Nic Carter: Why are NFTs difficult to explain?

I keep seeing supporters of NFT complaining that Bitcoin holders “don’t understand”. As the saying goes, Bitcoin holders are to NFTs what non-coins are to Bitcoin. This argument is an endless cycle:

“How can you not see the value of digital scarcity? You are a Bitcoin player!” This sentence will always be refuted: “NFTs are not scarce, you can copy and paste!” Endless refutations.

In my opinion, it is difficult for supporters to explain the reasons for NFTs because NFTs are not a single concept. They are a bundle of related concepts. NFTs are a cluster of entities that are superficially similar but functionally heterogeneous, just as “encrypted assets” or “blockchains” are semantically too decentralized to be regarded as a single classification element.

In other words-NFT is a process, not a product. For NFT, something is to assign a unique serial number to it, which exists on the public chain. That’s it. In addition,’NFT’ does not convey any additional information about the purpose or nature of the serialized content.

The problem is when proponents try to explain NFTs by resorting to specific conclusions (“NFTs are for x” or “NFTs realize y”). This confuses the problem, because the scope of NFT is very broad and contains a large number of applications. (Opensea’s NFT Bible is a good introduction.) So, when NFTs are interpreted as a single purpose, many people naturally don’t understand them: their potential mentors in the NFT world also don’t understand them. How can you teach things that you don’t really understand?

To single out the different types of ownership offered by NFTs, let us consider three examples. They are completely different, and apart from their mechanical properties, they have nothing in common. To confuse them is a misunderstanding in taxonomy.


The first is one of 100 digitally signed digital art works, produced by artist Grimes. When I bought this work (I haven’t bought it yet, but I admit I really want to buy it), I bought it for several reasons:

I know that what I bought is a’limited edition’ of a piece of art, and I have permanent rights to it.

I know that I am directly supporting artists (if buying art in the primary market) or indirectly supporting artists (some market platforms transfer the income from the secondary market to artists. If not, I am also influencing the market and encouraging artists to follow up. Markup during sale).

I know that if I choose to resell the artwork, I will probably resell it on the secondary market.

I know that Grimes uses this platform and only this platform to issue these NFTs. It is impossible to turn around and sell a second set of these identical digital paintings in a’limited edition’.

What I bought was actually a digitized version of the autograph collection after the show, or a signed limited edition album cover. Like I said jokingly, NFT should be understood as a signature, not an art.

See also  3 reasons why traders turned bullish after Bitcoin price surged to $10.7K - Cointelegraph

This is not difficult to reason, because in the simulated world, this approach is already familiar to us. The most important thing is that there is an extremely close causal relationship between the generation of IP and the digital serial code. I know that Grimes has certified this specific interface as her designated agent for digital art sales. I know that additional copies of these autographed artworks will not be sold in other digital content because she will violate the informal social contract with fans.

The important thing is that we have a strong guarantee that Grimes will not replicate these NFTs elsewhere. If the artist does not promise that it will not be released on 20 NFT platforms, what use is the limited edition NFT? This is also the reason why NBA/Top Shots products are successful: NBA will not sell designated highlights/moments on other platforms. You have an exclusive guarantee.


The second case here is tokenized Twitter. Jack Dorsey listed the first Twitter in history, and it looks likely to be sold to Justin Sun for $2.5 million. In this case, when you bid someone’s Twitter on Cent (actually I’own’ a Twitter of Neeraj), you are announcing that you are willing to buy the display rights of that Twitter on the Cent platform. But the creator must really accept this offer-you can’t buy a tweet without their consent. So you are actually promising to buy a signed version of Twitter on a third-party platform. This is Cent NFT. A statement of economic intent to express gratitude (it can also be used as a right to show off later. See-just five sentences ago, I boasted that I had Neeraj’s Twitter!)

Of course, many other NFT publishers may appear and participate in the competition, so I can’t say that I own the exclusive copyright of this tweet, just a tokenized version on a specific platform. In fact, I don’t own anything on Twitter about this tweet itself.

Here the connection between creators and NFT is much looser. Creators may not know that their tweets are for sale. When the creator accepts the transaction, they nod slightly to the buyer. But again, the buyer only has the exclusive right to show off the tweet on the Cent platform, not elsewhere. This is both a bet on Cent and a bet on the text itself.

Cultural relics

Finally, we have a type of NFT that you can unceremoniously describe as “art fraud on the blockchain”. There are many reports that some individuals use malicious or unintentional methods to list the content on the NFT website, either directly from another artist, or a derivative of some content guaranteed by intellectual property rights. This is an art fraud report on Rarible; this is Giphy’s complaint about this practice; there is also an allegation that Wu Tang Clan actually NFT the art of another artist. These cases are relatively close to the point, and the platform itself is also trying to supervise them.

See also  Here’s why bulls aren’t bothered by Friday’s $525M Bitcoin options expiry - Cointelegraph

But there are additional gray areas that make people question the IP relevance of NFT. In these cases, creators monetize memories or other content that is actually in the public domain. Who is the “creator” of “Pepe the Frog”? In theory, it’s Matt Free. But what about those endless mixes and derivatives? NFT-like memories or other culturally significant content will become a discussion about who owns the culture. Of course, the answer is everyone, and no one. How to have the right to monetize memories? Is it the initiator or the adaptor? Or is it a popularizer?

Another problem with buying NFTs that are not directly related to a particular creator is that you have no exclusive guarantees. I recently saw a piece of my own NFT image put into the filter. If I bought it, I wouldn’t have any exclusive requirements for the concept of “Nic’s tweets put universal filters”. The artist is not too important here, because the output is a simple algorithmic process combining content. It is this type of NFTs that makes people difficult to understand, and it makes sense: they raise extremely difficult ownership issues. The purpose of NFTs is to strongly define who owns what, but if you can’t agree on ownership in the first place, it doesn’t make sense to put these contents in a “firm property right” package.

This is about intellectual property

Through comparison, we can clarify the key difference between NFTs. In my opinion, the difference between NFT subcategories depends on the tightness of intellectual property integration. At one end of the genealogy, I have a strong guarantee that I will receive an autographed original artwork directly from the creator. I have an extremely close connection between the creator, her original IP, and the digital products I now meaningfully own. In the middle, we have a more scattered connection: I have the unique right to show off on other people’s Twitter, and they recognize it by getting rewards. But I don’t really own their IP, and of course I don’t own the tweet body. All I get from the creator is a rough nod–“Yes, I accepted a fee for these “braggering rights”. Ownership in exchange.”

On the most obscure side, my appeal to a certain memory or cultural artwork is suspiciously scarce. It may be presented in a unique way, but its creator does not even have ownership in a certain sense. Products are mostly derivatives-in the sense that most art is derivatives, it is still artistic, but it is definitely not a personal original and exclusive work. They monetized it, in fact, it may have violated copyright. I may still have fun from owning it, but apart from the entertainment value, I don’t know exactly what I have.

See also  3 reasons why bitcoin has doubled in less than a month - and why experts think it won't repeat its 2017 crash - Business Insider

Finally, in the truly wacky world of programmatically generated NFTs like Cryptopunks, I am very unclear about what I am buying. I am not entirely rewarding artists, because artists are an algorithm. Most likely, I bet that recently wealthy Ethereum enthusiasts will regard NFTs as a status totem, marking the membership of an exclusive club (those who have the foresight to buy the first batch of NFTs on Ethereum People, or people who have the financial strength to buy them once they become popular.) My best argument here is that these are actually a form of resaleable social signals, like a digital Hermès Birkin bag. The actual content of the NFT is basically irrelevant.

Therefore, in the debate about NFTs, I think people are talking about the past with each other. Skeptics believe that the “most hollow” NFTs–those with the loosest or non-existent IP/token link–and test ownership in this case. Proponents consider the “most complete” NFTs–NFTs that have close connections and guarantee the exclusiveness of the issuer–and point out the advantages of this issuance model. And their views are correct! Because NFTs are not a single kind of thing, NFT is a packaging medium.

I am not telling you that the NFT process is a gift from God. I’m not saying that they are doomed to fail or to collapse. The concept of a serialized, public chain-resident, and inherently financialized tool is obviously a useful package, and it will definitely continue to exist. What I want to say is that NFTs are a loose concept group, not a concept. For me, the most reasonable subcategories of NFTs include: a) the close connection between intellectual property and digital references; and b) the guarantee of exclusivity. The rest is hard to make sense.

Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.