Crypto Going to Zero

The law makes it worth something as tender.

Fiat paper money: legal tender or fire tinder? :wink:

PS
“Money” only has value if people accept is as having some value, even if that ‘value’ is as a place holder.

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“Money” only has value if people accept is as having some value, even if that ‘value’ is as a place holder.

The same with tokens.

While a dollar maintains its value equal to the next dollar…a painting is not equal in value to the next painting…a token denoted by a work of art is not equal to the next token denoted by another work of art.

Most of us wont be buying NFTs. No need to worry, I am totally uninterested in selling them in this venue.

If you buy a token it is denoted by the digital art.

I’m enjoying our conversation, but this sentence (I think) encapsulates the issue. What does that mean, for a token to be “denoted” by the digital art?

I’m not arguing that digital art doesn’t have value. It can be quite valuable, and highly valued by young people. I’m pointing out that the token has no relationship to any ownership - at all - of the digital art. Buying the token of a digital art doesn’t get you anything. It doesn’t give you permission to have the digital art on your phone, it doesn’t give you ownership of even a copy of the digital art. It gives you no legal interest at all in the digital art.

A person who owns an NFT of a digital artwork has nothing that I - a person who doesn’t own that NFT - don’t also have in that digital artwork. It’s like if I take a picture of my car and sell the picture. The person who buys that picture doesn’t get any rights, ownership, or anything in my car. The NFT doesn’t convey any ownership in the digital artwork itself, which is why the value of the digital artwork (which can be considerable!) doesn’t give any value to the NFT.

That’s why it’s a different case than dollar bills, or all the zeros and ones that represent financial assets in electronic banking. The reason those representations of other assets have value is because there are elaborate legal and contractual frameworks that formally tie the representation to the underlying asset. As you point out, the mix of cotton fabric and ink that is a dollar bill is worth a dollar because there is a law saying it is. The reason an interbank electronic transfer of a hundred dollars actually transfers a hundred dollars is because there are laws and enforceable contracts that tie the value of the asset to the electronic transfer.

None of that exists for NFTs, whether they “denote” digital art or anything else. There’s no legal or contractual tie between the NFT and the asset that it (falsely) claims to represent.

Note that this is not a technological problem. It’s a legal problem. It can’t be solved by putting more detail or information about an asset into the NFT. No matter how much information the NFT has, legally and contractually the NFT has no relationship to the asset.

The NFT market has exploded because people wrongfully think that when they buy an NFT of a digital artwork that they’re getting something in that digital artwork. That misperception might persist for a while. But at some point, there will arise a dispute involving a downstream owner of an NFT - and unlike bank transactions or dollar bills or real conveyances of digital artworks, they will discover that they don’t actually own anything in the underlying artwork. At all. That buying an NFT of a Bored Ape doesn’t mean you own a Bored Ape (any more than I own that Bored Ape), and that no one has to act as though you have any greater ownership in that Bored Ape than a random person on the street.

That’s the real question for you, Leap1. What do you think the relationship is between the token and the digital art that “denotes” it?

Albaby

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”Money" only has value if people accept is as having some value, even if that ‘value’ is as a place holder.

The same with tokens.

Besides “acceptance”, the value USD “money” is also supported by the government’s authority to tax the largest economy in the world.

Besides “acceptance”, the value of token “money” is backed by, well, nothing.

And I want to “thank” albaby for effectively destroying the value of my Pudgy Penguin NFT investment. Curse you!

For now, my Wacky Wolf NFT collection is intact.

AW

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I’m not arguing that digital art doesn’t have value.

That is the rub. The copies of the Mona Lisa or of any digital art are not worth much. Everything in digital art is a copy.

In an abstract or meta philosophical manner think of an oil painting as a token. Yes a physical token. As a US dollar is. As the digital number in an accounting column is.

The NFT is minted against a specific piece of art.

Most NFTs are problematic in that way. Because some artists are minting twice. Just like limited edition prints are hard to know if the edition really was limited. There is fraud.

The method I am discussing Arweave, Atomic and Koii create a system where there is a lack of fraud or fraud is harder to do without consequences.

Also the Arweave or IPFS storage is more problematic. The IPFS storage has a delete system going around deleting unpinned data. The artists need to pay for that storage monthly. The idea being to maintain the pin that stops the automatic deleting of the data.

Arweave is permanent. Most artists do not know that much.

The entire exercise among coders is known as the bigger mousetrap. Something occurs ie digital art copies, a bigger mousetrap is created to allow for value.

But I call tell you all of Jackson Pollock’s canvases were not fixed. Meaning the acid from the paints is eating through those multi million dollar canvases. By the end of this century nada.

It is not just art that can lose value. Obviously. It is all our human folly.

Al you and I are getting older and losing value faster than any of it. LOL

The NFT is minted against a specific piece of art.

Most NFTs are problematic in that way. Because some artists are minting twice. Just like limited edition prints are hard to know if the edition really was limited. There is fraud.

The method I am discussing Arweave, Atomic and Koii create a system where there is a lack of fraud or fraud is harder to do without consequences.

But again, none of that addresses the main point. The problem isn’t in the fraud. The problem is in those squishy words - “minted against.”

What does it mean for an NFT to be “minted against” a specific piece of art? From a legal, contractual, or ownership perspective, it means absolutely nothing. An NFT that is “minted against” a specific piece of art carries no rights to the specific piece. You can’t actually sell digital art using NFT’s.

Once more, with feeling - this has absolutely nothing to do with whether the art has value, or what the value of the art is. It’s that the token gives you no ownership interest in the art. Fixing the technological issue that pieces of digital art might disappear from the web or get “moved” to locations other than that listed in the NFT doesn’t do anything to solve that problem. The problem is that when you buy an NFT “minted against” an artwork, you don’t get anything that I (as a person who doesn’t own the NFT) don’t already have in the artwork.

Albaby

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Well, yeah, money is worth what people are willing to trade for it.

But, you know how the cartoon character looks down and discovers with a shock how there is no ground beneath his feet before he plumets to the distant ground, leaving a cloud of dust dangling in the air? A currency can do that. People can decide they don’t want a currency anymore, and they won’t trade their can of beans for that sort of money anymore.

I’ve never been willing to trade a dollar for any cryptocurrency. I suspect there are fewer people every day who want to make that trade. I wouldn’t trade for the old Zimbabwe dollars or Confederate money, either.

Dollars are more convenient, and despite the current inflation, more stable than cryptocurrency. The day may come when I won’t trade a dollar for beans, but if that happens, we’ll all probably be reduced to barter for a while. I’m pretty sure cryptocurrency is already stepping off the cliff and about to look down.

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I you want to own digital art, buy the copyright. It’s the copyright that matters. Where the art is stored is beside the point, as long as it is in fact stored.

Blockchain tech secures that the contract is a one off.

How does it do this? If there is an NFT attached to a specific jpeg, what stops someone from attaching that same jpeg to another NFT (without your embedded contract, and perhaps with their own embedded contract) and holding it or selling it?

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AW,

In a legal contract such as an NFT you make a claim as the issuer of the contract read minting process. A court of law will uphold a contract. The blockchain technology is just the Ethereum chain. At least for this discussion. If an artist uses two places on the blockchain for one piece of art, then that is fraud in front of a court of law.

The reason there are courts is to enforce contracts long before blockchain tech.

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Mark,

Adding prior to blockchain there was endless digital copies. Using a token as ownership matters to content creators and collectors.

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The reason an NFT for digital art is valuable regardless of Ethereum values has to do with art being on the cellphone…or TV, desktop etc…it is viewable to the owner.

I can call up the major works of world art on my phone for free.

Why should I pay in cryptos to be able to call up the image of a bored ape on my phone? Or even the Mona Lisa, for that matter?

Picture this…. Pun intended.

The Chicago Art Institute has a Cezanne exhibit running right now. Do you think they could raise much money by selling “tokens”?

(Send us 15 dollars and we will send you a password that will enable you to display Cezanne’s “Large Bathers” on your cell phone whenever you want.)

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I’ve never been willing to trade a dollar for any cryptocurrency.
…
I wouldn’t trade for the old Zimbabwe dollars or Confederate money, either.

Dollars are more convenient, and despite the current inflation, more stable than cryptocurrency.

Tru dat!

Methinks cryptocurrency is a fad, like mohawk haircuts and Zoot suits it will pass.

In a legal contract such as an NFT you make a claim as the issuer of the contract read minting process.

An NFT is not a legal contract. It is a chunk of code, which chunk of code can be assigned from the minting address to another address on the blockchain. Because the NFT is not a contract, it does not itself create any rights that the purchaser can enforce in court.

If a contract exists, it would be the agreement entered into between the purchaser and seller that surrounds the transfer of the NFT (again, a chunk of code) from one address to the other. The purchaser and seller can certainly create such an agreement, and such an agreement can include a term that says seller will not mint any more NFT’s denoted by that artwork. But there are several obvious problems with that, of course:

  1. You can’t do that on the chain - you need an off-chain agreement. And once you’re doing that, you don’t need the blockchain, except as a payment system.
  2. The agreement won’t run with the NFT. Only the initial purchaser would have the right to enforce; if the NFT is sold to another person, that purchaser has no rights to stop the seller from minting more NFT’s of the same artwork.
  3. Most NFT’s aren’t actually doing this.

Albaby

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An NFT is not a legal contract.

Since when is a contract in writing not a contract?

Courts will enforce contracts. The English courts have begun to recognize NFTs as property. Of course the contract becomes the terms.

https://www.dechert.com/knowledge/onpoint/2022/6/nft-fraud–…

The US courts will follow suit.

Methinks cryptocurrency is a fad, like mohawk haircuts and Zoot suits it will pass.

I don’t think so. When governments start issuing crypto currency, I think it will have some value.

AW

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Since when is a contract in writing not a contract?

Courts will enforce contracts. The English courts have begun to recognize NFTs as property. Of course the contract becomes the terms.

An NFT is not a contract in writing.

You might need to take a look at what an NFT actually is. The NFT is the thing being sold, not a contract setting the terms under which the thing is being sold. To turn to the real world analogy of an actual painting, if you buy a painting at auction at Sotheby’s there will be a lengthy set of Terms and Conditions that govern that purchase. Those Terms and Conditions are the contract - not the painting. The painting is what’s being sold, and the contract is the agreement between buyer and seller (and auctioneer, in this case) that governs the terms under which it is sold.

The way NFT’s are structured (at least on ethereum), the NFT is the object being transferred between the parties. It is the property being conveyed - not the contract under which the conveyance is taken place. The whole point of blockchain is that these conveyances happen without a contract - they happen automatically by execution of the blockchain protocol, without the need to have any contractual relationship between buyer and seller.

Albaby

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I don’t think so. When governments start issuing crypto currency, I think it will have some value.

I disagree. With WW II governments tried to control gold. Governments would need to control cryptos. I do not think that is possible. I think China is going to fall flat on its face.

I think pegging to a value for the USD with a treasury crypto in tow wont work.

Free of that pegging, cryptos a couple of them or maybe a few of them are worth something major. As we can now see even after a 70% drop.

You are limiting the reality of NFTs to fit your beliefs.

You do not mint an NFT without a contract. You can opt to do so. But artists use a developer contract.

Any contract is a contract if it the courts see it as meeting the necessary underpinnings. The law is only developing now. Neither of us can categorically speak for the courts.

You do not mint an NFT without a contract. You can opt to do so. But artists use a developer contract.

Who are they using the developer contract with? In other words, who’s their counterparty?

Any contract is a contract if it the courts see it as meeting the necessary underpinnings. The law is only developing now. Neither of us can categorically speak for the courts.

True, but I don’t think you have much of an understanding of contract law. Which makes for an interesting conversation, since I only have a passable understanding of how blockchain networks work. So I’m absolutely open to the possibility that I’m wrong about how the blockchain actually operates, but I am quite confident that you’re wrong about how contract laws apply to NFT’s. Granted, it’s not my area of specialization (my law practice concentrates in real estate development, which has some very specific laws governing contracts) - but I know the core legal principles pretty well.

When you use trading and commerce platforms (think eBay or Sotheby’s), you are creating a contract between the buyer and seller. In order for either of those counterparties to use the platform, they agree to the terms of service of the provider entity. That entity has the legal capacity to form contracts, so you end up with a tri-party contract which governs the terms of the transaction. It sets out a host of reciprocal obligations on the part of buyers and sellers, and defines the obligations of eBay or Sotheby’s with respect to the transaction. That type of transaction involves centralization and trust - centralization, in that you use a third party like ebay or Sotheby’s to coordinate the transactions, and trust in that the obligations of the parties don’t happen automatically but require the party’s future satisfaction of the contract (or using an enforcement mechanism).

Blockchains - specifically ethereum - aren’t built this way. They’re intended to be decentralized and trustless. The “blockchain” isn’t a legal entity that has the capacity to either enter into a contract or to be sued to perform an obligation. It’s just a creation of a lot of (very smart) developers, maintained by countless miners. So none of the legalities which surround every other commercial transaction exist with the blockchain - and because the blockchain is not a legal entity with capacity for contract, many of those legalities cannot exist WRT blockchain without some really major changes to the law. Changes that the courts cannot make, but only legislatures can make.

So from our discussions, it sounds like you’re looking at the problem entirely wrong. The problem with NFT’s that needs to be solved isn’t that they point to an image that isn’t directly stored on the blockchain (and thus can disappear or be relocated). It’s that NFT’s do not, and probably cannot, serve as a vehicle for conveying the property interests that people currently think they do.

The reason that people think they convey those interests is, like yourself, they assume that since those rights get conveyed in the analogous real-world transactions. Like buying a painting at gallery that the NFT would work the same way. But they don’t. The token isn’t the art, and because a blockchain isn’t an entity that can enter into contracts. So when you acquire a token through a blockchain, you are not getting the same bundle of rights you would get if you bought a painting at a gallery. You’re actually not getting any rights, at all, in the artwork. That’s not a problem that can be solved with tech. It’s a problem that may never be solved using crypto, because most of the things you need to do in order to solve them have to be done “off-chain.”

Albaby

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