News: I’m writing a book, people are minting NFTs for the lulz, Chuck Tingle calls NFTs a ‘scoundrel plot’

I’m working on a book on NFTs and how they became the tulip mania of crypto. As of now, the plan is to self-publish on Amazon, hopefully before the bubble explodes like this dead whale.

I’ve finished the outline—which I’ll continue to update in coming weeks—and I’m playing with ideas for a catchy title. 

If you have thoughts for a title, send them to me! I need as many ideas as possible. Only one rule: it has to be SEO-friendly, so we need the words “NFT” and “art” in there somewhere. Also, I can add a long subtitle stuffed with keywords, too. Here are a few thoughts:

NFTs: The art of the steal

NFTs: When crypto bros entered the world of high art

Since I’m working on a book about NFTs, I won’t be talking about much else for the next few months. Hence, this newsletter is mostly about NFTs. (I promise I’ll return to talking about Tether when this book is finished.)

My goal: 500 high-quality book words a day, starting today. 

Here the news:

BitClout’s content creator tokens are NFTish

I was going to write a big section here on BitClout, the social-media-on-a-blockchain experiment, because I initially thought the project’s creator coins were NFTs, but they’re not really. They are similar to NFTs due to their artificial scarcity and being a way to trade influence. But they are fungible tokens, and it turns out they are HYIPish.

If you want more details on BitClout, I wrote everything up in a separate blog post. Also, note that at least one BitClout investor, Social Capital CEO Chamath Palihapitiya, is building a big portfolio of NFTs.

NFTs don’t convey ownership, case in point

NFTs don’t convey ownership of a digital art piece in any form, shape or fashion. You can create an NFT of a piece of art even if you are not the creator. You can also create multiple NFTs of the same digital art. 

Where this really becomes a problem is when you mint an NFT, auction it off for an absurd amount of money, and then someone claiming to be the rightful owner of the underlying art steps forward. 

This is what happened when an NFT for a virtual house sold on SuperRare for $500,000 worth of ETH. Now the artist and the visualizer—who worked together on the Mars House—have locked horns over the copyright.

Mateo Sanz Pedemonte, a 3D modeler who created the virtual abode for artist Krista Kim, calls the project “a fraud.”

“Krista Kim never owned this project fully,” he said. “I have created the project with my own hands, combined with her direction. I do possess the full intellectual property.” (Dezeen)

People are minting NFTs for the lulz

People are minting NFTs and selling them as a joke. 

A New York Times writer minted a column as an NFT and sold it on Foundation to demonstrate the insane amounts of money people are willing to pay for these things. A bidder going by @3fmusic bought the piece for 350 ETH, worth $560,000. (NYT)

Recently, John Cleese put up an NFT of a drawing of the Brooklyn Bridge on OpenSea. The highest bid is now $35,000 by JeffBezosForeskin.

“The world has gone terminally insane,” Cleese told VanityFair, adding that “This all reminds me of Henry David Thoreau, when he said, ‘Our inventions are wont to be pretty toys, which distract our attention from serious things. They are but improved means to an unimproved end.’”

Author Chuck Tingle put off by NFTs

Chuck Tingle, a self-published writer whose focus is satirical gay porn, looked at the NFT phenomenon and was appalled. He proposed doing a “tingler” as a single reproduction with an NFT, but when he read up on NFTs, he summed up his horrified thoughts in an ebook the same day—now available on Amazon for $2.99.

The title of the book is: “Not Pounded By My Book ‘Pounded In The Butt By My Non-Fungible Tingler That Is Literally This NFT’ Because Of The Current Catastrophic Environmental And Ethical Impact.”

David Gerard wrote up a review of the book. Of course, he had to explain who Tingle is first, because not everybody knows. I sure didn’t, but Tingle is apparently quite popular.

As for Tingle, he thinks NFTs are a “scoundrel plot,” where promoters are “taking money from buds of less means.”

In a separate tweet, he suggested, “instead of trying to support art by buying digital plaques with your name on it that has no meaning or actual connection to the art JUST SUPPORT ARTISTS BY BUYING THEIR ART. NFTs are good example of trying to fix problem that already has had very easy solution for 1000s of years.”

Other newsworthy bits

NFTs are so big and bubblish they’re even featured in an SNL skit. This is a funny skit but sadly it only serves to promote more of the NFT nonsense.

Edmund Schuster, an associate professor of corporate law at the London School of Economics, debated Andrew Steinhold, partner of NFT fund Sfermion. The motion for the debate: “NFTs are dumb.” (The Blockchain Debate)

In a separate debate, David Gerard took on Josh Petty, CEO of startup Twetch. Petty has been experimenting with NFTs for limited edition Twetch hats, which you can buy with BSV tokens. “A crypto token has no intrinsic value,” Gerard argued. “It is a race to the bottom for these things.” (Coingeek)

As I’ve stated, NFTs are simply pointers. And if the thing it points to moves, there’s always a chance down the line that your NFT could point to “ERROR 404!” for the rest of its life.

Verge reporter Jacob Kastrenakes makes a similar point: “NFTs are fundamentally built on trust—trust that a seller won’t screw you over, trust that these tokens magically have value—and that holds true even at the deepest level of the system.”

Is FinCEN aiming for NFTs? FinCEN issued a blue box notice to let art and antiquities traders know they will be held to the same reporting standards as financial institutions. This means that they will have to submit suspicious activity reports, or SARs, for antiquities trade. The question is: Will NFTs be categorized as art? (FinCEN notice, OCCRP)

Do NFT buyers even care about art? Computer scientist Jorge Stolfi thinks not. “If you make an NFT out of your work, its market will be restricted to a few million crypto believers worldwide. And they are mostly not the type of person who appreciates art. The billions who do not care for crypto will not be able to buy it.”

Finally, if you are tired of watching NFTs sell for millions of dollars in crypto and want to see some real art, here’s your chance. The Louvre just put its entire collection online for free.

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BitClout’s social media experiment is one bad idea on top of another

BitClout, a social-media-on-the-blockchain project, is selling a type of token (called “creator coins”) tied to influential Twitter accounts—without account holders’ permission.

And folks are getting understandably pissed-off. 

At first, I thought these creator coins were NFTish due to their artificial scarcity and being a way to trade influence. But it turns out they are more HYIPish.

Creator coins are fungible, similar to ERC20 tokens on Ethereum. And each BitClout creator coin has its own supply. Elon Musk’s creator coin is worth $84,000, for instance, and there are currently 434 of them in circulation.

The BitClout “one pager” tells us a little bit more about how these creator coins work:

“Creator coins are naturally scarce, with fewer than 100 to 1,500 coins in existence for each profile. This is because as more people buy a profile’s creator coin, the price of the coin goes up automatically at a faster and faster rate. This means that, eventually, it could take billions of dollars to mint even one more coin.”

According to the paper, if you want to buy new coins associated with a creator, the profile will “happily mint them out of thin air” and sell them to you according to a price curve.

I don’t understand the formula for calculating price but here it is:

Price in BitClout = .003 * creator_coins_in_circulation^2
Price in USD = .003 * creator_coins_in_circulation^2 * bitclout_price_in_usd

The only value in these creator coins appears to be money coming in from new investors. Also, you are encouraged to hold on to your coins for as long as possible because the value will go up and up. It all sounds very much like a Ponzi, where folks who get in early are able to cash out, but the news is not so good for late investors.

BitClout token

BitClout also has its own blockchain and its own BitClout token (BTCLT). The project actually did a premine of 2 million BTCLT for founders and investors.

If there is an expectation of profits from an investment in a common enterprise based on the efforts of others, that’s generally a good sign something is a security, according to our friend Howey.

The project mints creator coins of Twitter profiles and assigns them dollar values, but you can only buy creator coins with BTCLT. And if you want BTCLT, you have to buy it with bitcoin via the BitClout website.

Your money goes in, but how does it get back out again? The BitClout token so far is not listed on any major exchange, but there is no reason to believe that won’t change very soon.

Big-name investors

BitClout controls a wallet containing nearly $190 million worth of bitcoin, most of it raised from notable VCs, including Andreessen Horowitz (a16z), Coinbase Ventures, and the Winklevoss twins.

Here’s Social Capital CEO Chamath Palihapitiya on a podcast discussing how BitClout is funded by him and others.  

Aside from Coinbase Ventures itself backing the project, a16z is one of the major investors behind Coinbase, so I’m sure there is a plan here somewhere to get that token listed pronto. And its not like Coinbase isn’t already listing a slew of coins that resemble securities.

Diamondhands

BitClout’s pseudonymous founder, who refers to himself as “Diamondhands”—meaning someone who is willing to take risks and hold on to an asset to the bitter end—is allegedly Nadar Al-Naji, the former Basis founder. And we all know how well that project went. 

Basis was a “price-stable cryptocurrency with an algorithmic central bank,” according to its white paper. After raising $133 million, Al-Naji eventually shut Basis down blaming regulatory constraints. He ended up returning 90% of the money. (Andressen Horowitz was also an investor in Basis, by the way.)

Basis and BitClout share a lot in common. Both projects are totally confusing. They both appear to have the same founding team and the same investors. “We are investors. Same team behind Basis [from] a few years back,” Tyler Winklevoss of Gemini Capital told Decrypt.

You could be forgiven for thinking this is just grifters jumping between grifts.

Robert Stevens wrote up a great report in Decrypt describing how BitClout works and where the funds are getting shuffled off to. Brady Dale also penned a good story in Coindesk.

By the way, I love how Diamondhands told Coindesk that BitClout is not a company, it’s a blockchain. As if that will spare it from an SEC enforcement action. Everything about this project is dumb and bad.

Anyhow, last week crypto law firm Anderson Kill sent a warning letter to Nadar Al-Naji, on behalf of Brandon Curtis, for using Curtis’ private information without his consent. I have no idea why VCs are pumping money into this.

Updated on March 29 to add Tyler Winklevoss’ quote from Decrypt.

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