Hello to the millions of people that will surely be captivated by this post the second that I hit the post button!
Yeah, fun.
Anyway, there's this thing that exists that seems to be confusing those of us who consider ourselves to be somewhat savvy in the weird world of finance.
That thing is the wondrous "NFT".
Now, after having many toxic arguments with people who are NFT investors and with people who hate NFTs with every fiber of their being, I feel that I need to make the following disclaimer:
I am not advertising NFTs, I am just trying to help people better understand what they are and exactly why especially wealthy people are willing to throw insane amounts of money at them.
I've had individuals who want to market NFTs wish death on me and my family, and I've earned a few social media stalkers based on their backward assumption that I am someone trying to market NFTs.
So what exactly is an NFT? A "non-fungible token" is a unique code that represents a type of asset that cannot be replicated (even though it can be replicated, but whatever).
It works like a cryptocurrency, because the code that's created is then verified by (usually) thousands of individuals who are attempting to decipher a mathematical equation to be able to earn money for finding the coveted "private key" that represents the NFT. That private key, while in the process of being found, is having its ownership by you verified by everyone who is attempting to figure out what it is.
Instead of the private key representing an amount of digital currency, it represents a digital asset.
Here's where shit gets really fucking stupid.
In the world of valuation of assets, there's two different methods you can use. You can value an asset based on its market value, or you can value an asset based on its historic cost.
An NFT will always represent a digital asset, and most of the time that asset is represented by a single image. If I paid one million dollars for an NFT, what would your reaction be? You'd probably think "Wow, look at that idiot. He just spent a million dollars on a digital image of Peter Griffin dressed like The Riddler". Now then, wouldn't it look very weird if you stood there and mocked me, and my response was "Oh yeah, that's right. I am just a complete buffoon! Please, allow me to enjoy my precious digital art in private so that I am not infecting you with my contagious idiot germs."
That's a little suspicious, eh? Well, think about what I just said about historic cost. I've just paid one million dollars for an asset, that while being completely worthless in terms of market value, still represents a one million dollar asset in terms of what I currently own. It's an asset that doesn't look attractive to you, but to me it's an asset that cannot depreciate in value in terms of its historic cost.
What can you do with an everlasting high-value asset? You can borrow more money from banks as you now have very substantial collateral, and yes, banks are stupid enough to allow a useless asset like an NFT to permit larger loans with lower interest rates.
What also makes NFTs attractive is that John Q Investor, who only trades in whatever financial instruments their company's 401K plan will allow, thinks that they're stupid. Thus, the narrative is that the big time investor spent so much money on NFTs only because they're stupid and they wanted that Peter Griffin image that badly, and not because they intended to commit (legal) fraud against the banks.
What's funny for me is that small time investors have posed the question "Why are rich people spending so much money on NFTs?" and I made the mistake of believing that that was an actual question. You know how questions work, you ask something in hopes that someone will give you a better understanding of what you're asking about, Well, not in that case. They're asking because they really REALLY hope that one of those rich people will take the bait, and then they can mock them incessantly. I wouldn't call myself rich, but I guess that providing an explanation of NFTs and why rich people spend so much money on them was enough to dupe people into thinking that I was one of those horrible 1%ers. So, I've had my fair share of complete losers using me as their scapegoat for fucking up their financial futures through bad investments.
Then there's the people trying to market NFTs. Oh boy. See, I can deal with mockery, I'm happy enough with my circumstances that words and their intent really can't hurt me. I got into an online debate with a guy who was trying to market his NFT business, and I guess that I revealed too much about his business model. He was based out of Haiti, and he chose to send some pretty credible threats to me and my family. He's in prison now, because he chose to threaten me without realizing that through my Son's Godmother, I have some very powerful connections in Haiti. Either way, having the ability to provide a matter-of-fact understanding of NFTs has made enemies of people from either side of that argument.
Are NFTs a scam? Yes. They're codes that represent digital images. The code can easily be replaced and used in the exact same way, and the image is only your property as it pertains to the code. It should also be mentioned that if someone simply copied your code and the image, and sold them, they still haven't committed a crime.
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