To the latest trend that's sweeping the internet called NFT, So what's behind this latest craze?
That is the question to ask.
Okay, so there's some super strange stuff happening online right now, and I need to tell you about it. First, look at this tweet. The first tweet ever tweeted in the history of Twitter. The tweet was by Jack Dorsey.
And this tweet was somehow just purchased for $2,915,835.47 And it's not just a tweet.
Just last month a single jpeg sold for 69 million dollars.
The NBA is selling little moments of basketball games for hundreds of thousands of dollars. This is all sorts of digital things that people are purchasing a version of them for lots of money.
There are three simple letters that you need to understand what's going on here.
What exactly is an NFT?
This story is much bigger than a $600,000 cat gif or a three-million-dollar tweet. It's a story about human psychology and how the way we value things is shifting because of technology. A technology that some people think may revolutionize our society, while at the same time accelerating the climate disaster. It's really nuts, it's all of these things together and I want to explain it to you, so let's do this.
NFT stands for non-fungible token.
So, fungible, let's talk about the word fungible. It's this very specific word that economists use, it has a very precise definition. I want to use a different word for fungible for a second. Let's just use the word replaceable.
Non-fungible means non-replaceable, you can't replace it, there's only one of them, it's unique. Non fungible.
Let me give you an example of something I feel very strongly about. Let's say you want to buy an orange jacket. You go on the internet, and a jacket costs $39. If you purchase one of these jackets for $39, you don't care what specific jacket they send to you, they're going to make thousands of jackets in your size, send them to stores, send them to people, and they will send one to you, you don't care which one it is. The jacket is fungible, it's replaceable. As long as you get one that's identical to the rest, it's worth the same to you, they're interchangeable.
However, let's talk about one Uni Qlo orange jacket that has been with me for a very long time. This is the original, and for those of you who don't know I sort of have a strange attachment to this jacket. I just love it, I love the color, I feel like an identity with this thing. And it’s sort of starting to disintegrate, but I love it and I kind of fell in love. This jacket is not replaceable. This jacket is non-fungible. It is the only one on the planet that exists. It has emotional value. It has significance. It is a very valuable thing because it is scarceEverything in our economy is one or the other, fungible or non-fungible.
There are tens of thousands of NFTs of all kinds. Some music is being given tokens, lots of art is being minted as tokens and being bought and sold, and then of course there's NBA Top Shot, these Top Shot moments from your favorite NBA players have been turned into non-fungible tokens.
As soon as humans have enough abundance to have their basic needs met, food, shelter, warmth, et cetera,
the next frontier is to create value in things that have no inherent value. The value turns into psychological hype. Excitement around a certain thing. We've been doing that forever; I mean the whole art industry is based on the idea of a bunch of people deciding that this painting, this little bit of canvas and wood and paint is valuable, and thus it is valuable. The only different about now is we now have the technology to do this in a non-physical way using this very sophisticated internet technology that is maturing very quickly.
Okay, so this is a lot of hype, and I know you're thinking like cool, there's a bunch of rich people online buying and trading digital art, and there's millions of dollars worth of cards, I thought you said that this was going to have the potential to change the world. And I'm getting there, but first I need to talk about the crazy flip side to the NFT fad. The reality is that the technology that is the backbone for all of this, the blockchain stuff that is the sort of heart and soul conceptually, but mechanically, like physically what it relies on is computers doing a bunch of little calculations all day and night forever. These computers aren't real computers, they don't have any memory, or screens, or anything. All they do is just make little micro-calculations all day, all night. Most NFTs are stored on a blockchain called Ethereum
If suddenly technology existed that took away the centralized middle man and made transactions between people able to be authenticated, verifiable, and much smoother, that could change our world.
I just know that this is a crazy moment where we're getting our heads around a new technology and what it means, and eventually will adapt. This won't be crazy, this won't be novel anymore, prices will go down, but the technology that allowed it all to happen will probably stick around.