Brilliant i love it
rilliant
I’m going to take a moment to talk about NFTs since I see people in here talking and arguing about them.NFTs have some actual use cases, but what people are currently doing with them on altcoin platforms is not one of them.
Below I will explain how the NFTs on altcoin platforms work on a technical level and I will explain why they probably wont even exist in 10 years.I will also explain why some of these NFTs are selling for such high prices.
Many of those NFTs that were sold for crazy high prices were not actually sold to other people.The person who bought those expensive NFTs is often the same person who minted the NFT in the first place.I will explain how whales can easily own very expensive rare NFTs for very little cost.They can just mint an NFT and sell it to them self for $500,000 worth of etһ.
They will only lose the small percentage that the NFT marketplace takes and now they own a super rare NFT worth $500k and they will still have most of their etһ because they sold the NFT to them self.And there is a small chance that they might be able to to sell that worthless NFT to some fool who believes that it is actually valuable.Doing this also entices more newbies to mint NFTs in the hopes of getting rich.
Some people are now using flash loans to borrow large amounts of etһ so that they can purchase their own NFTs for extremely high prices and then they pay back the flash loan all in the same block.https://www.theblockcrypto.com/post/122516/how-a-cunning-trick-made-it-look-like-a-cryptopunk-sold-for-532-million
Here is another example that can be done.
You can mint an NFT and sell it to yourself for $1000, then put it up for sale and buy it from yourself again for $1500, and sell it to yourself another time for $2200.Now you can put this appreciating NFT up for sale and try to sell it to some fool who sees it keeps getting sold for more and thinks that it must be valuable.
Have you seen celebrities buying NFTs like jpegs of bored apes for hundreds of thousands of dollars? Platforms like MoonPay are paying those celebrities to claim that they bought those NFTs.Those celebrities didn’t really pay anything for those NFTs.Those celebrities actually got paid for receiving those NFTs.You can often look at the blockchain and see that the etһ that was used to buy the NFT came directly from a platform like MoonPay, as is the case with the bored ape NFTs that Post Malone recently “bought for $700k+”
The current NFTs are useful for something.
These NFTs are a useful tool for laundering illegally acquired cryptocurrency.Criminals can shift around their ill gotten crypto between different tokens, mint an NFT, and purchase their own NFT with their dirty crypto.Now they’ve cleaned their dirty crypto and they also own a rare NFT that’s supposedly worth a lot of money.
I mean just look at how much it sold for!
It costs anywhere from $100-$600+ to mint an NFT on etһereum depending on the current gas fees and where you mint it.So they’re hyping shitcoiners/artists/anyone up and luring them into minting crap in the hopes of getting rich and NFTs are doing a great job of that at the moment.
People are spending millions of dollars worth of etһereum minting NFTs hoping to hit the NFT lottery and get rich.
All these NFT tokens being sold on etһereum right now either point to a URL on the internet, or an IPFS hash.In most circumstances they reference an IPFS gateway on the internet run by the same startup that sold the NFT.That URL also isn’t the media.That URL is a JSON metadata file.
The owners of the servers have no obligation to continue storing the media.
Now let’s take a look at a couple of real NFTs and see how they work on a technical level.
https://niftygateway.com/itemdetail/primary/0x12f28e2106ce8fd8464885b80ea865e98b465149/1
This NFT token is for this JSON file hosted directly on Nifty’s servers as shown below: https://api.niftygateway.com/beeple/100010001/
That file refers to the actual media that was “bought.” Which in this case is hosted by Cloudinary CDN, which is served by Nifty’s servers again.So if Nifty goes bust, this token is now worthless.It refers to nothing and this can’t be changed.
Now we’ll take a look at the $69,346,250 Beeple, sold by Christies.It’s so expensive.Surely it isn’t centralized, right? Wrong, it’s pointless: https://onlineonly.christies.com/s/beeple-first-5000-days/beeple-b-1981-1/112924
That NFT token refers directly to an IPFS hash.We can take that IPFS hash and fetch the JSON metadata using a public gateway: https://ipfs.io/ipfs/QmPAg1mjxcEQPPtqsLoEcauVedaeMH81WXDPvPx3VC5zUz
So well done for referring to IPFS, it references the specific file rather than a URL that might break! But the metadata links to: https://ipfsgateway.makersplace.com/ipfs/QmXkxpwAHCtDXbbZHUwqtFucG1RMS6T87vi1CdvadfL7qA
This is an IPFS gateway run by http://makersplace.com , the same NFT minting startup which will go bust one day.
You might say “just refer to the IPFS hash in both places!” But IPFS only serves files as long as a node in the IPFS network intentionally keeps hosting it.Which means when the startup who sold you the NFT goes bust, the files will probably vanish from IPFS too.
This is already happening.There are already NFTs with IPFS resources that are no longer hosted anywhere.
And just pinning the file on your own IPFS node also wont work because the metadata file generally points to a specific HTTP IPFS gateway URL and not the IPFS hash.This means that when the gateway operator goes bust, I can buy the domain and start serving dick pics lol
Right now NFT’s are built on an absolute house of cards constructed by the people selling them, and it is likely that every NFT sold on etһereum so far will be broken within a decade.This creates a pretty solid exit plan for makersplace if they run into financial problems.
The people who own the these useless NFTs “worth” millions of dollars are going to be pretty motivated to buy the site or fund it.Or someone can buy the bankrupt startup domains and start charging NFT owners to serve their files.
Someone should mint your comment as an NFT
Thank you.This is the best description of NFTs I have ever seen.I learned a lot by reading.Thank you again for taking the time to type that up.
I kind of hate how NFTs and crypto have become synonymous with the general public, and they’ve just never been the same level of value to me.
All I got from that is NFTs are made up and not worth a shred of what they claim to be worth.So, exactly how I thought of them before, rich person fraud like with art.
Great writeup for those who don’t do their own research, well done and thank you!!
Problem is that nfts are so broad of a term that is not very useable.
Comparing a jpeg photo, a smart contract liquidity position and a playable card in a game and saying they are all the same doesn’t make any sense
I’m not exactly sure how the tax law works in the US.But if they sell it to themselves for 100k and then some “lucky crypto investors” buys it from them at an incredible 90% discount for just 10k, doesn’t that mean they have a 90k loss on the books they can use to compensate gains on other trades.
I’m not asking because I want to use this as I live in a country that has no capital gains tax anyway.Just curious if there is something to my suspicion.
Not in disagreement for any of your point, but just wanted to state that Moonpay is an onramp for buying NFTs with a credit or debit card on opensea.So a purchase will appear to originate from Moonpay wallets even if the buyer used their own money via a debit card.Not saying Celebs aren’t lying but they could be using their own money through moonpay.Especially if they aren’t crypto literate.
Amazing and insightful comment.Well done
This description even if true in some ways is very limited and very negative.
You only show one side of the coin.
The one you don’t like bro.
There are a lot of uses for NFTs.Don’t look at an NFT as if it was a picture, nobody cares about the picture.See it as it was a key because that is the way it has to be seen.
NFTs are keys that open doors, either access to a DAO, either access some services, you can stake them to access rewards or private sales for some other content.There is a truck load of things yet to discover.
Also, NFTs are a new way for companies to start businesses owning their own liquidity and having each NFT holder as a shareholder in that company.
So obviously some clever people are using NFTs to do some arbitrage and crazy stuff to evade taxes or to lure some dudes but it is absolutely not the core of what an NFT is used for.It is not deviant at all, people that use it badly are the deviant ones.
This technology is here to stay weather you want it or not.
Face it bro
Also want to add a huge usecase you didn’t mention.NFT’s are actually awesome for the gaming industry.For example fortnite skins, those can be NFT’s so people actually own their skins and can sell them to other people.Theres already an emergence of crypto gaming with NFT’s but in its current state it needs some AAA companies to give the industry a boost as the games are pretty lack luster in terms of graphics and game play
Man this post was written so well, if I didn’t know any better, I would have thought I wrote it myself.
Some more information that debunks a lot of myths and misconceptions about NFTs and just how useful or useless they can be can be found in a recent post we wrote here — https://cipherblade.com/blog/are-non-fungible-tokens-nfts-used-for-money-laundering/
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