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Saturday 3 June 2023: Non-Fungible Talking Points

Bit late, this. Arguably, missed the whole bubble. Because I was busy, you know, doing things that actually make sense.

Let's assume we had a material of a certain value that people would use as a way to make transactions with each other and standardise the value of items. Then you'd have a Gold standard (or similar). So, that's possible.
And what if we got rid of the standardisation method, but kept the overall idea, so that items of currency still had a value relative to each other -- which was in itself tied to the amount of material required to make the lowest denomination of currency and then built up from that in increments that everyone just agreed was what they were worth. That's fiat currency.
Now, let's assume, for a moment, that we can digitise currency. That would, for the sake of argument, have brought about swipe cards and online portals into bank accounts. Okay. So, that's possible.

Now, the problems start to come when you consider that currency is already digitised and that in order to progress further than this, there would have to be a new innovation of some kind.
Bitcoin is not this innovation. Because there's nothing fundamentally new here. It isn't easier to use, because banks would still need to be able to accept it as currency, which is not the case, even now -- and there would have to be a benefit to using it above that which is provided by the standard digital, fiat currency. And this hasn't happened either.

What happened is that technology advanced to the point where encryption on all communications was not only needed, but also possible, and that a way of encrypting data in a chain of 'blocks' -- so that the encryption of the previous segment was needed to encrypt the next one -- called Blockchain was invented. This was a resource-intensive process so using blockchain in a meaningful way would need buy-in from anyone wanting to contribute. Leaving the ethical and sustainability concerns related to te system aside for the moment, it meant that the key innovation with Bitcoin, and by extension, blockchain, is that any user of the blockchain can donate their resources to encrypt more data, and in turn be rewarded with bitcoin; so in essence they could create it themselves.

Because what actually happened with Bitcoin is that a small fringe of people decided that, due to it being completely unregulated, this was a market that could be manipulated in the same way as the stock market. So that bitcoin would be able to make enormous gains in value -- and correspondingly, make them a lot of money. So the system gained popularity and a pattern similar to the stock market emerged (surprise, surprise). If you bought while it was increasing, you gained. Otherwise, you knew what you were doing when you invested.

Which also led to the rise in bitcoin related scams. All you needed to do was convince people you had a crypto-currency that had value, or potential value, in it. And you could get people to invest in you. Then delivering on that value was either a matter for the market to decide, or something that was actively never going to happen -- depending on who you asked. The final development in the saga took place at this stage of the process; art started to be used as a crypto-currency under the guise of being unique and 'non-fungible'. Even though that's not really how art works, especially when, as was the case with many such NFTs, the original art the token was based off had been used without the original artist's permission, so didn't even actually belong to the person selling it.

Governments never really got on board with this system that was so easy to abuse -- and any attempt to regulate the medium into a format that would actually be viable met with such active resistance that it didn't seem to be feasible. Because these people didn't want an actual currency -- they only wanted to abuse the promise of 'value'. So crypto-currency declined in popularity when it seemed to be unlikely to go anywhere. Most likely to rear up again in a few years.

At which point the sustainability and amount of energy required to actually produce these encryptions might need to be addressed, or how easy it is to manipulate the markets involved. But for now, there seems not much point looking into these. All of this is not to say that bitcoin is not the future of currency -- I just can't see how this precise iteration of the idea has many legs to it beyond being a tool for exploitation.