NFTs will (probably) be back

People like collecting stuff.

NFTs are really the third use that people have found for blockchain technology. The first one was illicit value transfers; Bitcoin and other cryptocurrencies may not be a very good form of money in general, but they make it easier to commit cybercrimes and to evade nations’ capital controls. The second one was DAOs, which at least in theory allow people to form organizations without paying the overhead of hiring lawyers (though as far as I can tell this doesn’t quite work yet). NFTs represent yet another thing you can do with blockchains — you can assign and transfer ownership of a digital collectible.

Not legal ownership, mind you. If I use a copyrighted image without permission I can be fined; if I refuse to pay the fine, people with guns will come and jail me. If I right-click on a non-copyrighted NFT image and use it, the most the NFT’s “owner” can do is to try to get a bunch of people to yell at me disapprovingly. But NFTs at least give some people a sense of ownership.

In recent months, the NFT space has experienced a major bust. NFT prices are down even compared to the rest of crypto, which itself is down by a very hefty amount. There are rumors that the number of people using OpenSea, the main NFT marketplace, has plateaued. Axie Infinity, a video game where you collect NFTs, got hacked by North Korea for $620 million — possibly the biggest heist in human history. Bored Ape Yacht Club, the most popular series of NFT collectibles, has had some major stumbles as well. And so on. In fact, there’s at least one entire website devoted to fiascos in the NFT and crypto space.

This underscores the fact that it is a very unwise idea to invest your life’s savings into NFTs. The space is absolutely chock-full of scams, Ponzi schemes, pump-and-dumps, and products of dubious value being supported by hype and nonsense. I don’t own any NFTs, and I wouldn’t blame you if you avoided the market entirely. I certainly wouldn’t want to end up like the guy described in this Daily Beast story:

[A] 38-year-old registered named Lauzrus Esteban [said] he lost his entire life savings this month in the Luna crash…Still, he said, he’s not about to take his money out of the market.

“I’ve already decided that whatever I have there I'm willing to lose, because I’ve been hearing you only make real money during the bear markets,” he said. “So I’m risking it. I’m risking everything.”

He added: “I still think it’s gonna be the future.”

But that said, I think it’s easily possible to go too far in the other direction, and to claim that the entire concept of NFTs is itself a scam or a Ponzi. I think that there is a place for NFTs in the world, and that the space will probably bounce back eventually.

People like collecting stuff