted cool baseball cards? That industry died some time in my early 20s (I'm well over 30 right now) and that's part of what led me to shift digital.

The real key is that there are a huge quantity of people who care about digital goods more than physical.

The one thing I think you've got quite wrong is about "shitcoin platforms". That just doesn't really apply to NFTs as broadly as you've used it. There are a load of validated, good NFT products, and there are heaps more that are total shit. I would say that painting the entire ecosystem of NFTs as "shitcoin platforms" represents a major blind spot in your evaluation.

I have nothing to sell or convince, just a point of view from someone who's been in this world for a long time trying to fill in gaps in knowledge where I can.

[detaro]

Regarding 2: Rights might very well be tied to owning the token. Just because you can obtain a digital file doesn't give you full license rights to it. Neither law nor the Art world are stranger to non-physical artworks with licenses.

[0b01]

Remember when Martin Shkreli had that unreleased Wu Tang album? Yes he still has it.

[dmt0]

Well, if he had it on blockchain and we all could have the digital copy of the album and listen to it, and he would only have the bragging right represented by his ownership of the token, it wouldn't be the same, would it?