Non-Fungible Tokens

[yogi]

Perhaps you have heard of Non-Fungible Tokens, or NFT's. They have been around for a while and I recently read about one being sold for more than $11 million at Sotheby's. I just finished replying to your last comment about a sculpture Better Homes and Gardens photographed for use in their magazine, and it made an interesting connection in my mind to NFT's. I'm very unfamiliar with all the intricacies of how they work, but this article in Forbes is very well written and understandable: https://www.forbes.com/advisor/investin ... ble-token/ You can read the article and see if it rings any bells for you, and not bother to try and wade through my blabbering. Or, you can skip the article and enjoy my interpretation of what appears to me as being a 21st century scam.


To put it into terms we both can relate to, a non-fungible token (NFT) is a digital file. The file can be owned by someone other than the person who created it. Two things come into play regarding the value of ownership of an NFT: the content of the file and the reputation of the person who created the content. Owning something, anything, created by a world renowned figure is of itself of certain value. If the creation is a unique artistic piece, it is non-fungible and that makes it desirable to own by collectors in certain circles. I'm sure you get the idea of how collectables acquire value, and of course the value is purely subjective. The item is worth only what the buyer will pay.

An NFT can be just about anything that lends itself to being digitized. A photograph of a sculpture, for example, could be an NFT. Any icon you can create in Gimp, any recording of voice or video, a meme, a gif, and whatever else you can think of. The Forbes article refers to Jack Dorsy's (a co founder of Twitter) first ever Tweet that he digitized and made into an NFT and sold for $2.9 million. HUH? How is that possible? You and I know how easy it is to replicate such files. What makes it so valuable? I don't know exactly what software is involved, but apparently NFT software can add a signature to a digital file and thus be a verification of its uniqueness. Thus, the person who bought Dorsey's Tweet was assured it was THE NFT created by Jack himself. It makes sense when you think of it. It's a very famous text written by a very famous person, and worth a lot of money to certain people who are collectors of such things.

Apparently other things besides a signature can be put into that NFT. Code can be included to insure that a royalty is paid to the creator each time the NFT is sold. That can't happen in the brick and mortar world, but it's fairly easy in the land of 1's and 0's. It's made possible by cryptocurrency. You, the creator/artist must have a digital wallet in order to put your work on display in a databank that handles such things, such as OpenSea.io where Jack Dorsey sold his Tweet. Having a digital wallet allows for transferring of digital currency in a seamless fashion. So, getting back to my "21st Century Scam" comment, NFT's are a fake commodity traded with fake money on fake exchanges. What could go wrong there?

My train of thought was triggered by your mailbox sculpture comments, but I quickly came to realize how you might actually benefit from NFT's if you could put the time and effort into it. I happen to know you are an accomplished author. Your books are in electronic bookstores, but that's not the inspiration I had. You told me that you designed more than a few book covers, which to my way of thinking is artwork. That situation has the two major factors influencing the value of an NFT, i.e., an accomplished individual and digital files with content of potential value to collectors. There are indeed people who collect book covers. Why not digital versions of book covers? Applying the right techniques to the file containing the artwork would assure the buyer that it is an original. Your reputation as an author might be limited to a specific circle of acquaintances, but those are the same people who may be collectors at heart. I don't know what a book cover NFT would be worth, but I am certain people who know you would place value on such a thing. Your only investment would be in obtaining a digital wallet and getting an account in a few places that sell NFT's. Then there is the NFT software, which I can't say is free or not. I don't know to be honest. After you acquire all that, then you just sit back an monitor your wallet.

Well ... it's just a thought. It may not be worth the effort. I just thought it was insanely improbably that anybody would pay $11 million at Sotheby's for a 28x28 pixel favicon file. But they did. You have a lot of potential NFT's in your arsenal. You never know what they could be worth.

[Kellemora]

I have to agree with you that it is all fake, just like the items you buy in an on-line game.
The tools, the characters, the items you use in the game, etc.
The gaming company makes a lot of money selling these virtual items, and use some of that money to keep their platform up and running, so they can sell more virtual items. They only have to create one, in order to sell 3 million or more of them.

[yogi]

Seems to me like I already posted a reply to the above, twice. I was interrupted by my wife of many years the first time and could not retrieve the comment I didn't complete. So, I'm positive I gave it a second shot, but I don't see it here. Obviously I had a Senior Moment; I wrote the reply but didn't post it.

All I wanted to point out was that the virtual merchandise in those games we all love to play is not the same thing as an NFT. The game tokens can be reproduced by the millions and traded as such, but an NFT is a one off kind of thing in that it contains a validating signature. The NFT can indeed be reproduced, but the original is non-fungible. It's a unique file onto itself which is what makes it collectable. Likewise the game tokens have a fixed value determined by the vendor. The price of an NFT is based on the market. In other words the buyer determines the price and not the seller.It's all digital and lives in virtual space and not really as fake as I implied. NFT's are often intangibles and thus can be claimed to be intellectual property. Most of that stuff is fake too, but definitely making some people wealthy.

[Kellemora]

I think you responded in a different post is why you couldn't find it.

What will cryptocurrency be worth when everyone and their brother starts making it?
Bitcoin was the first, but now there are over 7000 different brands!
I think it is those who are creating them who are getting rich, hi hi.

[yogi]

The thing that gets me about all those crypto-currencies is how their value is rated. Every one of them is value rated in terms of the U S Dollar!!! That means you really are dealing with dollars but under a different name. A few places will actually accept the digital currency for business transactions. Only one or two of them are stable enough for that to happen. The unstable value of the digital currencies is what will prevent them from becoming a standard. However, there is talk among central bank managers that it is "possible" to work with digital currency. Even the value of the U S Dollar changes on a daily basis depending on your geolocation on terra firma.

NTF's are akin to works of art. The artist makes the original and signs it to authenticate it. There are many reproductions if the work is good and the artist is well known, but only the original has any collector value.

[Kellemora]

I figure crytocurrency works like the stock market. When it is demand the value goes up, when too many folks are unloading it, the value goes down. I imagine BitCoin will drop in value just about as fast as it went up.

I'll have to check into those NTF's you are talking about. But I really don't see how something can be digitally signed in such a way it could not be faked somehow.
Many eons ago, when I was doing some transcription work, one of the clients wanted the files to have a specific date on them.
And he wasn't talking about the date typed on the page either. He showed me how to change the date of the actual files. Or by another way of changing the date on my computer so when I saved the file it gave it that date as the original date of creation.
He wasn't doing anything illegal with them, other than using an excuse that the reason he was turning them in late was they got lost on his desk somewhere. Back in the good old 5-1/4 floppy days, hi hi.

[yogi]

I briefly explained how these NFT files become secure in another thread. Basically they are signed much like encrypted software is. In the case of encrypted software there is a private key embedded into the code, a key that only the programmer him/herself knows. Then there is a public key so that this encrypted file can be used by the world at large. The two keys together make the software work. An NFT only has one private signature, and I'm not saying it is an encryption key, although it could be. The signature is digital and known only to the author. He keeps it in air-gap storage (if he is smart) so that nobody but him has physical access. It looks like any other file, but you need to have this signature key in order to read it. When you sell this NFT to somebody else, you would give them the key, and if they are smart they would change it to something only they know and also keep it in air-gap storage. If a fake version shows up, it's easily exposed as such because the purchase of the NTF is done using blockchain technology. When the owner sells it, the transaction is recorded so that the world knows from whence it came and to where it went. Anybody with a fake version isn't in the chain and would be exposed as bogus quite easily.

[Kellemora]

I just read where hackers are selling NFTs for folks to claim ownership of some paintings that then appear they are the true owner.
Way over my head Yogi!

[yogi]

Like many other things in the current century, intellectual property is going digital in the form of NFTs. Since I know you have some of that kind of property laying around somewhere, the idea crossed my mind that you might be able to profit from it. Then again, if you are unfamiliar with how it all works you are taking the right course of action by avoiding it all together.

[Kellemora]

I tried getting into the stock market many years ago.
My first mistake was taking advice from a financial officer, lost on every one of them.
Then I got into penny stocks, new companies that might have a chance. One did, but not enough to make up for the rest.
And as you know, I did harvest BitCoins for around 4 years, never made enough to cover the electricity I burned up.

Some day, perhaps the government will make all these cybercurrency groups all use the same blockchain the government controls.
But who knows?

[yogi]

While NTF's can be considered investments, they are not like equities or bonds for which you must put up some cash to purchase. They are ... collectors items that require very little, if any, cash to market. Of course there are downside risks to any venture, but digital tokens are not tangible. Thus the losses, if any, would not be tangible. We are talking about the price of ownership with NTF's and not about a balance in your bank account. Hopefully the value of the token will enhance your bank account, but you are starting from zero. The worst that could happen is your high priced token returns back to a value of zero.

The currency in which NFT's are traded is the most questionable part of the equation. Most crypto-currency experiences some very wild fluctuations in their value. It's all the result of speculators knowing there is a fixed number of digital coins and market demand will determine their value. I suppose the market can be manipulated, but nobody would ever be able to take control. It's because of this speculative aspect of crypto-currency that it has not become a standard form of currency. Some places are indeed experimenting with it, but there are no signs at the moment that any of them will be stable enough for governments or big businesses to latch onto.

I'm pretty sure the blockchains are merely an accounting method. The government would be interested in any capital gains you might experience as a result of your transactions, but I don't see them being interested in anything more than your accounting practices. And, by the way, that is the fly in the ointment. You must pay a tax on the profits from the sale of your NFT. Not only that, but the digital coins you use to buy and sell the NFT fluctuate in price and you must pay a tax on any gains from that too.

[Kellemora]

It is all still way over my head Yogi!

I'm sure the government will some day soon figure out a way that all businesses will have to do their accounting on-line to a government owned IRS monitored cloud service. They would love this as they could collect their income taxes daily, weekly, or monthly, instead of once every three months from businesses.
The sad thing about taxing businesses is, they don't actually pay the tax, their customers do at an inflated rate.

[yogi]

NFT's are becoming quite popular. If it's a fad or the wave of the future remains to be seen. Digital currency has one good thing going for it that appeals to many economists. It would be an ideal vehicle for a global currency. Countries would not have to abandon whatever currency they now use, but any international transactions can be conducted in a commonly accepted digital form of currency. Whatever that currency is would need to be way more stable than the ones floating around today in order to overtake the confidence the financial world has in the more traditional and major currencies. I can see that happening.

Taxes already are collected in real time. Getting them to the appropriate government treasury in real time is just a matter of modernizing the current system. Everything necessary to do it is already in place. The reality is that corporations are not wage earning human beings and in that sense they only act as a vehicle for the rest of us to financially support our government. The so called inflation factor could be eliminated by enacting a system of direct deposits. Those check out registers can make direct deposits to the state and federal treasuries if they were programmed to do so.

[Kellemora]

Back when I had employees, I had to send my FICA payment, along with the employees deducted amount on each payday.
Since our bank had a special way of handling all of that for me, all I had to do was worry about having my check in there before I sent out the paychecks.
Dad, for the florist did it a bit differently. He maintained a separate bank account of which he always kept much more in it than what he new he needed for FICA each week. He did cut a check to drop off at the bank, but they actually paid FICA out of his special account for that purpose. Then deposited his check into that account.
This worked out really well when we used a place like Paychex the last few years. All Paychex had to do was send a report to the bank, and mail my dad one. When he got it, he would write a check to his FICA bank account for that much, usually a week after the fact, so it was good he always kept more than needed in that account.
My brother did things entirely differently. He used direct deposit for payroll and FICA and many other things. Actually, that is how the bank he used worked. You had to have a separate payroll account, banking account, and FICA wire transfer account. So the government got their money instantly each week.
Speaking of money, we have two large stores here now that do not take cash, and about a dozen gas stations that don't take cash.

[yogi]

Well there you go. You just explained how al those taxes businesses collect from us peons can be deposited into the government treasuries instantly. But, you know, even if that happened tomorrow morning none of the businesses would reduce their prices by the amount of their so called inflated tax collection costs.

I've not run into any places in and around O'Fallon where cash is not taken. I know there are shops that work on electronic money transfers exclusively, but they seem to be rare birds at the moment. With the proliferation of clever phones and credit cards, hard currency would seem to be obsolete. The problem there is that each of those digital transactions have a fee attached to them. Now there is a case where I can agree a hidden tax is embedded into the system.

[Kellemora]

Don't know if you have a Sam's Club near you or not, or if they have a gasoline pump area.
If they do, you will find they do not take cash. You must use a credit or debit card there.

Almost all of the large chain gas stations still have a little box with a person inside to pay with cash.
But several of the smaller gas only, no store, places, you can only pay at the pump with a credit or debit card.
By law there is a person on site just in case of an emergency, but apparently they have some other type of job they are doing while sitting in the box. Exactly what I don't know though.

In the summer, we have a few hot dog vendors with carts around town. They do not have metal change. They only take paper dollars, but will break a 20 dollar bill, but nothing larger, usually. Now that the hot dogs are 1.50 each, you have to buy two of them, so a few folks stand around asking if you want to split a hot dog order, hi hi.
I did learn that a couple of them will take change if it is exact, like a paper dollar and two quarters. But none of them give change back using coins.
One of them will take a credit card if you spend more than 5 bucks, but the rest don't.

[yogi]

I never saw a Sam's Club in O'Fallon, but we did have some up north. In fact wife had a membership card and would shop there from time to time. I never purchased gasoline from Sams, and I can't say that I know if my wife did. But it makes sense that Sams would insist on credit cards only given that there is no attendant at the pump.

It's interesting to note that the hot dog vendor is dealing in paper currency only. There seems to be a shortage of metal change in general, but I'd guess the hot dog wagon has a different motive. You need to buy 2 dogs in order to pay for them. I assume the vendor is not collecting sales tax per se, but at least in Illinois the tax had to be paid by the seller whether he collected it from the buyer or not. I'm also very impressed that you can buy a hot dog for $1.50. It probably has something to do with no bricks and mortar to maintain.

My oldest daughter used to live in Kenosha, Wisconsin. One time when we went to visit her we decided to go shopping at the local grocery called Woodmans. They had a wide variety of food at reasonable prices, but they were doing something like Aldi does by not packaging your groceries for you. Bring your own bag was the norm and that was way before the concern about plastic bags became a fad. To my surprise and embarrassment, they did not take credit cards. This too was an obvious ploy to lower costs. I didn't know that in advance and did not have enough hard cash to pay for the groceries. Fortunately my daughter was close by and saved the day. I've not been to Kenosha in many years, but I'd be surprised if Woodmans closed down or changed their policies.

[Kellemora]

Most of those who work from food carts, and a lot who work from food trucks, have always dealt with even cash. Sales taxes are included in the final price which they make sure comes out even.
Even back home, 20 years ago and longer, we had several stores who's prices were adjusted so after adding sales tax it came out even, or to a larger coin, like a quarter or half dollar.

At stores like Dollar Tree, where everything's a Dollar, they add the tax at the register.
But a few of the Dollar General Stores set their pricing in even increments of 1, 2, 3, 4, 5 dollars, etc.
But not all the Dollar Generals work the same. Some have the tax included, others don't.
An item might really be 91 or 92 cents plus tax, so comes out to 1 dollar.

None of the Aldi stores back home or down here provide bags. But they do leave all their boxes up front for you to use.
I'm leery of any store that sells foodstuffs where they allow customers to bring in their own bags.
The bacteria and possible cross-contamination they put their selves at risk with is amazing.
I've seen people packing vegetables, chicken, and meats all in the same dirty bag they've used for eons, and keep them in the back of their car for the pets to sit on. Gross!

[yogi]

I hear what you are saying about contaminated bag brought to the store by the consumers. It could be a problem, but I'm sure it's no greater than whatever contribution the toxic fumes from the store supplied plastic bags produce.

Back in the days when I lived in Chicago there were quite a few street vendors of various things. They would cruise the neighborhoods on a schedule and sell their wares in that fashion. I don't recall there being any issues with sales tax or change. But then, back in those primitive times few things cost more than a dollar. The guy who came by in a Viennese Waffle truck sold them for 10 cents each. I'm pretty sure the hot dog guy was selling Vienna hot dogs for 25 cents. The peanut vendor's price escapes me, but it too was a matter of a single coin being exchanged. I can't recall any pennies being involved, but maybe there was. Usually they would write down the prices on the bag and total it up manually. More often than not they would round it off to the nearest dollar.

Now that I think about it, those push cart purveyors of foodstuff could not have been very sanitary. In spite of their best efforts those flies are everywhere and feed off everything they find. LOL

[Kellemora]

We used to have stick bread pretzel vendors on street corners down in the city. You got like six to eight in a bag for a buck.
Similar ones you buy from stores inside do not taste the same, not even close.
In order to achieve that taste, they have be held behind a BiState Bus for half a day, get drizzled on with rain and stick to the soft damp paper bag, suck up the air pollution for several hours, and then you finally get that unique taste, hi hi.

You may find this hard to believe, but plastic bags are much cleaner and safer than the old paper bags.
The storage room for those paper bags had to be treated with rodentacides and pesticides on a regular basis.
Even more so back when they took back returnable bottles, then they had ants and other insects to deal with in the back area of the store. Stores lost one heck of a lot of money due to returnable bottles, and the labor cost to take them in and pay out the refund on the bottles. Plastic bottles can be recycled, but their price is so low, it's usually not worth it. Although I do, because I pass the recyclers for plastic, and steel, on the way to the highest paying aluminum can recycler.
States that charge a deposit on anything are like self-defeating propositions for everyone concerned.
Those returning them to get their deposit back don't make anything for their labor, and the stores who take them in have much greater expenses by handling them.

I did the mathwork on this several times, concerning grocery store T-shirt style bags.
The average consumer would require collecting them for five years, to have enough to consume a 6 inch cube of space in a landfill. Other plastics, like bottles could be recycled, but it is not cost effective to do so at this time.
Some day in the future, our current landfills will become like gold mines, and be excavated for the recyclable goods in them. At a time when it would be cost effective to do so. But right now, when the plastic is super low cost, and the recycling cost so high, it just doesn't make sense to do it yet. Probably wouldn't hurt to just stockpile waste plastic in a few locations, instead of letting it go into landfills, so that when it does become affordable to recycle them, they can get to them easier and cleaner.