[muglug]

I think the strongest claim (one I've also arrived at independently) is that NFTs (aka digital collectibles on the blockchain) are mainly popular because they provide a thing for people who already own cryptocurrencies to spend their digital cash on, without feeling like they're "cashing out" (which has negative connotations in crypto).

Instead NFTs are seen as an investment vehicle — they will appreciate in price over time, just look at BAYC.

One of the other claims is that cryptocurrency largely favours existing pools of wealth and capital. Anecdotally this matches my experience — the people I know who have done really well from crypto investments are those who were already incredibly well-off in the early 2010s, and were looking for interesting places to invest.

The last claim (that I've also heard first-hand) is it's really easy to raise VC money if your startup centres around "decentralisation", which means a ton of entrepreneurs have a strong vested interest in believing that all this stuff is the future. The big irony there is a lot of the companies in this space (e.g. Coinbase) are de facto advertising themselves as the centralised hub for decentralised systems, creating big points of failure that contradict the entire ethos of the blockchain.

[andrewxhill]

On your second argument, the rich get richer.

Again, it's definitely true... across the entire economy. In most of the economy, there are pretty much two parties that own the organizations. Those who create the organizations (e.g., founders and some employees) and those who invest in the organizations (wealthy entities). What's different in web3 is that many great projects are working to introduce a 3rd (or more) slice of the pie: the community. Some places to look for this are DAOs working on grants to underrepresented people, Gitcoin Grants & quadratic funding for funding public goods etc, any good token distributions for new tokens, or community-driven networks like Audius or Helium.

It's pretty early days, but I think lots of people _inside_ of web3 are working really hard on this problem.

Two really great Sunday evening links: This one is a fascinating argument to more precisely frame how speculation leads to innovation, so why the belief of investors is a good thing https://www.youtube.com/watch?v=k_GNLPniic4. And this one, connecting crypto to a long thread of history (and economic access) https://overcast.fm/+kmaHgw-3s

[andrewxhill]

On your final point: really easy to raise money and the irony of centralized projects built on the stack.

Again, probably true... but to an extent. Take a look at that Chris Burniske talk I posted in the other comment. There are many things that look new in crypto, but in fact, they are just more efficient in crypto. One of them is the speed through which the value that accrues in crypto is redeployed to fund new innovations. So when we see these huge market caps of tokens, it means huge treasuries are also being deployed to fund good (and bad) ideas. This means many founders in the space can find good homes quickly, making it more competitive for external investors to access the founder pipeline. So the strong vested interest you point out is partially just the result of this wild fast loop.

I really don't see coinbase as a contradiction. It solved some pretty big pain points that web3 alone couldn't solve in the early days. Some of that will be replaced, other parts of it probably will not be replaced. It's just one piece of a puzzle.

I guess final thought related to that last point. There is a really easy mistake that founders make all the time. They look at the market or the competitors and they assess the current state, a snapshot. It's really hard to break out of that and assess that outside of us with velocity taken into account. Where will they be in x amount of time? People will sit there and point at centralized opensea as proof of web3 failure, until opensea isn't the dominant player anymore, and they will point to the next thing. But where is it all going? Where is it already that we just cannot see from the outside?

[muglug]

I'm doubtful that any of those decentralising innovations will come to pass, because the history of the web tends towards centralisation mainly because humans tend towards centralisation. The more complex the underlying technology for something becomes, the more people cling to services that make it more simple. And anything to do with crypto is very complex.

[andrewxhill]

Okay, I'll write back with three comments in case people want to sink their teeth into these responses distinctly :D

Your first argument: NFTs are primarily successful because crypto-holding individuals see them as a place to invest without cashing out.

On trend with all my answers, I think this is true to an extent too. But what it misses is a vibrant ecosystem of experimentation that is happening with NFTs below the easily visible surface. The ecosystem is driven by creative people and consumed by people that truly believe these are worthwhile experiments to undertake.

Just a few diverse examples:

- Loot provided NFTs that is simply your inventory in a yet-to-be-made game. The creator essentially said, here, this is an open, ownable, and composable building block. Now, the owners are stakeholders in the development and success of those games. Of course the people that bought these were already holding ETH, but many of those people think something cool is happening here. Otherwise, nothing will get built. https://hackmd.io/@XR/lootwars

- Sam Harris's plans to use the membership/association behind the rise of Pfps to create a community that gives away its wealth and then virtue signals that in ways to encourage others to do the same https://docs.google.com/document/d/1u_YeUyztgJhWgLZ9YJh6eVKZ...

- CryptoVoxels sell parcels of land as NFTs. Taken together, they generate a metaverse of spaces that the owners fill out with their imagination. https://www.cryptovoxels.com/ These people are passionate about something new and different, they are building.

I personally even find the memberships and DAOs driving many of the popular Pfps (e.g. Doodles, Creature World, Coolman's Universe) to be a bit contrary to your main argument. Many of them have highly active communities that you only get to be part of by owning the NFT. So for many, it's not really a place to park or spend their ETH. The economy of those closed communities is pretty fascinating. Recall, the NFT creators (core team) get a cut every time an NFT is sold. But it's not like the 5% is going to some artist's pocket, they are building teams of devs etc to world build. It's worth taking to pen and paper and figuring out the economic game being played between the core teams that build the community and the collectors/traders that want to be part of it. They are revenue generating creative organizations... let's see where they go.

[andrewxhill]

Just more concretely closing the loop back to what you said. You said Instead NFTs are seen as an investment vehicle — they will appreciate in price over time, just look at BAYC. This is sometimes true, some of these NFTs are actually more like startups than you maybe are noticing. They use the transaction fees (5% of price) to hire paid teams to build things for the community that make membership (ownership) more valuable. So yes, some people buy those NFTs knowing that the team behind them is just getting started and is working to make the club more beneficial to be part of. Some will be flops, others will probably be around for a long time.

[muglug]

> But what it misses is a vibrant ecosystem of experimentation that is happening with NFTs below the easily visible surface

You could argue there was a vibrant ecosystem in the dotcom space in 2000 as well, but ultimately that vibrant ecosystem was only able to exist because so much money was being pumped into the space. I don't think "some people are doing cool things" is a protection when the most visible people are doing things that seem, to me, at least a little dodgy.

[andrewxhill]

Why stop at 2000 though? The internet is still full of terrible things today, many of which are the most visible, and most of which are happening because, money.

https://www.youtube.com/watch?v=k1BneeJTDcU

Terrible things on the internet don't make all things built on the internet guilty by association. Just like scammers and grifters finding opportunities in web3 don't make all NFTs bad ideas.

[muglug]

> Terrible things on the internet don't make all things built on the internet guilty by association.

OK, but it's not like TCP requires fantastically large amounts of energy for each request. While I'm sure there are particular companies working on a solution for those problems, I've seen enough of the cryptocurrency world to understand that the big players won't shift their money into theoretical environmentally-sound currencies, because they simply don't care about global warming as long as they can be very rich.

The thing I keep coming back to is that blockchain databases don't allow me to do anything, as a developer, that I couldn't do with traditional databases and with much less power consumption. People have been buying in-game digital good for decades without needing the blockchain. Services like Venmo and Paypal make it easy to send (small amounts of) money across continents in an instant.

Blockchain databases are fundamentally unnecessary to the average person.

Edit: and it occurs to me that this is the main reason these technologies get such short shrift on HN: to most of us they seem like solutions in search of problems, and sometimes even just solutions in search of money.

[dmitriid]

> Loot provided NFTs that is simply your inventory in a yet-to-be-made game. The creator essentially said, here, this is an open, ownable, and composable building block. Now, the owners are stakeholders in the development and success of those games.

This betrays complete lack of knowledge of how games work.

Just because you bought your armour from League of Legends doesn't mean it will automagically work in Lord of the Rings:

- the data is different

- the underlying character models are different

- why would developers of Lord of the Rings accept anything into their game that breaks the game aesthetic?

- anyway will not work in 2-10 years because tech changes

But sure, yeah, it's a "composable building block".

Additionally: this "composable building block" is stored on a central server somewhere, of course, because storing anything on the blockchain is prohibitively expensive.

So, you have:

- in your wallet

- some small hash,

- pointing to some proprietary model on a central server

- that with 100% certainty will only be applicable to the single game that sells it

But yeah. That "simplifies inventory in a yet-to-be-made game", for sure.

> Sam Harris's plans to use the membership/association behind the rise of Pfps to create a community that gives away its wealth and then virtue signals

I've read this sentence 10 times and I still don't know what it means

> CryptoVoxels sell parcels of land as NFTs. Taken together, they generate a metaverse of spaces that the owners fill out with their imagination

So, a game sells something in the game's virtual world that is only applicable to that game and to that virtual world. What does this have to do with NFTs or blockchains in general?

Second Life has been around since 2003.

> Many of them have highly active communities that you only get to be part of by owning the NFT.

There are many communities you get to be a part of only when you buy an equivalent of a fictional token. This doesn't make them "counterexamples".

> So for many, it's not really a place to park or spend their ETH. The economy of those closed communities is pretty fascinating.

It really isn't.

> Recall, the NFT creators (core team) get a cut every time an NFT is sold. But it's not like the 5% is going to some artist's pocket, they are building teams of devs etc to world build.

Riiight. When Patreon does that, it's evil centralised service. When "core NFT team" does that, it's "look it's a vibrant crypto community unlike the world has ever seen".