Surf Report: Fine, I'll talk about NFT's

Issue 28: 04.04.2021 (Free Version)

April 04, 2021

Hey everyone—I’m so glad to have you here. What a week.

Some people have asked me what I think about NFT’s and my usual answer is: I don’t think about them. Which isn’t entirely true but it’s a fun retort, and communicates my point which is that I’m not interested. I’ll explain why, since I think that’s the more valuable thing to have right now than an NFT.

For the uninitiated or those who missed SNL’s parody of the current craze, a quick primer: NFT stands for “Non-Fungible Token” and refers to digital content (a jpeg image, an mp3, a text file, etc.) that has been rendered unique by attaching it to the Ethereum blockchain network where proof of originality and ownership can be verified. It’s a new way of making scarce and special what could otherwise be freely copied. So if, say, some jpeg image was turned into an NFT, it means that image could be copied and shared as always but those copies would be easily identifiable as not the original. There is only one true NFT of that image, which can be attributed to a single owner, and all other copies no matter how exact aren’t the “real” original image. (Some people describe NFT’s akin to signed artworks, with all other copies being worth less because they don’t have the original creator’s signature on them.)

Fun right? Well, things got a little out of hand and one thing led to another and when Christie’s completed the first-ever auction for an NFT a jpeg image by the artist Beeple ended up selling for $69 million dollars.

Given that software is eating the world and the idea of value and commerce is at the heart of society and markets, why am I not particularly interested?

A few reasons:

  • I’m not entirely convinced that you need a blockchain to accomplish what NFT’s are trying to do. The blockchain and the idea of a “token” were byproducts of the invention of Bitcoin, where value transacted on the network is a closed system and both of those aspects were necessary. Other applications of “blockchain” since then haven’t proven quite as game-changing for this reason. You could use DocuSign to effectively create NFT’s too, which I think I’d prefer.

  • NFT’s currently rely on the Ethereum network, which is not as decentralized or reliable as it’s made out to be. The point is, if you own an NFT you are still dependent on the long-term value and stability of the underlying technology it’s tied to. If you had the choice between owning an original Picasso that was painted on sturdy canvas or another painted on a lower quality material that is degrading more rapidly over time, which would you choose? The underlying substrate matters. DocuSign has been around since 2003, and people have been trusting it to certify legal documents meant to last for decades, so while it’s a centralized verification authority it’s also proven trustworthy for this type of thing. (And if you wanted a truly decentralized version you could build it on top of Bitcoin instead)

  • The excitement has been in the buying and selling, not the owning. The fact that Beeple immediately converted his $53 million NFT earnings from ETH to USD should tell you something very important about what’s being valued here. Things are worth what people will pay for them, yes, but there’s a difference between transacting value and storing value. One reason art has historically proven to be a good store of wealth is because artworks tend to appreciate only after the artist has died and their contribution realized and valued by culture. And it’s only once an artist has died that you have provable scarcity too.

As of late, the shine on NFT’s appears to be wearing off.

As a concept and technology I actually think NFT’s hold plenty of promise. We’re already seeing interesting extensions, like this NFT jeweler creating cool ways to display NFTs in the physical world, or NBA TopShot which is applying the idea to the trading card market.

I’m looking forward to innovation in the world of music—not sound files so much as live performances. Concert tickets for in-person events need to be non-fungible due to physical attendance limits, so a version of this technology could be used to make buying, selling, and re-selling tickets more efficient, and extend to sports, theater, and beyond.

At the end of the day the NFT craze reminds me an awful lot of the ICO craze back in 2017, which defrauded a lot of people out of a lot of money and stained a lot of legitimate cryptocurrency work in the process.

Also, tastes change. Timing is everything in the world of cool. Nobody bought Beanie Babies (or tulips for that matter) to keep forever, they bought them to flip for more money. Which is fine and fun, just don’t be the last one holding the NFT bag when the music stops.

And the music always stops.

Until next time 🤙,


“Stocks are bought not in fear but in hope. They are typically sold out of fear.” —Justin Mamis

Breaking 🌊

🏗 President Joe Biden unveiled his $2 trillion infrastructure plan, which is being met with mixed feelings from the market. It’s a lot of money, and it’s not clear where it will all come from.

😬 A so-called professional hedge fund investor was so irresponsibly overleveraged using borrowed money to invest in junk companies lost $10B dollars in a few days, triggering $30B in large stock sales. (Archegos was reported to have about $10 billion under management and anywhere from three to 10 times that amount in market exposure.)

Personally identifiable data of 533M Facebook users has been posted online. Facebook says the data comes from a leak that was reported on and fixed in 2019

₿💱 PayPal launches 'Checkout with Crypto', allowing customers to use bitcoin at 29M merchants; Mogo launches first Bitcoin cashback mortgage; Morgan Stanley already has Bitcoin exposure through various funds; Visa moves to allow payment settlements using cryptocurrency; BNY Mellon just issued a report comparing Bitcoin to gold

From The Tweetbox 🐦

If lots of people don't think it's a bad idea, you're late.

The more you pay attention to your competitors, the more you end up just like them. Obsessing over what everyone else is doing doesn’t help you differentiate, it causes you to assimilate.

worst Q1 return for 30-year Treasury since 1919, worst Q1 for IG bonds since 1980, worst Q1 for gold since 1982 —Bank of America

“Spending money to show people how much money you have is the fastest way to have less money.”

Interesting parallel here between hedge funds & how Warren Buffett got to be so wealthy, which can be phrased as a valuable life lesson: Start early when things are small and still being figured out.

Conventional wisdom: Make your money grow! Bitcoin wisdom: Get better money.

Crush every no-coiner argument with this handy cheat sheet

For The Pros 😎

Worth A Read 📃

Without advertisers or major investors, Bandcamp turned a profit helping musicians at all levels make a living. Now, as payment models in the streaming era come under scrutiny, will its influence grow?

Here’s An Idea 💡

Hiring in-house storytellers and historians to maintain an archive and curate an organization’s own mythos

mythos = stories and legends, symbols and icons, rituals and rites that form shared identity


“The beginnings of all things are small.” —Cicero

Groms 🐣

Twitch Drops earn you in-game rewards for watching people play games.

Zebedee is working to reward players with in-game Bitcoin. Competitive gaming takes on a whole new dimension when your in-game score represents real value.

Pods & Schools 🐬🐠

🔊📚 Daylight Robbery: How Tax Shaped Our Past and Will Change Our Future, by Dominic Frisby (2019)

"Devalue money and you devalue debt, and you lighten your obligations. But you also confiscate value from anyone who holds this money.”

Tools of the Trade ⚒

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Nothing in this email is intended to serve as financial advice. Do your own research.