What do you think of adding a low% of crypto allocation

[41_swish]

I have always heard it is fine to have ~5% of your net worth in purely speculative assets. If you want bitcoin to be in your 5% speculation that's fine. I probably wouldn't feel comfortable with much more, but I am not very bullish on crypto.

[maizefolk]

I'm in the odd position that if bitcoin's value keeps increasing I would have to start rebalancing out of it just to stay under that 5% allocation. If I counted bitcoin as part of my net work it'd be about 3.5% of my total net worth today.

As someone who hit FI years ago and whose crypto position that mostly traces back to ~$40 bucks worth of bitcoin left over after testing out bitcoin as an actual method of online payments more than a decade ago I find the whole situation pretty entertaining.

[footwear]

i have never held any crypto but just bought a good amount of XRP just to speculate. hopefully in five years it is my FU money...ha!

[41_swish]

I'm in the odd position that if bitcoin's value keeps increasing I would have to start rebalancing out of it just to stay under that 5% allocation. If I counted bitcoin as part of my net work it'd be about 3.5% of my total net worth today.

As someone who hit FI years ago and whose crypto position that mostly traces back to ~$40 bucks worth of bitcoin left over after testing out bitcoin as an actual method of online payments more than a decade ago I find the whole situation pretty entertaining.

I mean if that's the case ride it forever, or cash out whenever you see fit. That is sweet

[erjkism]

good to see mustachians finally beginning to understand how high bitcoin could go. This has been and will continue to be the fastest way to FIRE.

[GuitarStv]

good to see mustachians finally beginning to understand how high bitcoin could go. This has been and will continue to be the fastest way to FIRE.

Buying a winning lottery ticket is significantly faster.  As would putting all your life savings on a winning RED roll of the roulette table.

[waltworks]

good to see mustachians finally beginning to understand how high bitcoin could go. This has been and will continue to be the fastest way to FIRE.

Buying a winning lottery ticket is significantly faster.  As would putting all your life savings on a winning RED roll of the roulette table.

Always bet on black.

-Batman

[waltworks]

In all seriousness, if I was in the accumulation phase, I might consider it. Schiller P/E ratio is what, like 39? That's the second highest ever, right behind tech crash numbers.

Real estate is crazy too. The world I started investing in (around 2000) was much cheaper. I'm not entirely sure the path I took (just stick extra money from into index funds and rentals) would actually work anymore, and in that scenario (you'll work until you die/traditional retirement age no matter what - but younger folks don't believe SS will be around so it's probably until you die), why not roll the dice on crypto?

I've actually talked to a few Gen Z people who basically don't even consider traditional investing (ie bonds, stock, real estate, index funds, etc) something that they would ever do. They grok crypto, though, and track crypto price movements like old fogies track the stock indexes.

So yeah, I could see it going up a lot more. I still won't be buying any, because I could also see it crashing 95% based on some new different popular thing or meme or just running out of new entrants to the market. People still need real money from their jobs to buy crypto and jump in, so if there's a major recession, that could happen pretty fast.

If there's a more susceptible asset to a market panic/herd mentality crash during economic hard times, I can't think of it.

-W

[Glenstache]

Anyone else catch the latest news on googles new quantum chip? This seems like a big risk inbthe not fistant future to current block chain security/value. Anyone have thoughts?

[clarkfan1979]

good to see mustachians finally beginning to understand how high bitcoin could go. This has been and will continue to be the fastest way to FIRE.

If you are using Bitcoin to FIRE, the high level of volatility will make it more difficult for a safe withdrawal strategy. You will probably need more of it than a S & P 500 fund.

I first heard of bitcoin in December 2017 when it hit $20,000. A few people in my social circle bought it. Then it tanked and didn't rebound until December 2020. Pretty much everyone I know sold at a loss because they were not willing to wait 3 years for it to recover. I don't think I would be patient enough either because there are no fundamentals behind it. If I bought real estate or a stock at a discount I feel like I could be more patient on waiting for it to appreciate if the fundamentals to support it are improving.

I'm not buying bitcoin because for me personally, it's unnecessary. For people who have less options and want a home run, I can see the appeal.

[clarkfan1979]

In all seriousness, if I was in the accumulation phase, I might consider it. Schiller P/E ratio is what, like 39? That's the second highest ever, right behind tech crash numbers.

Real estate is crazy too. The world I started investing in (around 2000) was much cheaper. I'm not entirely sure the path I took (just stick extra money from into index funds and rentals) would actually work anymore, and in that scenario (you'll work until you die/traditional retirement age no matter what - but younger folks don't believe SS will be around so it's probably until you die), why not roll the dice on crypto?

I've actually talked to a few Gen Z people who basically don't even consider traditional investing (ie bonds, stock, real estate, index funds, etc) something that they would ever do. They grok crypto, though, and track crypto price movements like old fogies track the stock indexes.

So yeah, I could see it going up a lot more. I still won't be buying any, because I could also see it crashing 95% based on some new different popular thing or meme or just running out of new entrants to the market. People still need real money from their jobs to buy crypto and jump in, so if there's a major recession, that could happen pretty fast.

If there's a more susceptible asset to a market panic/herd mentality crash during economic hard times, I can't think of it.

-W

I agree 100% with Walt on his last point. It's my opinion, but I can't think of an asset that is more vulnerable to a market panic crash.

The reason why I agree with his point is who actually owns Bitcoin. People who buy it are novice investors (dumb money). Yes, some larger investing institutions own it as well. However, they have advanced analytics that will help them sell first if there is ever a crash. Dumb money will be left holding the bag. Good luck and be careful.

[LateStarter]

Anyone else catch the latest news on googles new quantum chip? This seems like a big risk inbthe not fistant future to current block chain security/value. Anyone have thoughts?

I don't think any of the experts are anticipating the capability of breaking Bitcoin in the not-too-distant future - only the click-bait headlines. And note that a quantum computer capable of breaking Bitcoin can break just about anything and everything.

Quantum-resistant cryptography exists and is probably advancing just as as fast as quantum computing. Bitcoin can be updated if and when it becomes necessary. I'm not worried - there's people way smarter and more knowledgeable than me looking after their Bitcoin interests - and mine too.

[lifeanon269]

I don't think any of the experts are anticipating the capability of breaking Bitcoin in the not-too-distant future - only the click-bait headlines. And note that a quantum computer capable of breaking Bitcoin can break just about anything and everything.

Quantum-resistant cryptography exists and is probably advancing just as as fast as quantum computing. Bitcoin can be updated if and when it becomes necessary. I'm not worried - there's people way smarter and more knowledgeable than me looking after their Bitcoin interests - and mine too.

Current best estimates are that in 10-20 years there will likely be a quantum computer that could break public-key cryptography. There are 3 main risks that this poses. I'll state them in order of risk. The first one is that early bitcoin addresses were P2PK format. This means that people paid bitcoin directly to public keys. So bitcoin still stored at these addresses have their public keys exposed and are at risk from quantum computers.

The biggest offender of this is Satoshi's keys. The biggest problem there is that Satoshi has purposefully vanished because there shouldn't be a single owner of a public ledger like bitcoin. With Sathoshi gone, his coins will likely remain at these P2PK addresses. I don't believe there is a good solution for these coins without violating some very core principles of bitcoin. Myself, I consider that these coins will likely just be a prize to the first organization to create a quantum computer powerful enough to grab them.

The other risk of quantum computers are bitcoin stored at addresses that have been reused. In non-P2PK addresses, the public key is hashed and encoded and therefore hidden behind that particular addresses format. The public key isn't exposed until the sender goes to spend those coins which allows bitcoin nodes to validate that the sender is the actual owner for the coins. This is why it is best practice (along with privacy reasons) to not reuse bitcoin addresses. Just like with P2PK addresses, addresses that are reused have their public keys exposed to the world and so any bitcoin stored at reused addresses are at risk of being stolen by a strong enough quantum computer.

The final concern is that, as stated above, when you go to spend bitcoin, regardless of the address type being used, you reveal the public behind the address associated with the private key used to spend the bitcoin. There are thousands of transactions sitting in the mempool prior to confirmation that are validated by bitcoin nodes with public keys and signatures to them. If you had a strong enough quantum computer, you could attempt to crack any of the public keys of transactions sitting in the mempool prior to them being included in a block. You could then use RBF to replace the transaction with a new transaction and thus steal that bitcoin. You'd have to have a quantum computer strong enough to crack the keys prior to the transaction being confirmed however.

This is why it is necessary to move to quantum resistant cryptography. There are several challenges that this also produces however. One is that safe quantum resistant algorithms available today have public key sizes that are much larger than the public keys used with ECDSA. This means that transaction sizes will be bigger and therefore less transactions will be able to fit into a block. So a move to a new algorithm would likely have to come with a block size increase which require a hard fork. That presents its own challenges for the network with reaching consensus.

The other challenge is that a move to a new algorithm means that the entire UTXO set would need to be moved to this new algorithm. The current UTXO set size is almost 200M. This would take about half a year to move given the current block size, and that's if blocks were only used for the purpose of migrating addresses to a new address type.

So there are definitely some technical challenges ahead for bitcoin and challenges that require some solution thinking today as opposed to waiting for the problem to come. But this is a problem facing information security across all areas of computing today, not just bitcoin. Security that all of our computer systems rely on today will be at risk.

[lifeanon269]

If you are using Bitcoin to FIRE, the high level of volatility will make it more difficult for a safe withdrawal strategy. You will probably need more of it than a S & P 500 fund. 

If there's a more susceptible asset to a market panic/herd mentality crash during economic hard times, I can't think of it.

-W

I agree 100% with Walt on his last point. It's my opinion, but I can't think of an asset that is more vulnerable to a market panic crash.

The reason why I agree with his point is who actually owns Bitcoin. People who buy it are novice investors (dumb money). Yes, some larger investing institutions own it as well. However, they have advanced analytics that will help them sell first if there is ever a crash. Dumb money will be left holding the bag. Good luck and be careful.

One thing that I should be noted that most people focus on the record highs that bitcoin continues to make when discussing its price. But what doesn't get much attention is its annual lows. If you take a step back and look at its annual lows every year, you'll actually see some pretty stable and steady growth there. People, especially here on these forums, that don't think about or use bitcoin regularly only start talking about it after it is back in the news cycle for breaking new highs again. Meanwhile bitcoin's annual low price keeps chugging higher. Just look at this thread that was dormant for over half a year until bitcoin hit $100k.

If you're too focused on crashes from those short term peaks in price because you are finally reading about bitcoin in the news again after ignoring it for 2 years, then you're missing the forest for the trees.

The annual low price for bitcoin being stable and steadily rising year after year means there is a large and growing number of holders of last resort that remain holders of bitcoin regardless of how far down it falls in price. This is the true signal among the noise that people are missing. That's not the dumb money flocking into bitcoin when they first hear about it in the news once again. That's the growing smart money that sees the real potential in bitcoin.

[GuitarStv]

If you are using Bitcoin to FIRE, the high level of volatility will make it more difficult for a safe withdrawal strategy. You will probably need more of it than a S & P 500 fund. 

If there's a more susceptible asset to a market panic/herd mentality crash during economic hard times, I can't think of it.

-W

I agree 100% with Walt on his last point. It's my opinion, but I can't think of an asset that is more vulnerable to a market panic crash.

The reason why I agree with his point is who actually owns Bitcoin. People who buy it are novice investors (dumb money). Yes, some larger investing institutions own it as well. However, they have advanced analytics that will help them sell first if there is ever a crash. Dumb money will be left holding the bag. Good luck and be careful.

One thing that I should be noted that most people focus on the record highs that bitcoin continues to make when discussing its price. But what doesn't get much attention is its annual lows. If you take a step back and look at its annual lows every year, you'll actually see some pretty stable and steady growth there. People, especially here on these forums, that don't think about or use bitcoin regularly only start talking about it after it is back in the news cycle for breaking new highs again. Meanwhile bitcoin's annual low price keeps chugging higher. Just look at this thread that was dormant for over half a year until bitcoin hit $100k.

If you're too focused on crashes from those short term peaks in price because you are finally reading about bitcoin in the news again after ignoring it for 2 years, then you're missing the forest for the trees.

The annual low price for bitcoin being stable and steadily rising year after year means there is a large and growing number of holders of last resort that remain holders of bitcoin regardless of how far down it falls in price. This is the true signal among the noise that people are missing. That's not the dumb money flocking into bitcoin when they first hear about it in the news once again. That's the growing smart money that sees the real potential in bitcoin.

Counterpoint - it's actually the huge (and growing) number of people who have forgotten/lost their keys and can never again access their bitcoin.  They're HODL'rs for life, regardless of what they actually want to do.

[lifeanon269]

Counterpoint - it's actually the huge (and growing) number of people who have forgotten/lost their keys and can never again access their bitcoin.  They're HODL'rs for life, regardless of what they actually want to do.

Lost coins certainly contribute to scarcity. There are a lot of factors that play a part in the ever-increasing price floor year over year. The ever increasing US dollar supply plays a role too, for example.

However...
Counter-counterpoint? - The growing number of bitcoin users worldwide year after year would suggest otherwise that the growing price floor is a result of increasing scarcity alone.

That does bring up a good point though. For all those factors that play a part in the growing price floor each year, I don't see any of those factors that would point to a reversal in that trend.

[ChpBstrd]

Trump says the U.S. is going to do ‘something great with crypto’

A national strategic bitcoin reserve or stockpile is among Trump’s many campaign promises to the growing industry that helped get him re-elected.

https://www.cnbc.com/2024/12/12/trump-says-the-us-is-going-to-do-something-great-with-crypto.html

So would a "strategic bitcoin reserve" look like the U.S. taking on debt to buy and hold bitcoin? Not sure I understand what the point would be, other than pumping bitcoin to the moon.

[lifeanon269]

Trump says the U.S. is going to do ‘something great with crypto’

A national strategic bitcoin reserve or stockpile is among Trump’s many campaign promises to the growing industry that helped get him re-elected.

https://www.cnbc.com/2024/12/12/trump-says-the-us-is-going-to-do-something-great-with-crypto.html

So would a "strategic bitcoin reserve" look like the U.S. taking on debt to buy and hold bitcoin? Not sure I understand what the point would be, other than pumping bitcoin to the moon.

Well what do you typically do when you're overleveraged on something?

You hedge it a bit. The US is certainly overleveraged on debt with the US Dollar. So using some of that debt toward something that is a hedge against it could actually in the end strengthen the dollar as part of the US treasury and help reduce the overall debt burden.

[waltworks]

I would assume it’s just an idea to do a govt sponsored pump and dump to benefit trump’s buddies. Occam’s razor, right?

[Retire-Canada]

Trump n' Dump.

[erjkism]

good to see mustachians finally beginning to understand how high bitcoin could go. This has been and will continue to be the fastest way to FIRE.

Buying a winning lottery ticket is significantly faster.  As would putting all your life savings on a winning RED roll of the roulette table.

True... I should have said... "the fastest way to FIRE (with a reasonable chance of success) for the average earner"

[GuitarStv]

good to see mustachians finally beginning to understand how high bitcoin could go. This has been and will continue to be the fastest way to FIRE.

Buying a winning lottery ticket is significantly faster.  As would putting all your life savings on a winning RED roll of the roulette table.

True... I should have said... "the fastest way to FIRE (with a reasonable chance of success) for the average earner"

Yeah, but then you would have been making some pretty big assumptions.

[Telecaster]

So would a "strategic bitcoin reserve" look like the U.S. taking on debt to buy and hold bitcoin? Not sure I understand what the point would be, other than pumping bitcoin to the moon.

If you are a grifter looking for a way to pump your bags, well the government is the apex bag holder.   Both Trump and Melania are active crypto scammers. 

If you think Trump is doing this to help the country you are the dumbest fucking human who ever lived. 

[MustacheAndaHalf]

Trump says the U.S. is going to do ‘something great with crypto’

A national strategic bitcoin reserve or stockpile is among Trump’s many campaign promises to the growing industry that helped get him re-elected.

https://www.cnbc.com/2024/12/12/trump-says-the-us-is-going-to-do-something-great-with-crypto.html

So would a "strategic bitcoin reserve" look like the U.S. taking on debt to buy and hold bitcoin? Not sure I understand what the point would be, other than pumping bitcoin to the moon.

That article is more hype than substance, which is very appropriate considering the subject.  I found another article on Coin Telegraph that cites the intent of the Trump Administration to make Bitcoin "2% of Treasury reserves", from which they calculate $76 billion of Bitcoin will be purchased over 5 years.
https://cointelegraph.com/learn/articles/proposed-us-bitcoin-strategic-reserve

I couldn't find reserves matching their $3.8 trillion figure... the Fed holds $6.9 trillion, and the Treasury's balance sheet shows a net $5.4 trillion.  Setting that aside, $76 billion over 5 years is $15 billion per year, or just under $1.3 billion per month.  Coinbase has about $2 billion of trading per day, so even the $76 billion figure would be a rather small increase in overall demand.
https://data.bitcoinity.org/markets/volume/30d?c=e&t=b

[MustacheAndaHalf]

I don't think any of the experts are anticipating the capability of breaking Bitcoin in the not-too-distant future - only the click-bait headlines. And note that a quantum computer capable of breaking Bitcoin can break just about anything and everything.

Quantum-resistant cryptography exists and is probably advancing just as as fast as quantum computing. Bitcoin can be updated if and when it becomes necessary. I'm not worried - there's people way smarter and more knowledgeable than me looking after their Bitcoin interests - and mine too.

The other risk of quantum computers are bitcoin stored at addresses that have been reused. In non-P2PK addresses, the public key is hashed and encoded and therefore hidden behind that particular addresses format. The public key isn't exposed until the sender goes to spend those coins which allows bitcoin nodes to validate that the sender is the actual owner for the coins. This is why it is best practice (along with privacy reasons) to not reuse bitcoin addresses. Just like with P2PK addresses, addresses that are reused have their public keys exposed to the world and so any bitcoin stored at reused addresses are at risk of being stolen by a strong enough quantum computer.

The only way for a Bitcoin address to hold Bitcoin is by receiving Bitcoin.  When Bitcoin moves, both sending and receiving addresses appear in the public ledger (the blockchain).  Maybe I'm missing something, but I don't see how an address with Bitcoin in it could not already be revealed by the transaction that deposited Bitcoin in it.

[lifeanon269]

The only way for a Bitcoin address to hold Bitcoin is by receiving Bitcoin.  When Bitcoin moves, both sending and receiving addresses appear in the public ledger (the blockchain).  Maybe I'm missing something, but I don't see how an address with Bitcoin in it could not already be revealed by the transaction that deposited Bitcoin in it.

The main threat from quantum computers is breaking public key cryptography with Shor's algorithm. Shor's algorithm with quantum computers can attack asymmetric cryptography, so any public key exposed, the reciprocal private can be found with a strong enough quantum computer.

Symmetric cryptography is less at risk from quantum computers, however. With Grover's algorithm and quantum computing, the number of operations that is required to brute force the encryption algorithm are square rooted. So for SHA256, for example, rather than requiring 2^256 operations, you're left with 2^128, which is still pretty secure.

There are different address types. The very earliest address types (which is what Satoshi was using) were P2PK. This means people were paying bitcoin directly to public keys. So the public keys are already exposed and therefore can be attacked with Shor's algorithm and quantum computers. Any bitcoin stored at P2PK address formats are at risk.

Modern address types, such as P2WPKH, will take the public key and hash it; multiple times with different algorithms (sha256 and RIPEMD-160). Because the public key is hashed in the process of creating the bitcoin address, the public key is protecting using symmetric cryptography and therefore not exposed when giving someone your bitcoin address so they can pay you. The only time the public key is exposed is when you go to spend from that address. In which case, you expose the public key along with a signature using your private key so that bitcoin nodes can validate that you're the owner of said bitcoin at the bitcoin address.

You can read more up on bitcoin address formats here:

https://learnmeabitcoin.com/technical/keys/address/

[ChpBstrd]

The main threat from quantum computers is breaking public key cryptography with Shor's algorithm. Shor's algorithm with quantum computers can attack asymmetric cryptography, so any public key exposed, the reciprocal private can be found with a strong enough quantum computer.

Symmetric cryptography is less at risk from quantum computers, however. With Grover's algorithm and quantum computing, the number of operations that is required to brute force the encryption algorithm are square rooted. So for SHA256, for example, rather than requiring 2^256 operations, you're left with 2^128, which is still pretty secure.

Sounds like many of those early bitcoins that were lost and left at public addresses will eventually be re-mined / stolen and re-enter "circulation". This would relieve the supposed scarcity problem and be an incentive for quantum computer development.

[MustacheAndaHalf]

The only way for a Bitcoin address to hold Bitcoin is by receiving Bitcoin.  When Bitcoin moves, both sending and receiving addresses appear in the public ledger (the blockchain).  Maybe I'm missing something, but I don't see how an address with Bitcoin in it could not already be revealed by the transaction that deposited Bitcoin in it.

The main threat from quantum computers is breaking public key cryptography with Shor's algorithm. Shor's algorithm with quantum computers can attack asymmetric cryptography, so any public key exposed, the reciprocal private can be found with a strong enough quantum computer.

Symmetric cryptography is less at risk from quantum computers, however. With Grover's algorithm and quantum computing, the number of operations that is required to brute force the encryption algorithm are square rooted. So for SHA256, for example, rather than requiring 2^256 operations, you're left with 2^128, which is still pretty secure.

There are different address types. The very earliest address types (which is what Satoshi was using) were P2PK. This means people were paying bitcoin directly to public keys. So the public keys are already exposed and therefore can be attacked with Shor's algorithm and quantum computers. Any bitcoin stored at P2PK address formats are at risk.

Modern address types, such as P2WPKH, will take the public key and hash it; multiple times with different algorithms (sha256 and RIPEMD-160). Because the public key is hashed in the process of creating the bitcoin address, the public key is protecting using symmetric cryptography and therefore not exposed when giving someone your bitcoin address so they can pay you. The only time the public key is exposed is when you go to spend from that address. In which case, you expose the public key along with a signature using your private key so that bitcoin nodes can validate that you're the owner of said bitcoin at the bitcoin address.

You can read more up on bitcoin address formats here:

https://learnmeabitcoin.com/technical/keys/address/

Interesting, I didn't know about these new address hashes.  So you can have a list of secure hash algorithms, and then post the result of hashing the address.  You can later perform operations that show you have the public and private key, but running results through secure hash algorithms to obscure the address and key.

Bitcoin seems to be in very active development.  It's main competitor, Ethereum provided support for NFTs, which had some potential for artists to profit without middlemen.  Bitcoin responded with something called ICON that has similar functionality.

[Telecaster]

As soon as some one figures out a use case for NFTs this will be huge.   

[MustacheAndaHalf]

As soon as some one figures out a use case for NFTs this will be huge.

Perhaps NFTs make Dogecoin look good, but they could potentially solve a problem for artists.  Art galleries selling the work of an artist mark up the price significantly to make a profit.  An artist selling an NFT can avoid that markup, but it requires a buyer who is willing to have a digital receipt rather than the art itself.  The art world can accept or reject NFTs, I don't know either way.

[Telecaster]

Perhaps NFTs make Dogecoin look good, but they could potentially solve a problem for artists.  Art galleries selling the work of an artist mark up the price significantly to make a profit.  An artist selling an NFT can avoid that markup, but it requires a buyer who is willing to have a digital receipt rather than the art itself.  The art world can accept or reject NFTs, I don't know either way.

I've got a pretty good idea which way things are headed. 

The gallery provides marketing services to the artist.  They know how to place art in front of buyers.  That's why they get paid.  But using a gallery isn't a requirement by any means.  Artists can sell directly to the public using any number of direct marketing techniques. 

As a consumer, buying an NFT gives you a link to a .jpeg, which is significantly worse than simply right click, save as.  You have to be literally dumb as fuck to buy an NFT instead of the art itself. 

[GuitarStv]

I ran into a person who was trying to explain how NFTs would revolutionize the music industry.

Him - Instead of just making money from traditional music sales (CDs, records, cassettes, .mp3s), touring,  and streams of their music, artists can make money from NFTs!

Me - so they're still going to have concerts, sell CDs, records, cassettes, .mp3s, and stream music?  What are they selling then?

Him - NFTs!  You just say an NFT represents something and then you can sell it!

Me - So, it represents music . . . but isn't actually the music?  It's not the rights or anything?  You're selling literally nothing.

Him - No, you have an NFT!  They can be recorded by blockchain!

Me - So you have an immutable record of owning nothing?

Him - Yeah!  And you can sell it to someone else who wans one!

Me - OK, can you see any potential problems with this?

Him - Well yeah.

Me - Thank God.

Him - NFTs might become so popular that they become detached from the value of the music they represent.  So like, only the wealthiest fans would be able to own NFTs of the music the artists they love make.  It could ruin music.

Me - At least they'll still be able to buy the music, listen to it, and go to concerts though, right?

Him - Yeah, but what's the point of any of that if you don't have the exclusivity of an NFT?

[Psychstache]

I ran into a person who was trying to explain how NFTs would revolutionize the music industry.

Him - Instead of just making money from traditional music sales (CDs, records, cassettes, .mp3s), touring,  and streams of their music, artists can make money from NFTs!

Me - so they're still going to have concerts, sell CDs, records, cassettes, .mp3s, and stream music?  What are they selling then?

Him - NFTs!  You just say an NFT represents something and then you can sell it!

Me - So, it represents music . . . but isn't actually the music?  It's not the rights or anything?  You're selling literally nothing.

Him - No, you have an NFT!  They can be recorded by blockchain!

Me - So you have an immutable record of owning nothing?

Him - Yeah!  And you can sell it to someone else who wans one!

Me - OK, can you see any potential problems with this?

Him - Well yeah.

Me - Thank God.

Him - NFTs might become so popular that they become detached from the value of the music they represent.  So like, only the wealthiest fans would be able to own NFTs of the music the artists they love make.  It could ruin music.

Me - At least they'll still be able to buy the music, listen to it, and go to concerts though, right?

Him - Yeah, but what's the point of any of that if you don't have the exclusivity of an NFT?

No. I refuse to believe this is a real conversation. My hope is already so low.

[GuitarStv]

I ran into a person who was trying to explain how NFTs would revolutionize the music industry.

Him - Instead of just making money from traditional music sales (CDs, records, cassettes, .mp3s), touring,  and streams of their music, artists can make money from NFTs!

Me - so they're still going to have concerts, sell CDs, records, cassettes, .mp3s, and stream music?  What are they selling then?

Him - NFTs!  You just say an NFT represents something and then you can sell it!

Me - So, it represents music . . . but isn't actually the music?  It's not the rights or anything?  You're selling literally nothing.

Him - No, you have an NFT!  They can be recorded by blockchain!

Me - So you have an immutable record of owning nothing?

Him - Yeah!  And you can sell it to someone else who wans one!

Me - OK, can you see any potential problems with this?

Him - Well yeah.

Me - Thank God.

Him - NFTs might become so popular that they become detached from the value of the music they represent.  So like, only the wealthiest fans would be able to own NFTs of the music the artists they love make.  It could ruin music.

Me - At least they'll still be able to buy the music, listen to it, and go to concerts though, right?

Him - Yeah, but what's the point of any of that if you don't have the exclusivity of an NFT?

No. I refuse to believe this is a real conversation. My hope is already so low.

He did also mention having a lot of his money tied up in NFTs, so was kinda invested in their success.

[lifeanon269]

I've been critical of NFTs in the past and am still not completely sold on them yet.

The biggest problem I see for NFTs is that blockchains are inherently not scalable. Being a distributed/decentralized system means that you don't have scalability in the amount of data you want decentralized. It is impossible to scale an infinite amount of data in a decentralized way. Blockchains are broadcast networks and therefore there must be limitations in the amount of data being propagated if you want it to remain decentralized.

This means that the art that the NFT represents must be stored outside of the blockchain and it is only the signature of the NFT that is stored on the blockchain. So you still need some type of centralized oracle that stores the art itself that the NFT has a signature to. If you don't have an oracle, then the public has no consensus or knowledge around what the NFT represents unless the owner of it makes it public enough.

The idea of an NFT makes sense. It is no different with other physical works of art. There are many copies of Picassos hung on walls world wide. But there is only one original owner of a given Picasso work of art. Obviously it makes sense that the original Picasso work of art is more valuable than the infinite copies of it. There are tons of skilled digital artists in the world that unfortunately don't have a way of authenticating their works of art in the same way we can today with physical works of art. With NFTs, you now have a way of creating an authentic digital work of art that can be an "original" piece with appropriate value applied to it because of its authenticity. This means that rather than the artist's work being devalued because of "right-click and save" counterfeiting, you can have an NFT that provides that authenticity backed with secure cryptography.

This concept makes sense and I can see immense value in that. However, in practice, because of the issues I mentioned above, there are some big technical hurdles. Securing the non-fungible tokens on a blockchain is the easy part. We've actually been able to do that for a long time now. You can create authenticity to a work of art you created. But how do we distribute the knowledge of what that NFT represents in a way that is decentralized enough or has enough public consensus around what that NFT represents? Having an artist create their own website where they store those NFTs that others can purchase is probably the best way. To validate an original Picasso you can go to Picasso.com and view the NFTs for all his works of art. But emerging artists probably won't have the same clout Picasso does to have their own website that people know about. You also still need a market with which that NFT can be sold easily enough for emerging artists too. However, those centralized markets can fail as centralized entities often do, which can lead to a loss of value for any NFTs stored or traded on those platforms. We've seen this numerous times with current centralized NFT marketplaces. Even if the market itself doesn't fail, all the pitfalls of centralized platforms remove any potential benefits that might be brought by having a decentralized NFT. What good is a decentralized NFT bring if the marketplace that brought about its value censors or removes your NFT from the marketplace?

It makes sense for digital works of art. I am not so sure it makes sense for musical art since the idea of authenticated audio doesn't even really exist for music today in the physical world, so what exactly are you trying to replicate digitally? But for other types of digital art I do see the value. I am just not yet convinced of the technical hurdles that have yet to be solved.

I think part of the problem of perception for these things, as always, is that a new emerging technology is rife with scams and therefore becomes widely associated with those scams. It takes a more critical mind to step back and separate the idea and concept itself, from the scams that have emerged from that idea seeking to capitalize on something new and buzz-worthy.

[GuitarStv]

The idea of an NFT makes sense. It is no different with other physical works of art. There are many copies of Picassos hung on walls world wide. But there is only one original owner of a given Picasso work of art. Obviously it makes sense that the original Picasso work of art is more valuable than the infinite copies of it. There are tons of skilled digital artists in the world that unfortunately don't have a way of authenticating their works of art in the same way we can today with physical works of art. With NFTs, you now have a way of creating an authentic digital work of art that can be an "original" piece with appropriate value applied to it because of its authenticity. This means that rather than the artist's work being devalued because of "right-click and save" counterfeiting, you can have an NFT that provides that authenticity backed with secure cryptography.

The original Picasso work of art is valuable because it's a real and tangible piece of history.  You can touch it.  It was touched by Picasso.  He mixed the paints and applied them to the canvass.

It seems like people are trying to force that into being for digital art with NFTs.  But you will never touch the original tangible piece of art.  It will never be a piece of history in the same way.  Right click and save isn't counterfeiting.  It creates a perfect and exact copy, identical in every way to the original.  It will never be scarce because of what it is, so there is this push to make something artificially scarce in the attempt to recreate what naturally exists for physical art.

It's very, very obvious that this is happening which is why NFTs have not (and likely never will) gain traction for this purpose.

[41_swish]

NFTs were legitimately nonsense. If you thought that buying a million-dollar picture of an ape was a good idea, then you need to look in the mirror and ask yourself some questions.

[lifeanon269]

The original Picasso work of art is valuable because it's a real and tangible piece of history.  You can touch it.  It was touched by Picasso.  He mixed the paints and applied them to the canvass.

It seems like people are trying to force that into being for digital art with NFTs.  But you will never touch the original tangible piece of art.  It will never be a piece of history in the same way.  Right click and save isn't counterfeiting.  It creates a perfect and exact copy, identical in every way to the original.  It will never be scarce because of what it is, so there is this push to make something artificially scarce in the attempt to recreate what naturally exists for physical art.

It's very, very obvious that this is happening which is why NFTs have not (and likely never will) gain traction for this purpose.

It isn't valuable just because it is physical. It is valuable because of the work that such an esteemed artist like Picasso put into the art. If Picasso were alive today and rather than working on a physical canvass instead worked on a digital one, wouldn't that art be just as valuable? Why does the canvass matter? That's not why people value art.

There are millions of digital artists in the world that create wonderful pieces of art, but on a digital canvass. I see no reason why we should value art differently just because the canvass is digital. If you think so, then perhaps you don't understand art to begin with?

Like I said, I have been critical of NFTs in the past (you can see in my post history that is true). But it is mainly for some of the technical reasons I mentioned, not because I stubbornly refuse to see there could be potential value for digital artists with such a technology.

I also refuse to use the word "never" when discussing the likelihood of something. Especially when it comes to something subjective such as art. I personally don't value art that much. In fact, even in my own home I don't really have much of any art hanging on my walls. I don't care to walk through art museums and gaze and various works of art. That doesn't mean I don't acknowledge that others are fascinated by it. Similarly, even if some of the technical hurdles don't get fully solved, that doesn't mean that the subjective value of NFTs doesn't catch on to the point where the art community just simply doesn't care that NFTs are fully technically "solved" and therefore NFTs still could be widely used regardless of their weaker technical foundation. Who am I to judge?

[YttriumNitrate]

The original Picasso work of art is valuable because it's a real and tangible piece of history.  You can touch it.  It was touched by Picasso.  He mixed the paints and applied them to the canvass.

It seems like people are trying to force that into being for digital art with NFTs.  But you will never touch the original tangible piece of art.  It will never be a piece of history in the same way.  Right click and save isn't counterfeiting.  It creates a perfect and exact copy, identical in every way to the original.  It will never be scarce because of what it is, so there is this push to make something artificially scarce in the attempt to recreate what naturally exists for physical art.

It's very, very obvious that this is happening which is why NFTs have not (and likely never will) gain traction for this purpose.

For what it's worth, "Commedian" recently sold for over $6 million, no NFTs involved but very NFT-esque since all the buyer got was a certificate of authenticity, duct tape, and a banana.

[GuitarStv]

The original Picasso work of art is valuable because it's a real and tangible piece of history.  You can touch it.  It was touched by Picasso.  He mixed the paints and applied them to the canvass.

It seems like people are trying to force that into being for digital art with NFTs.  But you will never touch the original tangible piece of art.  It will never be a piece of history in the same way.  Right click and save isn't counterfeiting.  It creates a perfect and exact copy, identical in every way to the original.  It will never be scarce because of what it is, so there is this push to make something artificially scarce in the attempt to recreate what naturally exists for physical art.

It's very, very obvious that this is happening which is why NFTs have not (and likely never will) gain traction for this purpose.

It isn't valuable just because it is physical. It is valuable because of the work that such an esteemed artist like Picasso put into the art. If Picasso were alive today and rather than working on a physical canvass instead worked on a digital one, wouldn't that art be just as valuable? Why does the canvass matter? That's not why people value art.

People value art for many reasons.  Beauty, emotion, story being told (or at least perceived) - the work that the artist put into the piece.  But all of these are equally available from a copy.  So when we're talking about the original piece of art it's something very specific that is adding value.  It's not necessarily the canvass that matters.  It's the direct connection to something the artist did.  You can touch, smell, taste the exact same thing the artist touched, smelled, tasted.  There's a value to that.  There's also the exclusivity of there literally being only one unique copy that cannot be perfectly duplicated.

This is a problem that all digital art has by nature of it's medium - there's no direct connection.  You will never touch the original of a digital piece of art, because that's not how we work with digital stuff.  The original artist created the art in RAM, then saved the piece from the program they were using to disk, then likely made another copy of that into another folder, then uploaded it to a server which published it for other people to be able to access.  Everything in the digital realm is a copy of a copy of a copy.  The original (RAM version) was long destroyed when the artist powered off his PC.  There can never be the same kind of direct connection to something the artists did.

Simply calling one copy in a long chain of identical copies 'unique' doesn't make it any different than all the other identical copies.  These are perfect duplications in every way, the only difference between them is that one has an NFT 'sales receipt'.  To me (and apparently to a great number of other people in the world) the existence of this receipt isn't really adding any value to the work.

There are millions of digital artists in the world that create wonderful pieces of art, but on a digital canvass. I see no reason why we should value art differently just because the canvass is digital. If you think so, then perhaps you don't understand art to begin with?

I have never claimed to understand art (certainly not all art).  There are a few areas of art I've got great interest in, and many that don't speak to me at all.

Like I said, I have been critical of NFTs in the past (you can see in my post history that is true). But it is mainly for some of the technical reasons I mentioned, not because I stubbornly refuse to see there could be potential value for digital artists with such a technology.

Oh, I absolutely see potential for all artists with such a technology.  Effectively you're generating a revenue stream with no need for any work - so if NFTs were to take off, there's only up side for artists.  All the revenue that existed before, plus this one is pretty great.

[Glenstache]

Yes, but can I use bitcoin to buy an NFT as a store of wealth?

[lifeanon269]

People value art for many reasons.  Beauty, emotion, story being told (or at least perceived) - the work that the artist put into the piece.  But all of these are equally available from a copy.  So when we're talking about the original piece of art it's something very specific that is adding value.  It's not necessarily the canvass that matters.  It's the direct connection to something the artist did.  You can touch, smell, taste the exact same thing the artist touched, smelled, tasted.  There's a value to that.  There's also the exclusivity of there literally being only one unique copy that cannot be perfectly duplicated.

This is a problem that all digital art has by nature of it's medium - there's no direct connection.  You will never touch the original of a digital piece of art, because that's not how we work with digital stuff.  The original artist created the art in RAM, then saved the piece from the program they were using to disk, then likely made another copy of that into another folder, then uploaded it to a server which published it for other people to be able to access.  Everything in the digital realm is a copy of a copy of a copy.  The original (RAM version) was long destroyed when the artist powered off his PC.  There can never be the same kind of direct connection to something the artists did.

Simply calling one copy in a long chain of identical copies 'unique' doesn't make it any different than all the other identical copies.  These are perfect duplications in every way, the only difference between them is that one has an NFT 'sales receipt'.  To me (and apparently to a great number of other people in the world) the existence of this receipt isn't really adding any value to the work.

There seems to be a lot of contradicting and mental stubbornness in this post while also some slight conceding in the end.

On the one side, you say that NFTs could have great value and potential for digital artists to monetize their works of art. Then on the flip side you say that NFTs are pointless and meaningless because the very medium the art is conducted on runs counter to the nature of why art is valuable.

This seems to be contradictory to me.

This was after you said that all the same reasons why art is revered by people can be equally had from a copy. If physical art could be physically duplicated precisely, people would still value the art as it is for its beauty. As I said, even with physical copies that aren't exact, people hang them all over the place worldwide because they're still beautiful works of art. But the original is valuable because, as you said, you can view every brush stroke and really appreciate the true talent of the artist. There is also scarcity for such works of art that has now garnered the admiration of fans worldwide. This scarcity is what drives value. When art is both appreciated for the talent it took to create it and scarce, real value is to be had.

It should be noted that digital art can have scarcity.

My uncle is a digital artist and produces physical copies of his artwork that is displayed in art shows all around the world. His canvass is a digital canvass, but for the most part, his art is displayed and viewed physically. He sells a lot of his art to office buildings to display in large formats in lobbies, etc. His digital artwork has a lot that goes into it. Thousands of layers are all combined to produce a single image. This final work of art that he created digitally in its original format produces a massive sized file. When art is viewed online, it is almost assuredly compressed down to allow the art to load at an acceptable speed on webpages. It would take a really long time for a webpage to load his original work of digital art. While this might not be true of all digital works of art, it should be noted as a counter to your claim that all copies of digital art are created equal. The NFT solves this issue by creating a digital signature of the original work of art. It can thus be cryptographically proven that 1) the image you're looking at is actually an original piece of art that was created by the artist and not a diluted down compressed copy and 2) who the owner of said original work of art is.

Can the original work of digital art be duplicated exactly? Certainly. But that's really almost beside the point as well. I guarantee you there are artists out there that can duplicate the Mona Lisa precisely enough that if you or I were looking at them side by side, neither of us would be able to tell which was the original and which was the copy. NFTs however to provide a solution to this in the digital world that allows anyone that can run a computer application, the ability to authenticate works of art and validate who the true owner is as if we're all seasoned art appraisers.

Images you're viewing on the internet are of all varying degrees of quality. Just google "Starry Night" by Van Gogh and you'll get all different variations of quality of said work of art with different degress of compression, resolution, etc. If this was originally a digital work of art, it would be difficult to know which was the original and it would often times be clear there are absolutely differences in the quality in all of the images. Other times even a single pixel's difference that is imperceptible to the eye would change the cryptographic signature of the image entirely. It would also be pretty obvious when looking at the original how much higher of a quality the image would be where you could truly appreciate the work that was put into it. The NFT's signature could cryptographically prove which one is the original and also who the owner of it is.

Oh, I absolutely see potential for all artists with such a technology.  Effectively you're generating a revenue stream with no need for any work - so if NFTs were to take off, there's only up side for artists.  All the revenue that existed before, plus this one is pretty great.

There is certainly value to be had for both the artist and owner. So I find it contradicting that you claim NFTs don't provide value while in the end conceding that there is value to the artists in being able to monetize digital art in ways there were previously impossible.

I think trading ape images on centralized platforms is silly and borderline fraudulent. But if the technical hurdles of distributing original works of digital art so that art communities can reach a consensus on how digital art is stored in a decentralized way to match the security of the storage of the token itself, then I think that's a pretty big breakthrough. But, as I said, even if that technical hurdle isn't passed, there could still be value in NFTs if the art community says there is without broad consensus. Art is subjective. You don't need the entire art community to appreciate different subjective forms of valuation. Some may gravitate towards less ideal technical forms NFTs while some won't. That's OK. Just like not everyone appreciates the artistry of a banana duct taped to a wall.

[FinallyFree]

The only crypto allocation I have is in BTC.  It is becoming a nation state and corporate reserve asset.  There's a lot of information out there about this development, so I'm not interested in debating the pros and cons of BTC.  It's my belief that, yes, it makes sense to have a 2-5% allocation to BTC in ones portfolio and held for 10+ years. 

I don't allocate to other "meme coins", but I'm not saying that one can't as a speculative play.  But meme coins are really speculative.  It's possible some forms of other kinds of digital crypto or NFTs might have their own value proposition, but I consider them to be separate from BTC in use case and function. 

BTC can now be allocated in a brokerage or retirement account by investing in Microstrategy (MSTR) which buys BTC for their corporate treasury, or by investing in one of several new BTC ETFs.  I like Fidelity's BTC ETF because they actually custody their own BTC so one can be more confident their ETF is actually backed by existing BTC.  Some people believe investing in MSTR has advantages over the BTC ETFs, but the ETFs allow for fractional investing. 

I strongly advise not using leverage to own BTC.  There is too much risk of getting wiped out by leverage.  If your goal is FI or FIRE, it's just too risky, imo.  Just buy it without debt and own it for a decade or more. 

So, yes, I think it makes sense to have an allocation percentage to crypto -- specifically Bitcoin.  Blackrock is recommending 2% to their clients.  Perhaps even 5% allocation to BTC might make sense if you're comfortable with that. 

[the_gastropod]

The NFT solves this issue by creating a digital signature of the original work of art. It can thus be cryptographically proven that 1) the image you're looking at is actually an original piece of art that was created by the artist and not a diluted down compressed copy and 2) who the owner of said original work of art is.

Digital signatures with asymmetric key algorithms have existed since the 1970s. NFTs didn't solve anything. The rest is a rube goldberg excel spreadsheet with two cells: image_url / owner.

The NFT's signature could cryptographically prove which one is the original and also who the owner of it is.

The *only* way this works is assuming the viewer both: 1. can tell which is the original, anyway (or at a minimum, who the original artist is). Otherwise, good-looking copies can also have cryptographic signatures that prove they're "the original". And 2. That the viewer knows which NFT blockchain is the "true" one to examine. Other blockchains may contain the identical artwork (or url thereof), and list a different owner.

[lifeanon269]

The NFT solves this issue by creating a digital signature of the original work of art. It can thus be cryptographically proven that 1) the image you're looking at is actually an original piece of art that was created by the artist and not a diluted down compressed copy and 2) who the owner of said original work of art is.

Digital signatures with asymmetric key algorithms have existed since the 1970s. NFTs didn't solve anything. The rest is a rube goldberg excel spreadsheet with two cells: image_url / owner.

The NFT's signature could cryptographically prove which one is the original and also who the owner of it is.

The *only* way this works is assuming the viewer both: 1. can tell which is the original, anyway (or at a minimum, who the original artist is). Otherwise, good-looking copies can also have cryptographic signatures that prove they're "the original". And 2. That the viewer knows which NFT blockchain is the "true" one to examine. Other blockchains may contain the identical artwork (or url thereof), and list a different owner.

Digital signatures exist for a long time, yes. But digital time did not. Bitcoin is digital time (Satoshi even referred to bitcoin as a timechain, not a blockchain). This means that while a digital signature can be made for anything, until bitcoin there was no way to prove which digital signature came first.

This is what bitcoin solves. Not the digital signature problem, but the digital time problem.

This is the part that your second paragraph essentially refers to. NFTs on a robust public blockchain like bitcoin works because it is the only timechain that can cryptographically prove which the original work of art is. You can't have a copy without there being an original to copy from. Therefore the original can be timestamped on the blockchain and thus cryptographically proven that it is the original work of art. I agree that there would need to be consensus around which blockchain is referred to as a "source of truth" and this is what I alluded to when I talked about consensus in the artistic community.

But this is also why bitcoin is so valuable because it is that single source of truth for digital time and thus timestamping something on bitcoin provides that cryptographic proof that isn't feasible elsewhere digitally, even on other public blockchains.

[GuitarStv]

People value art for many reasons.  Beauty, emotion, story being told (or at least perceived) - the work that the artist put into the piece.  But all of these are equally available from a copy.  So when we're talking about the original piece of art it's something very specific that is adding value.  It's not necessarily the canvass that matters.  It's the direct connection to something the artist did.  You can touch, smell, taste the exact same thing the artist touched, smelled, tasted.  There's a value to that.  There's also the exclusivity of there literally being only one unique copy that cannot be perfectly duplicated.

This is a problem that all digital art has by nature of it's medium - there's no direct connection.  You will never touch the original of a digital piece of art, because that's not how we work with digital stuff.  The original artist created the art in RAM, then saved the piece from the program they were using to disk, then likely made another copy of that into another folder, then uploaded it to a server which published it for other people to be able to access.  Everything in the digital realm is a copy of a copy of a copy.  The original (RAM version) was long destroyed when the artist powered off his PC.  There can never be the same kind of direct connection to something the artists did.

Simply calling one copy in a long chain of identical copies 'unique' doesn't make it any different than all the other identical copies.  These are perfect duplications in every way, the only difference between them is that one has an NFT 'sales receipt'.  To me (and apparently to a great number of other people in the world) the existence of this receipt isn't really adding any value to the work.

There seems to be a lot of contradicting and mental stubbornness in this post while also some slight conceding in the end.

On the one side, you say that NFTs could have great value and potential for digital artists to monetize their works of art. Then on the flip side you say that NFTs are pointless and meaningless because the very medium the art is conducted on runs counter to the nature of why art is valuable.

This seems to be contradictory to me.

Ah, maybe I can clear this up then.

If purchasers of art could be convinced that there was great value in a fart counter that automatically records the number of farts an artist created while working on an artistic project (without need of any input from the artist) then this would have great value and potential for any artist.  It's a way of generating money without doing anything - literally money for nothing.  Just like an NFT.  The art isn't what's being monetized with an NFT (common mistake that people make - NFTs do not confer copyright), only the imagined exclusivity of having purchased the NFT is what's being monetized.  The art can still be sold and distributed through any other regular channel unless there's a separate agreement related to copyright.  Like the fart monitor, the NFT is ephemeral and only tangentially related to the art/artist.  It's a sales receipt kept online in a database.

So sure, if you can convince someone to buy one it is great potential for an artist.  Still largely pointless and meaningless for anyone interested in art though.

This was after you said that all the same reasons why art is revered by people can be equally had from a copy.  If physical art could be physically duplicated precisely, people would still value the art as it is for its beauty. As I said, even with physical copies that aren't exact, people hang them all over the place worldwide because they're still beautiful works of art. But the original is valuable because, as you said, you can view every brush stroke and really appreciate the true talent of the artist. There is also scarcity for such works of art that has now garnered the admiration of fans worldwide. This scarcity is what drives value. When art is both appreciated for the talent it took to create it and scarce, real value is to be had.

No, not all reasons.  I was pretty specific about this - there is a direct connection with the artist that exists with physical art that is not reproduced with copies.  Holding the strat that Hendrix played the Star Spangled Banner on at Woodstock is going to feel very different to a fan than holding a replica strat . . . even if the replica is objectively a better musical instrument (better wired, holds tune better, better paint job, better dressed frets, etc.).

Sure it's scarce, but that's not what drives the value.  It's the connection that a fan feels that drives the value.

It should be noted that digital art can have scarcity.

In theory, sure.  Anything and everything can be scarce.

My uncle is a digital artist and produces physical copies of his artwork that is displayed in art shows all around the world. His canvass is a digital canvass, but for the most part, his art is displayed and viewed physically. He sells a lot of his art to office buildings to display in large formats in lobbies, etc. His digital artwork has a lot that goes into it. Thousands of layers are all combined to produce a single image. This final work of art that he created digitally in its original format produces a massive sized file. When art is viewed online, it is almost assuredly compressed down to allow the art to load at an acceptable speed on webpages. It would take a really long time for a webpage to load his original work of digital art. While this might not be true of all digital works of art, it should be noted as a counter to your claim that all copies of digital art are created equal.

I don't think that I ever said all copies of digital art are created equal.  It's common procedure to compress data to transmit it - this always involves data loss.  So of course it's possible to make a terrible digital copy of something . . . and of course that would be of less value.  What I was saying is that anything digital can be perfectly duplicated.  As you mentioned, your uncle has a file after creating his art.  That file is a copy of the information that he had in his PCs RAM before saving it.  It's already a copy of the original before he even sells/displays it.  There is no original that a collector touch and be directly connected with the artist.  Remember, it's not scarcity - it's that connection that is valued.

The NFT solves this issue by creating a digital signature of the original work of art. It can thus be cryptographically proven that 1) the image you're looking at is actually an original piece of art that was created by the artist and not a diluted down compressed copy and 2) who the owner of said original work of art is.

Not quite.  At least not the last time that I looked into NFTs (which has been a couple years, so please correct me if I misunderstand something with my rusty memory).

To create an NFT you go to a marketplace platform (SuperRare, Nifty Gateway, Makersplace, Foundation, probably many more) and tokenize your digital thingie.  You then pay fees to push the record of this onto the blockchain and publish your NFT on the marketplace.  The only thing stopping you from creating multiple NFTs of the exact same digital thingie somewhere else is the honor system.  NFTs aren't protected or recognized by copyright law.  NFTs have been minted by people who didn't create the art that they created the NFT for.  (There are some weird edge cases as well - like who gets the right to mint an NFT in the case of a joint project.)

All the NFT really gives you is your name listed as owner of the digital art in a database somewhere.  Nothing less, nothing more.

Can the original work of digital art be duplicated exactly? Certainly. But that's really almost beside the point as well. I guarantee you there are artists out there that can duplicate the Mona Lisa precisely enough that if you or I were looking at them side by side, neither of us would be able to tell which was the original and which was the copy. NFTs however to provide a solution to this in the digital world that allows anyone that can run a computer application, the ability to authenticate works of art and validate who the true owner is as if we're all seasoned art appraisers.

Images you're viewing on the internet are of all varying degrees of quality. Just google "Starry Night" by Van Gogh and you'll get all different variations of quality of said work of art with different degress of compression, resolution, etc. If this was originally a digital work of art, it would be difficult to know which was the original and it would often times be clear there are absolutely differences in the quality in all of the images. Other times even a single pixel's difference that is imperceptible to the eye would change the cryptographic signature of the image entirely. It would also be pretty obvious when looking at the original how much higher of a quality the image would be where you could truly appreciate the work that was put into it. The NFT's signature could cryptographically prove which one is the original and also who the owner of it is.

An NFT is a fancy receipt for art.  It doesn't actually say that the art you're displaying is real, it just says that you bought a certain piece of real art at some point.  It's not actually able to authenticate a piece of art - except in the weird edge case of digital art.  Because digital art can be perfectly duplicated every time it's recreated, this receipt is supposed to be used to 'authenticate' that the perfect copy held buy the guy who bought the art work is more legit than the perfect copy held by the pretender.

[erp]

I'd recommend 'All that Glitters' by Orlando Whitfield. He doesn't talk about crypto or NFTs at all, but talks extensively about fraud and art pricing - I think that it's incredibly difficult to talk about how NFTs in the art market should be priced without understanding the underlying weirdness in the art market pricing too.

[lifeanon269]

Ah, maybe I can clear this up then.

If purchasers of art could be convinced that there was great value in a fart counter that automatically records the number of farts an artist created while working on an artistic project (without need of any input from the artist) then this would have great value and potential for any artist.  It's a way of generating money without doing anything - literally money for nothing.  Just like an NFT.  The art isn't what's being monetized with an NFT (common mistake that people make - NFTs do not confer copyright), only the imagined exclusivity of having purchased the NFT is what's being monetized.  The art can still be sold and distributed through any other regular channel unless there's a separate agreement related to copyright.  Like the fart monitor, the NFT is ephemeral and only tangentially related to the art/artist.  It's a sales receipt kept online in a database.

So sure, if you can convince someone to buy one it is great potential for an artist.  Still largely pointless and meaningless for anyone interested in art though.

Ya, I am not so sure that cleared things up for me on what you're trying to explain. Apologies, but let's move on from the farts. haha

Copyright has nothing to do with any of this. This is an entirely new paradigm based on provable cryptography, not nebulous legal matters with jurisdictional boundaries.

No, not all reasons.  I was pretty specific about this - there is a direct connection with the artist that exists with physical art that is not reproduced with copies.  Holding the strat that Hendrix played the Star Spangled Banner on at Woodstock is going to feel very different to a fan than holding a replica strat . . . even if the replica is objectively a better musical instrument (better wired, holds tune better, better paint job, better dressed frets, etc.).

Sure it's scarce, but that's not what drives the value.  It's the connection that a fan feels that drives the value.

It absolutely is the scarcity that drives the monetary value of such an item. You are almost there proving my point for me. Let's take your Hendrix example. Let's say you can create an exact duplicate of the stratocaster that Hendrix used to play the Star Spangled Banner to the point where everyone that wanted one could have one. The emotional attraction and "connection" to such an item is still there for every owner of the item that wanted one. That doesn't change. But because everyone that wants one has one now, the monetary value of such an item diminishes because of the fact that everyone has their own. So I'd argue that scarcity is absolutely critical to the monetary value of artistic works and it is the combination of people's emotional value and scarcity of such works that drives the monetary value of art.

So it then stands to reason that by creating authenticity of digital works of art so that you can authenticate an original work as well as providing proof of ownership of said work of art, you've now created monetary value for digital art work that wasn't possible previously.

Not quite.  At least not the last time that I looked into NFTs (which has been a couple years, so please correct me if I misunderstand something with my rusty memory).

To create an NFT you go to a marketplace platform (SuperRare, Nifty Gateway, Makersplace, Foundation, probably many more) and tokenize your digital thingie.  You then pay fees to push the record of this onto the blockchain and publish your NFT on the marketplace.  The only thing stopping you from creating multiple NFTs of the exact same digital thingie somewhere else is the honor system.  NFTs aren't protected or recognized by copyright law.  NFTs have been minted by people who didn't create the art that they created the NFT for.  (There are some weird edge cases as well - like who gets the right to mint an NFT in the case of a joint project.)

All the NFT really gives you is your name listed as owner of the digital art in a database somewhere.  Nothing less, nothing more.

To be clear, you don't need a centralized marketplace to have an NFT. This has been my criticism of the current form of NFTs at the moment that I've been trying to explain. Colored-coins, for example, were around with bitcoin far earlier than NFT buzz and markets ever were, even though NFTs and color-coins are functionally the same. These centralized marketplaces just allow for the trading of these NFTs between marketplace participants where price discovery can take place. I can take my work of art (or any document or piece of data) and hash it and embed it into a bitcoin transaction. I now have a cryptographically provable timestamp that the work of art existed at that point in time and that I (by virtue of holding the private key behind that transaction) am the owner of it at that time. This is functionally equivalent to an NFT. The missing piece, since hashes are irreversible encryption, is displaying the digital work of art in a way that it can be hashed by others (verified) so that others can validate the authenticity of it.

This is another function of these centralized marketplaces; as oracles. They allow for verification of the art itself to the token, however, there is no reason this can't be decentralized in other ways. For example, as an artist, I can host my art on my own website that is owned by me where I have art displayed that can be validated as authentic. In which case the owners of the NFT can cryptographically prove they're the owners of those works of art deemed by the artist themselves. Chain of ownership can be proved thereafter on the blockchain should ownership change hands.

In the same way that I can digitally sign a message that proves I own a certain amount of bitcoin, someone can cryptographically prove they're an owner of a given work of art. Yes, if an NFT hasn't been created for a piece of art before, someone other than the artist can create one first. But that's beside the point. If the artist cares about NFTs, they have authority to create an NFT of their art before anyone else because they're the ones that created the art.

If the actual artist themselves is saying I'm the owner of their work of art, that certainly carries value due to that scarcity. And as I mentioned above, it is scarcity combined with the emotional value of the artistic piece itself that drives the monetary value of art.

What I do think is important in this, and I already mentioned this several times, is that there needs to be a consensus in the art community as to where (as in what blockchain) NFTs have value. This part is less of a technical hurdle and more of a social consensus one. As we've seen with bitcoin, it has proved to be a secure timechain that can be used to cryptographically timestamp information. In that same regard, I think it will be natural for artists to gravitate toward the timechain with the most security for their NFTs. In that sense, I see bitcoin again being utilized here. Like I said, I could care less about NFTs myself, but I acknowledge that others might value them and acknowledge that the security of bitcoin's timechain is naturally suited for them.

Scarcity is what drives the monetary value of just about all things in life. If everyone can get their hands on something, no one would care to pay money (which is really just a value representation of our time and hard work) for any such object. There are of course different forms of value. Something are "priceless", meaning that no amount of money could replace the immense emotional value of something. Somethings can hold emotional value be also be worthless monetarily speaking, if there is no scarcity behind it or if no one else holds the same emotional feelings behind the object as you do. So it is important that when we talk about the value of art and the value of NFTs, we're talking about the monetary value of art here and why scarcity is absolutely important in that discussion.

[Telecaster]

But if the technical hurdles of distributing original works of digital art so that art communities can reach a consensus on how digital art is stored in a decentralized way to match the security of the storage of the token itself, then I think that's a pretty big breakthrough. But, as I said, even if that technical hurdle isn't passed, there could still be value in NFTs if the art community says there is without broad consensus. Art is subjective.

I agree with all of that.  To your first point though, the technology not being there is a big, big problem.  NFTs don't actually do what the proponents say they do.   It is as if someone claimed to invent a hoverboard.   It is claimed to be supercool, fun to ride, and is revolutionizing personal transportation.    Only problem is that it doesn't actually hover.  But if it did hover, it would revolutionize personal transportation.

Same thing with NFTs.   NFTs don't solve any problems that anyone has.   Sure, it is conceivable they could solve a problem some day.   But it is non-sensical to tout benefits that do not exist and may never exist.   Until those benefits materialize, NFTs are a fool and his money program.   

[Scandium]

It's my belief that, yes, it makes sense to have a 2-5% allocation to BTC in ones portfolio and held for 10+ years. 
Blackrock is recommending 2% to their clients.  Perhaps even 5% allocation to BTC might make sense if you're comfortable with that.

So, I'm sorry to nitpick, but I'm trying to understand the reasoning behind this (maybe I should look up what blackrock says). What is the scenario where having 5% of your portfolio in BTC is beneficial/necessary (outside of "line goes up" speculation)? Sounds like you think the use case for BTC (whatever that means) will make this necessary? But how would that work?

If in the future some transactions can only be done using BTC, couldn't I just convert my USD to BTC then? Why would I have to own BTC for 10+ years (and hope)? If this is some important transaction, there will presumably still be 10s of millions of people who don't  own any BTC, so I don't see how there could be an overnight switch where USD is worthless, and BTC is the only method of payment. If the Euro is replaced with BTC, I will simply convert some USD to BTC before a europe vacation, or whatever. I will sell my (USD) VTSAX and convert that to BTC to pay the IRS. Maybe in 2045 I will be slightly less rich than if I had gone 100% BTC in 2024, but I consider that I minimal risk to take (compared to the alternative).

Alternatively, or is the thesis that value of BTC will slowly go up, and USD go down, so in the future you can pay taxes, buy bread or whatever with (small amounts) of BTC but massive amounts of USD? Basically that people with BTC now will be rich in 10 years, and everyone else, who saved in USD/fiat, will be destitute (call this the "enjoy being poor/speculation" scenario). Considering that the majority of rich people have fiat now, and no sign of going 100% BTC I find this basically inconcivable. As you say even blackrock only recommend 5%. Sure some rich people have crypto holdings, but that's in addition to fiat currency, not replacing it (not any I've heard of at least).