NFT’s WILL EAT THE WORLD AND CHALLENGE YOUR REALITY
(Full disclosure, not all me.)
However bullish you are on NFTs, you are wrong. You are insufficiently bullish.
First, the usual anti-FOMO advice.
The rest of this thread is giga-bull NFTs in general as a technology.
This does not mean that you should ape into any PFP collection. Most individual NFTs are heading to zero.
Solving the Byzantine General’s problem allowing for decentralized consensus is not a discovery that leads only to permissionless wire transfers or even digital gold or even uncensorable payments.
All of those things are super important and the OG Bitcoin decentralization maxis with their full nodes and paper wallets are providing an invaluable public service, keeping a global independent payment rail open and running.
They are sentries on our societal frontier. But that is not the end of it. That is the beginning of it.
Modern society runs on databases that are run by TTPs (Trusted Third Parties).
Where are these TTPs? They are literally everywhere.
Citibank. Google. Facebook. New York City. Hilton. Delta. The Olive Garden. Time Warner Cable. Uber. Amazon. The Social Security Administration. Your employer. Your pension fund administrator. The IRS. The NSA.
For modern society to function at current scale and for *you* to function in it – to travel, to earn money, to vote, to get a cab, to eat, to not be jailed, requires thousands of databases to track you.
It is not evil, it is a function of “this is the only way we could do it”
In that context, the TTP is who decides, in practice, your rights, from trivial to important.
From if your hotel reservation is cancelled to whether you can wire more than $100K to your crypto-exchange in a day to whether you are allowed to vote in the Presidential election
We take it for granted, because it has faded in the background of our lives, but databases run by TTPs rule everything around us.
Memes are the apex object of society, but the architecture and machinery of society in 2021 is an Oracle or Amazon database
OK, so what? What is the big deal with TTPs?
There is a micro and macro problem with modern TTPs
The micro problem is that they trend to being anti-competitive. Computers lead to economics of scale in data and infrastructure so firms tend to grow
And as they grow they build a huge installed base of data and data infrastructure that is the main competitive barrier to entry in any modern business.
This is why the antitrust regulators know there is something problematic with FAANG, but can’t find it
The answer isn’t to force them to lower prices (anyway a lot of their products are free) or to try and tell them which products they are allowed to build or not.
These are 19th century solutions to a 21st century problem.
If there was ever going to be a regulator and had to solve things in the traditional way, there is a simple solution to these issues.
Force companies and governmental agencies to provide first class access to the underlying data.
The market will solve the rest
The macro problem with TTPs and the increasingly centralization they provide is that are increasingly creating easy chokeholds to hijack the whole of society.
People have a hard time thinking about this in abstract terms so we need to do examples
Imagine taxis 10 years ago. A fully decentralized industry that knew effectively nothing about their customers.
Uber was a revolution and really convenient, but…
A future dictator can trivially ban someone from Uber/Lfyt/etc, but mission impossible stopping him from a taxi
The same thing applies to Facebook, Apple, Amazon and Microsoft.
They are amazing businesses and millions use their products daily. They have brought tens of trillions of dollars of utility into our lives.
But, they can be hijacked by people with guns
Its possible that state worries too much about day to day risks and not enough about existential risks.
Day-to-day risks: crime, drugs, money laundering, tax evasion, terrorism
Existential risks: dictators
I’m sure there was crime and tax evasion in pre-Hitler Germany and in pre-Stalin Russia and in pre-Mao China.
And none of these things caused 1% of the deaths, economics and cultural destruction that was caused by hijacking the machinery of the state
Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety”
Is one of the most important things ever written on these matters
It is of course important to try to reduce day to day societal ills.
But these efforts are double-edged swords when they open the door for the edge risk of someone hijacking the whole system
THe worry is that the world is sleepwalking into high centralized systems with literally nobody pushing the other side of the equation.
China is already over the transom. And sadly, the USA and EU are heading in the same direction
So pause and recap:
a) BTC solved decentralized consensus
b) Centralized consensus is everywhere
c) TTPs cause micro problems (anti-competitive) and macro problems (present existential risks)
So what do our JPGs have to do with this?
a) They are decentralized
b) They are constitutionally protected free speech
c) They can represent the nuance of the world which is non-fungible, not fungible
d) They can be used to build decentralized social organizations
Let me give you a preview of where we are headed
The addressable market for NFTs is not “a subset of the art market”, but, in the first phase, all societal intangibles.
These represent tens of trillions of value and are the coordinating mechanism of society.
It is obvious that NFTs are the “internet moment” for art
The art establishment is going to get flippened because it is behaving exactly as conventionally as any other incumbent.
It is amusing to see in this “creative” and “counter-cultural” field
But one massive mistake people make, including some of my best friends in crypto, including 2011 to 2013 crypto OGs is thinking that the scope of NFTs is “art”
Art is just a subset of societal intangibles. The cutting edge subset, but a subset
After they flippen art, NFTs will start eating brands, they will start eating culture, they will start creating decentralized alternatives to centralized orgs.
Are the Bored Apes a silly collectible are are they a decentralized competitor to Supreme?
So that will be the next phase, NFTs will be used by companies and decentralized organizations to organize their communities.
Unlike customer databases, they are public, they are composable, they are uncensorable.
They solve both the micro and the macro problem
If I want to go provide some service to the Bored Ape Yacht Club community, I do not have to ask permission of Yuga Labs. I can just airdrop to the holders or use BAYCs as a mint pass.
This solves the micro problem with TTPs, no antitrust regulators needed
On the macro side, if I were a potential dictator, same problem.
I cannot easily freeze the movement of BAYCs because they run on Ethereum, not in the customer database of Yuga Labs.
It is a vastly more difficult and impractical problem to chase down everyone individually
And this is the intermediate stage.
In time our metaverse of persistent digital objects will become more and more real until it becomes our default reality.
This will also run on NFTs and will be our default reality.
Critical to be decentralized
Then comes that stuff that is less interesting conceptually to 6529. Will we bring movie tickets, vacation rentals, hotel reservations, home sales and so on to NFTs?
Yes, of course and it will be good for market efficiency
But all off-chain assets will require a trusted third party linkage to come on-chain.
So these bringing your Cancun rental on-chain will solve economic efficiency problems in the normal way but not any fundamental problems of liberty and societal organization
BTW all of this points to where the next angle of system attack will be on crypto and that is non-custodial wallets.
Both the USA and the EU are floating different attacks on non-custodial wallets.
This is the ONLY regulatory battle we MUST win
We can concede everything else and still win.
Whether DeFi governance token X is a security? Who cares.
We simply need to maintain right to hold crypto directly, not in a TTP, and transact reasonably (without insane recordkeeping requirements)
If we can preserve this (which is not a ‘won’ fight, it is a fight that has just begun – @coincenter and @NeerajKA and @twobitidiot throw EVERYTHING at this specific topic), then JPGs can take us the rest of the way to Valhalla.
We can absolutely organize decentralized orgs with JPGs without violating any securities laws.
And if we can do it, then the magic of network, of the collective intelligence of humanity will take us the rest of the way.
This is enough for today. Read this. Absorb it. Read it again.
This is the underlying theory. Take a day or two to digest it.
With acknoledgement to @punk6529