NFTs-Explained

NFTs-Explained

– Now to the latest trendthat’s sweeping the internet.- So called NFT.- [Reporter] They’re nowselling for huge bucks.69 million dollars.- So what’s behind this latest craze?- That is the question to ask.- Okay, so there’s somesuper strange stuffhappening online right now,and I need to tell you about it.First, look at this tweet.The first tweet ever tweetedin the history of Twitter.The tweet was by Jack Dorsey.- I’m one of the co-founders of Twitter.- And this tweet wassomehow just purchasedfor $2,915,835.47.- (laughing) You serious?- And it’s not just a tweet.Just last month a single jpegsold for 69 million dollars.The NBA is selling littlemoments of basketball gamesfor hundreds of thousands of dollars.This is all sorts of digital thingsthat people are purchasinga version of themfor lots of money.There are three simple lettersthat you need to understandto understand what’s going on here.Those letters are NFT.- Now to the latest trendthat’s sweeping the internet.- What is exactly is an NFT?- So called NFT.- Do you all in the chatunderstand what an NFT is?- Does that stand for not safe for work?What does this mean?- Why would you pay for an NFTwhen you can look at it for free?- Is this a gigantic bubblejust waiting to burst?- I believe in this spacewith my whole heart.- I’m just fascinated by it, all of it.- This story is much bigger thana $600,000 cat gif.Or a three million dollar tweet.It’s a story about human psychologyand how the way wevalue things is shiftingbecause of technology.A technology that some people thinkmay revolutionize our society,while at the same timeaccelerating the climate disaster.It’s really nuts, it’s allof these things togetherand I wanna explain itto you, so let’s do this.♪ Now what the hells an NFT ♪♪ Apparently cryptocurrency ♪♪ Everyone’s making some money ♪- [Announcer] Oh that was insaneofficially insane Lebron James.- NFT stands for non fungible token.Okay, there it is, that’s the explanation.Non fungible token, makes sense right?The video’s over now.No, one of my issues with this topicis that people throw aroundthings like blockchain,crypto art, ledger, NFT,and they just expect me to understandwhat they’re talking about, and I didn’t.Okay, I’m gonna talk abouta Tesla for a second.Customized by Unplugged Performanceto be the most unique andhigh quality Tesla there is.Oh and it’s not just a Tesla,it’s also $20,000.You can enter for achance to win the Teslaand $20,000 by going toOmaze.com/JohnnyHarris.When you donate $10 or more,your donation goes tosupport two non-profits.501C3 is the first one.They are an organization that seeksto mobilize the next generationto fight climate changeby creating a global communitythat embraces low carbon culture.The other one is called Give Powerwhich seeks to give clean drinkable waterto the 2.2 billion people around the worldwho do not have safeaccess to clean water.The non-profit uses itsdeep solar expertiseto power and provide cleanwater, food security,and light to regions around the world.So to potentially win a Tesla and $20,000,and to support these organizationsgo to Omaze.com/JohnnyHarristo find out more.So, fungible,let’s talk about the word fungible.It’s this very specific wordthat economists use,it has a very precise definition.I wanna use a different wordfor fungible for a second.Let’s just use the word replaceable.Non-fungible means non-replaceable,you can’t replace it, there’sonly one of them, it’s unique.Non fungible.Let me give you an exampleof something I feel very strongly about.Let’s say you want tobuy an orange jacket.This is really absurd,I’ve actually never counted these before.- Stop it, get some help.- You wanna buy an orangejacket from Uni Qlo.You go on the internet,and a jacket costs $39.If you purchase one ofthese jackets for $39,you don’t care what specificjacket they send to you,they’re gonna make thousandsof jackets in your size,send them to stores, send them to people,and they will send one to you,you don’t care which one it is.The jacket is fungible, it’s replaceable.As long as you get onethat’s identical to the rest,it’s worth the same to you,they’re interchangeable.However, let’s talk aboutone Uni Qlo orange jacketthat has been with mefor a very long time.This is the original,and for those of you who don’t knowI sort of have a strangeattachment to this jacket.I just love it, I love the color,I feel like an identity with this thing.And it’s sort of starting to disintegrate,but I love it.And I kind of fell in love.This jacket is not replaceable.If I went onto the website and paid $39for a Uni Qlo orange jacketthat was this exact same model,it would not be this jacket.This jacket is non-fungible.It is the only one onthe planet that exists.It has emotional value.It has significance.It is a very valuablething because it is scarce.There is only one of them,it’s valuable to me at least.And I kind of fell in love.Okay, we can put these down for a second.Everything in our economyis one or the other,fungible or non-fungible.A sack or rice is fungible,you just want a sack of rice,you don’t care which one it is.The Mona Lisa, non-fungible,there’s only one.Unsurprisingly, non-fungible thingsare way more valuablethan fungible things.To that’s the NF in NFT, non-fungible.Now let’s talk aboutthe T, which is token.This is a very internet-y word.And to explain this, Ihave to explain somethingI have avoided explainingfor a very long time,the blockchain.Luckily, there’s a way to understand this,and I’m going to make itas painless as possible.Let’s say I want to buythree slices of pizzafrom my friend Anna.She charges me six dollarsfor these three slices.I don’t use cash anymore,so I pull out my debit card, my bank card,and I swipe on her little terminal.As soon as I swipe this carda message is sent to my bankand it says hey, Johnny, whohas an account at your bankwants to spend six dollars on pizza,and that money needs to go to Anna’s bank.This is like the bread andbutter of what a bank does,all day, they document every transactionthat comes in from all their customers,they send out money to the other banks,and at the end of the daythey have a tally of all the moneythat went out of youraccount and into your accountand they can give you a number.They can say based on allof these transactions,you have $50 in your bank account.And so when that requestcomes in as I swipe my cardmy bank is like okay,based on all of your transactionsyou have $50 in your account,I can send six dollarsto Anna’s bank, approved.And they approve the transaction.Once that money comes into Anna’s bank,Anna’s bank is doing the same thing.They’re like oh cool, she had $80and now she has $86,and they add it to her record.More and more your money isjust a number on a screen.It’s the result of abunch of transactions.You don’t barter with physical things,you don’t use cash as much.So the bank keeping meticulous recordsof every transactionbecomes really important.We trust the bank to do this correctly.So thank you banks.Banks and other middle menhave been keeping stufflike this running smoothlyfor centuries.I mean kind of smoothly.- [Reporter] The NASDAQ,everything and morehas been completely wiped out.- [Reporter] It was theworst day on Wall Street.- What in the world ishappening on Wall Street?- There have been a few bumps in the road.With the rise of the internet,people started to wonder.Is there a way that wecould do this same thing,coordinate this same transactionof transfer of money betweentwo people without the bank?The result is a very cleverconcept called the blockchain.The blockchain.The blockchain fulfills thesame thing the bank was doing,but instead of doing thisprivately on my bank accountand talking to Anna’s bank,all of the transactionsare actually recordedpublicly on the internet.♪ You’re going surfing on the internet ♪So let’s redo thisexample in a crypto world.Anna charges me six crypto coinsfor my three slices of pizza.I go to swipe my proverbial bank cardto say yes, I want to pay you six coins.Instead of the bank seeingthat request for a transactionand trying to validate it,it goes on to this public recordwhere a bunch of people’s computersall around the world are keeping trackof every single transactionof everyone always.If I don’t indeed have thesix coins in my accountto pay Anna,all of the people’s computerswho are keeping track ofevery single transactionwill notice that there’s a discrepancy.They’ll be like whoa whoa whoa dude,you don’t have six coins.We’re looking at every transaction everand you don’t have six coins.Your transaction is rejected.If I do have six coins,all of the computerslooking at the public recordwill see that request for a transactionand they’ll be like yep, approved.You have six coins andnow Anna has six coins.And they’ll write that transactioninto the public record.Now Anna having those six extra coinsis now the business of everybody,everybody now knows that.The point here is that the group verifiesthe legitimacy of every transactionby keeping an eye on every transactionto make sure that it adds up.Okay I’m getting hot at this point,so I’m taking off my orange jacket.Okay, so you’re wonderingwhat does the blockchainand this public recordhave anything to do with cat gifsthat sell for $600,000?Well I’m about to tell you.So in my pizza example wetalked about blockchainas a way to verify currency transaction.I pay you this much, you pay me this muchand everybody knows how much everybody hasbecause it’s all public.But this is where it startsto bend my mind a little bit,what if we apply this to somethingthat isn’t money or currency?Let’s say one day you’rejust looking at the ledgerand the ledger’s likeJohnny wants to give Anna six coins.Okay he’s got six coins, approved.And then a transaction comes upthat’s like a Malaysian businessmanwants to give three million dollarsworth of coins to Jack Dorseyin exchange for a little token,or digital certificate that saysthat the tweet is now somehow ownedby the Malaysian businessman.The only thing that theblockchain cares aboutis does the Malaysian businessmanhave three million dollars worth of coins?And so a bunch of computersall around the worldlook at the whole entirelist of transactionsand say like yeah, this guy has morethan three million dollarsworth of coins, approved.They approve the transaction,and now it is written in a public recordthat is unalterablethat says that this Malaysianbusinessman owns this tweet.The token has beentransferred to somebody new,non-fungible token, NFT.And if there’s anythingthat gets human psychologyto value something,it’s if an entire groupvalidates that it’s realand that there’s only one of them.There are tens of thousandsof NFTs of all kinds.Some music is being given tokens,lots of art is being minted as tokensand being bought and sold,and then of course there’s.- NBA Top Shot.- Who’s taking advantage of this.- These highlight moments,these Top Shot moments fromyour favorite NBA playershave been turned into non-fungible tokens.- Jesse made headlines the other daywhen he paid $208,000 fora Lebron James Top Shot.- It’s the weirdest thing.As soon as humans have enough abundanceto have their basic needs met,food, shelter, warmth, et cetera,the next frontier is to create valuein things that have no inherent value.The value turns into psychological hype.Excitement around a certain thing.We’ve been doing that forever,I mean the whole art industry is basedon the idea of a bunch of peopledeciding that this painting,this little bit ofcanvas and wood and paintis valuable, and thus it is valuable.The only different about nowis we now have the technologyto do this in a non-physical wayusing this very sophisticatedinternet technologythat is maturing very quickly.Okay, so this is a lot of hype,and I know you’re thinking like cool,there’s a bunch of rich people onlinebuying and trading digital art,and there’s millions ofdollars worth of cards,I thought you said that thiswas gonna have the potentialto change the world.And I’m getting there, but firstI need to talk about the crazyflip side to the NFT fad.The reality is that the technologythat is the backbone for all of this,the blockchain stuff thatwe’ve been talking aboutrelies on the public ledgerthing that I talked about.That is the sort of heartand soul conceptually,but mechanically, like physicallywhat it relies on is computersdoing a bunch of little calculationsall day and night forever.These computers aren’t real computers,they don’t have any memory,or screens, or anything.All they do is just makelittle micro-calculationsall day, all night.Most NFTs are stored on ablockchain called Ethereum.And as of now, in early April2021 when I’m filming this,the Ethereum blockchainis using 33 terawatt hours of electricity.And you’re like what’s aterawatt hour of electricity?That’s the same amount of poweras the country of Serbia.A reminder that generating electricityusually comes from power plantsthat are burningfossil-fuels, that are puttingcarbon into the atmospherewhich is a big freaking problem.- [Narrator] Facing a manmadedisaster on a global scale.- The power consumptionof the Ethereum blockchainis exploding, it quadrupledin the like eight months,and it is showing no sign of slowing down.It is a lot of energy.And to think that that much energyis not being used tolike, move people aroundor produce things,it’s used to crunch numbersin a weird computer warehouse somewhereso that somebody can buy a fake tokenof a thing that we only,oh man, I can’t, it’s mind blowing.It’s such an ironic momentwhere it’s like this is all digital,it’s all fake, it’s not real,but it’s having deeply real world effects.I just wanna finish this video now,talking about what this might meanfor our world going forward.This is definitely hype,and that’s the whole point.I mean these speculationmarkets are all about hype.We see this all the timewith new technologiesand new things thatpeople get excited about.And they swarm it with their investmentsand the price goes up,and then something happens, for example.- Come on Uncle Phil,this is the ’90s man.- What’s a web page,something ducks walk on?- How nice of you to join us.- On equal value, so cashin on today’s new economy.- It’s the ’90s, it’s hammer time.- In the ’90s the internet was taking offand people were just realizingthat you could make money on the internet.You could make bigbusinesses on the internet.The stock market wassurging, 400% in five yearsmainly fueled by so muchhype and excitement aroundthese new internet companies.- [Reporter] Break the recordas America’s longest boom.- The new economy, is a boom without end?- This rise peaked in March of 2000,and then the bubble burst,and a lot of thesecompanies either went underor completely lost all ofthis excitement valuationthat they had.- Saw it didn’t you, it was down some.- But, did that mean thatthe internet went away?Did that mean that internetbusinesses didn’t come back?No, companies went onto reshape our world.Right now I think we are probablyin that stage of NFTs.It’s hype, it’s novel, it’s exciting,but what it’s doing isit’s pushing our mindsto think differently about how we validateand verify things.If I buy a house, there is a wholethick stack of paperworkand a bunch of middlemento make sure that it is very clearwho owns the house,and how that money gets transferredfrom one person to another.It is a nightmare of an experience.If suddenly technologyexisted that took awaythe centralized middle manand made transactions between peopleable to be authenticated, verifiable,and much smoother, thatcould change our world.I’m not here to say ifthe bubble’s gonna burst,or whatever, I don’t know.I just know that this is a crazy momentwhere we’re getting ourheads around a new technologyand what it means,and eventually will adapt.This won’t be crazy, thiswon’t be novel anymore,prices will go down,but the technology thatallowed it all to happenwill probably stick around.(soft music)

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