The Blockchain Debate Podcast

Motion: NFTs are dumb (Edmund Schuster vs. Andrew Steinwold, co-host: Maria Shen)

March 25, 2021 Richard Yan, Edmund Schuster, Andrew Steinwold, Maria Shen Episode 25
The Blockchain Debate Podcast
Motion: NFTs are dumb (Edmund Schuster vs. Andrew Steinwold, co-host: Maria Shen)
Chapters
The Blockchain Debate Podcast
Motion: NFTs are dumb (Edmund Schuster vs. Andrew Steinwold, co-host: Maria Shen)
Mar 25, 2021 Episode 25
Richard Yan, Edmund Schuster, Andrew Steinwold, Maria Shen

Guests:

Edmund Schuster (twitter.com/edmund_schuster)
Andrew Steinwold (
twitter.com/andrewsteinwold)
Host:

Richard Yan (twitter.com/gentso09)
Special co-host: Maria Shen (
twitter.com/mariashen)

Today’s motion is “NFTs are dumb.”

Non Fungible Tokens have taken the world by storm. A transaction in NFT is a transaction in some sort of digital ownership. Or as the Bloomberg columnist Matt Levine put it, “digital ostentation.” As the new owner of the NFT of a song or a jpeg, you don’t have exclusionary access to the 0’s and the 1’s that make up the digital object. But there is still scarcity ascribed to the thing you’re buying, because the seller promises to only do this transaction a small number of times.

So as a buyer, you may feel good about a special bond you have now formed with the seller - in general an artist. Or you can signal to the world that you have deep enough pockets to have made such a transaction.

In our debate today, on one side, we have a London School of Economics professor who is both a staunch no-coiner and an NFT bear. On the other, we have a founding partner of a NFT dedicated fund that started in 2019. Our cohost is from a renowned crypto fund, an NFT advocate and a collector herself. So this will be interesting.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

Please note that nothing in our podcast should be construed as financial advice.

Listen-along transcript: https://share.descript.com/view/NnA9YEyInkE

Source of select items discussed in the debate (and supplemental material):

Guest bios: 

Edmund Schuster is an Associate Professor of corporate law at the London School of Economics and Political Science. In October 2019, he published the paper “Cloud Crypto Land” that discusses inherent obstacles in the legal system that prevent blockchain systems and smart contracts from being truly useful. He is a self-declared no-coiner.

Andrew Steinwold is a managing partner of an NFT-focused crypto fund named Sfermion. He also publishes content about the NFT world via his newsletter and podcast, both named Zima Red. He thinks “NFTs are eating the world.”

Maria Shen is a partner on the investment team at Electric Capital, a well-known crypto fund. NFTs are part of their scope of investment. She is the author of the well-followed crypto developer report.

Show Notes Transcript

Guests:

Edmund Schuster (twitter.com/edmund_schuster)
Andrew Steinwold (
twitter.com/andrewsteinwold)
Host:

Richard Yan (twitter.com/gentso09)
Special co-host: Maria Shen (
twitter.com/mariashen)

Today’s motion is “NFTs are dumb.”

Non Fungible Tokens have taken the world by storm. A transaction in NFT is a transaction in some sort of digital ownership. Or as the Bloomberg columnist Matt Levine put it, “digital ostentation.” As the new owner of the NFT of a song or a jpeg, you don’t have exclusionary access to the 0’s and the 1’s that make up the digital object. But there is still scarcity ascribed to the thing you’re buying, because the seller promises to only do this transaction a small number of times.

So as a buyer, you may feel good about a special bond you have now formed with the seller - in general an artist. Or you can signal to the world that you have deep enough pockets to have made such a transaction.

In our debate today, on one side, we have a London School of Economics professor who is both a staunch no-coiner and an NFT bear. On the other, we have a founding partner of a NFT dedicated fund that started in 2019. Our cohost is from a renowned crypto fund, an NFT advocate and a collector herself. So this will be interesting.

If you would like to debate or want to nominate someone, please DM me at @blockdebate on Twitter.

Please note that nothing in our podcast should be construed as financial advice.

Listen-along transcript: https://share.descript.com/view/NnA9YEyInkE

Source of select items discussed in the debate (and supplemental material):

Guest bios: 

Edmund Schuster is an Associate Professor of corporate law at the London School of Economics and Political Science. In October 2019, he published the paper “Cloud Crypto Land” that discusses inherent obstacles in the legal system that prevent blockchain systems and smart contracts from being truly useful. He is a self-declared no-coiner.

Andrew Steinwold is a managing partner of an NFT-focused crypto fund named Sfermion. He also publishes content about the NFT world via his newsletter and podcast, both named Zima Red. He thinks “NFTs are eating the world.”

Maria Shen is a partner on the investment team at Electric Capital, a well-known crypto fund. NFTs are part of their scope of investment. She is the author of the well-followed crypto developer report.

The Blockchain Debate Podcast #25: Motion: NFTs are dumb.

Richard: [00:00:08] Welcome to another episode of the blockchain debate podcast, where consensus is optional, but proof of thought is required. I'm your host Richard Yan today's motion is NFTs are dumb. So non-fungible tokens have taken the world by storm. A transaction in NFT is a transaction in some sort of digital ownership.

[00:00:25] Whereas the Bloomberg columnist, Matt Levine put it "digital ostentation." As the new owner of the NFT of a song or a JPEG. You don't have exclusionary access to the zeros and the ones that make up the digital object, but there's still scarcity ascribed to the thing you're buying because the seller promises to only do this transaction a small number of times.

[00:00:47] So as a buyer, you may feel good about a special bond you have now formed with the seller, in general an artist, or you can signal to the world that you have deep enough pockets to have made such a transaction. In our debate today, on one side, we have a London school of economics professor who is both a staunch no-coiner and an NFT bear. On the other, we have a founding partner of an NFT dedicated fund that started in 2019. Our cohost is from a renowned crypto fund and an NFT advocate and a collector herself. So this will be interesting. If you're into crypto and liked to hear two sides of the story, be sure to also check out our previous episodes. We feature some of the best known thinkers in the crypto space.

[00:01:30] If you would like to debate or want to nominate someone, please DM me at block debate on Twitter. Please note that nothing in our podcast should be construed as financial advice. I hope you enjoy listening to this debate. Let's dive right in.

[00:01:45] Welcome to the debate. Consensus option of proof of thought required I'm your host, Richard Yan. Today's motion: NFTs are dumb. To my metaphorical left is Edmund Schuster, arguing for the motion. He agrees that NFTs are dumb. To my metaphorical right is Andrew Steinwold, arguing against the motion. He disagrees that NFTs are dumb. To my metaphorical middle is Maria Shen, who will be co-hosting. 

[00:02:05] Let's quickly go through the bios of our guests. Edmund is an associate professor of corporate law at the LSE. His research focuses on Corporate Law, Law and Finance, Takeover Regulation, as well as Economic Analysis of Law.

[00:02:18] In October, 2019, he published the paper Cloud Crypto Land that discusses inherent obstacles in the legal system that prevent Blockchain Systems and Smart Contracts from being truly useful. He is a self-described no-coiner. 

[00:02:31] Andrew Steinwold is a managing partner of an NFT focused crypto fund named Sfermion he also publishes content about the NFT world via his newsletter and podcast, both named Zima Red. He thinks NFTs are eating the world. 

[00:02:46] Maria Shen is a partner on the investment team at Electric Capital, a well-known crypto fund and NFTs are part of their scope of investment. She is the author of the well followed Crypto Developer Report. She previously worked on a startup in the manufacturing space and developed search tech and Microsoft. 

[00:03:03] So welcome back to the show, Edmund. And welcome Maria and Andrew. 

[00:03:06]So we normally have three routes, opening statements, host questions and audience questions. After the release of this recording, we'll also have a post-debate poll and that compared with the pre- debate poll will determine the winner. Whoever moves more minds, percentage wise will be the winner. Okay. So we'll have an opening statement by Edmund first because you were for the position. So Edmund, please explain to us why you think NFTs are dumb. And maybe throw in your definition of NFTs for those that are new to the space. 

[00:03:35] Edmund: [00:03:35] Thank you, Richard. And thank you, Maria, for taking time for this and Andrew. That's great to have a debate on this. 

[00:03:41]So I agreed to take this position, that NFTs, are dumb but I feel like I need to qualify this statement first just to be clear what I mean when I say, admittedly provocatively that they are dumb. So first I don't really have a general answer to the question, what people assign value to and why.

[00:04:03] Some people say something is dumb because it's kind of irrational. But as soon as you dig a bit deeper, this is really typically a meaningless and often a circular statement. There is no objective, rational reason to assign value to any piece of art or anything at all, really. Because stuff has value just because we enjoy it and weather and why we enjoy something is really, it's an empirical, a psychological question.

[00:04:33] The question that cannot in principle, I believe be answered with logic alone. So what we do know, however, and that is an economic fact is that scarcity is a necessary, certainly an insufficient, but certainly a necessary condition for anything to have any value. Air and water are very useful and necessary, but they don't have value because they're not scarce.

[00:05:03] So when I say that, NFTs are dumb, I really mean two different things. The first, element here is mainly a psychological point. Since the beginning of time, really people have assigned value to symbolic items. 

[00:05:20]If we look at today, let's say I'm in a restaurant, in some happy future where restaurants are open again, and let's say Lindsay Lohan comes to the same restaurant.

[00:05:33] She might come to my table, or might come to her table and ask her for an autograph on my napkin let's say. And so this act, if she agrees to that and she signs my napkin, this act would be, I think, recognized by almost everyone as not an act of vandalism, but quite the opposite. She would have turned a worthless object.

[00:05:58] Let's say a used paper napkin or something like that into a collector's item. Some people I presume at least would be prepared to pay some money for that napkin. Some people might say, this is now a valuable object in itself. Now why is that? That is really hard to answer. Certainly hard to answer for me, but there's some interesting psychological research about this question.

[00:06:26] And this research suggests that for some reason, humans are psychologically hardwired to believe or perhaps just to feel. That there's a process, a strange process by which Lindsay signing my napkin includes or brings with it, a transfer of some personal quality of Lindsay to the napkin. this is sometimes referred to as centralism.

[00:06:57] There's this transfer that we somehow feel happened. Now this transfer, according to psychological research, we feel that transfer not to be permanent. They are fun experiments about that. So if you ask a bunch of people, what one of my used t-shirts is worth the answer will certainly be nothing, right?

[00:07:20] My used t-shirts are worth absolutely nothing, but if you ask them what the value is of a t-shirt that was worn by George Clooney. They will say, well, it's worth something now. It's now a collectors item. People may pay a lot of money for that. And then if you ask them the same, t-shirt worn by George Clooney.

[00:07:40] But now this t-shirt has been washed and is now sold. If you ask people, what is it worth now? And then they say it's worth like much less. So the process of washing it somehow takes away the essence of George Clooney. And therefore the t-shirt is worthless. Now I don't have anything to say about the rationality of that, because as I've said, I don't think this is a question that is open to discussion, open to debate based on rationality.

[00:08:09] But I think most people will agree in my Lindsay Lohan example that if I were to try and sell a photocopy of the signed napkin, that photocopy wouldn't be worth anything. So how do NFTs fit in on this point? Well, a creation, any creation, no matter how pretty or masterful or somehow, exceptional, it is can not have value unless it is scarce.

[00:08:39]Now the laws of physics enforce this scarcity with any physical object. You cannot clone, you cannot duplicate any physical object, but the principles of computer science and information theory mean that there is simply no meaning to original in relation to digital art or indeed any information, the general theory of relativity.

[00:09:07] Is certainly masterful and genius and valuable, but the information itself cannot be scarce once it's published. And therefore it's not valuable as such as information. 

[00:09:18]Also the reason why as a legal principle, you cannot have property rights in pure information. Now, what we do with NFTs in a way is to artificially and arbitrarily assigned to one person, the right to say that they have the original, even though we know that this has absolutely no real meaning in relation to a digital assets.

[00:09:43]Now, I just think it's very hard to imagine that this fact alone, our arbitrary assignment of some metaphorical, original ownership over digital assets, will lead to the same level of enjoyment, or even to an, to a comparable level of enjoyment among the owners of such an NFT that we observe in people buying physical objects.

[00:10:09] And I think that is due to a psychological reality of life in any event, if it really were enough to be just called the owner of a digital or regional, or of some information with no other additional features, then if that were enough to trigger this emotional reaction, then. The real question is why haven't we seen this before?

[00:10:33] There's absolutely no need for blockchain technology to achieve this, you know, arbitrary assignment by the creator to a specific person that he or she is the owner of that digital artwork or digital document or whatever it may be. Yet in decades that, that this would have been possible. Nobody seems to have done it. So this to me is a strong indication that there is something broken in the kind of fundamental understanding of how this works. And this leads me to my second point. 

[00:11:07] NFTs as kind of more traditional assets. Here, my point is mainly a legal one. You can, of course tie all sorts of promises to any number of items or actions. I can say that anyone with the right arm bands can enter the VIP area of my club or that I will give you an access code, and only people with an access code can download, I dunno, some artwork or perhaps one of my articles for free. But here, the code or the wristband, are not valuable in their own, right?

[00:11:39] They are only valuable because they are used as an access token. The value is in the promise, the promise to let somebody download something, or to enter the VIP area or whatever it may be. No matter the token, no matter that kind of technological solution you use, you need to trust the person who makes the promise and the NFT.

[00:12:03] The token has the value that the promise has. NFTs phase two problems here, I think first where they are valuable standings, for some promise, where they are an evidence, for some promise, they can be and are valuable as the promise, but there are simply aren't needed for making it. Any number of solutions could be used to achieve the exact same aim. So let's not talk more about NFTs than we talked about the value of an Excel sheet to record people on my VIP list. 

[00:12:39] Second it's sometimes said that NFTs give us the possibility to transfer the IP underlying the artwork. But the reality is that this cannot be done meaningfully as a matter of law. So you can do this, but the result would be the same as just using emails or fax or whatever else, paper to transfer those IP rights.

[00:13:02] So again, the problem here is that NFTs simply don't bring anything to the party. So to conclude, I don't say all NFTs are dumb. I'm just saying that they are dumb in the sense that where they are not dumb, they aren't needed for what we use them for. And from what I can see in the market, and I know Andrew knows infinitely more about this than I do.

[00:13:26]I believe they're mainly used as objects for speculation, not based on the enjoyment intrinsic enjoyment, in relation to the NFT itself. But based on the expectation that someone, someone else at some point in the future will pay even more for them, then you paid for it. And that I think is the problem.

[00:13:50] And that I think signifies a certain expectation gap between people who believe in NFTs as valuable and the people who actually spend money on them.

[00:14:02] Richard: [00:14:02] Okay. Great. Thanks Edmund. So, gosh, you made so many points. It's really hard to keep up and summarize. I think Andrew had his hands full. So Andrew, let's hear your opening statement. 

[00:14:14] Andrew: [00:14:14] Cool. Yeah. So first of all, I just want to briefly touch upon what is an NFT, just for those who don't know. I'm sure everyone listening probably knows, but just in case, so an NFT is a non-fungible token. What that means is essentially just say unique digital asset and. Basically the difference between a fungible item and a non-fungible item, a fungible item is something that's completely interchangeable. So like a dollar or Bitcoin. My dollar is the same as your dollar. And my Bitcoin is same as your Bitcoin. Doesn't matter who, whose is whose, but for a non-fungible good, which is a unique good. Like no one in the world has my exact computer. Other people have MacBook pros, but no one has my exact one. So that is a potentially a non-fungible good. And so that, that's what non fungible tokens are. 

[00:14:54] So yet Edmund hit upon a lot of points there. I would say the one that I want to tackle from the get-go is probably talking about how right now, he's saying that NFTs are mostly used for speculative purposes. And I would say that from January until today, we see a lot of speculation happening in the market. So I would say in this short period of time, that is pretty accurate. There's a lot of people out there that are looking for it to make a buck, and they're not really using NFTs for their intended purposes.

[00:15:24] I'd say the vast majority of users today. But I've been in the market since 2019 NFT markets since 2019 full-time. And from that period on, the trade volumes are very, very minimal and people were in my opinion, using NFTs for their intended purposes. So if you're a collector  let's say you like to collect rare coins or something like that.

[00:15:42] What you do is you collect those coins, you enjoy the process of collection, you connect with other people that like rare coins and you guys bond over that because you guys can talk about, you know, I have a coin from ancient Rome or whatever, right. And so that was happening in the energy markets collectors were collecting their crypto kitties or whatever they are they're into and connected with other people that are fanatical.

[00:16:00] And, and then that was it. And then if you look at the, kind of the, gaming asset space, so yeah. Gaming space more broadly, let's say Axie Infinity, which is like a Pokemon, like game in the NFT world. So people would collect their axies and they would battle them. And there's a big leaderboard.

[00:16:14] So you can see your ranking and it's like a competition, it's a game. And so people are using NFTs for their intended purposes in that arena for gaming. And if you look at virtual worlds where NFTs are used to, have ownership over the piece of land where you can build something. So, you can look at the virtual worlds of Cryptovoxels, the Central Ansonia space, Sandbox, et cetera.

[00:16:33] People were buying pieces of land and building homes, building galleries, building, storefronts, building all sorts of cool stuff. And, those platforms themselves are quite social because you see other people building, you can go walk over to them, talk to them. And I think in that instance, definitely people are using NFTs for their intended purpose, which is to, be creative, build some cool stuff and, meet some cool people in these worlds and just have a good time.

[00:16:54] And then if you look at crypto art or art, NFT art people were definitely using art for the various intended purpose, which is just  enjoyment. So I don't think that people were buying art necessarily to speculate, especially back in the past couple of years, people would just like a piece of art and like a style and, vibe with an artist story and they would purchase that piece of art.

[00:17:15] And so, in that case, again, NFTs were used completely for their intended purpose. So, I don't want to say, Edmund is totally incorrect. I think that he's, 95% incorrect on that part. But now because of this current, cycle where we're in, where things are getting a little bit excited and people are really ante, I think that, people are looking to make a quick buck, but once this ends, once this speculative cycle ends and this could be tomorrow, it could be three years from now.

[00:17:38] I have no idea. It's going to go back to people using NFTs for intended purpose and the big reason why. And if these are so important, in my opinion, Is really all about property rights. I understand Edmund thinks that, property rights are not possible, in this world, in the digital world for some reason, but I have to disagree.

[00:17:54] I think blockchain solves the issue of property rights because they give users true ownership over their goods. So let's say I have, I don't know, some Axew creatures or a piece of art or whatever. I have some NFTs in my crypto wallet and suddenly, maybe I tweet something bad about the artist to say, Hey, I hate Beeple or whatever, and maybe I have some of Beeple's pieces.

[00:18:13] And so Beeple can't go and delete all my stuff from my wallet. Like I truly own that on those goods. And I've total rights over those assets. It's like we have property rights in the physical world. We should have property rights in the digital world. Right. And if I'm saying, like, let's say I'm on Fortnite, which is a big video game and I buy some Fortnite Skins and maybe I say Fortnite sucks on Twitter.

[00:18:35] Maybe the developers, they see that they say, Hey, you know what? Andrew is talking mad smack about us. And we're going to go into his account and delete all this stuff because screw him. Right. And so that's not possible in the world of NFTs that is very possible in the world of today. The internet that we know of today, which is a very kind of centralized, kind of command economy, communist style system.

[00:18:54] And so I do think that NFTs are extremely, extremely important for our future. And they're kind of flipping the current paradigm of the internet on its head, where a lot of these platforms today are very, very value extractive of their users. No users don't actually get anything from using these platforms. And now suddenly they're kind of flipping at where it's value added up to the users so that, if I buy some Axew Pokemon creatures. I stopped playing that game and other people start playing the game. It can becomes very popular. Then in theory, the assets could increase the value.

[00:19:24] And then in, in that sense, I have skin in the game. I'm actually getting almost paid to play this game. Now that should be the intention. It shouldn't be speculation on the assets. It should be, you truly enjoy the NFT and you truly enjoy the reason the intended purpose of NFTs. So it's gaming, it's gaming. If it's collecting, it's talking to other collectors in the experience of collecting and so on, so forth. So now that those are my rebuttals to a few of Edmund's points.

[00:19:47] Richard: [00:19:47] Okay. Sounds good. So let me just quickly summarize some of the points that both of you have raised. I feel that two things can be true at once. So this idea of digital ownership can have become more popular as a result of younger generation, just having totally different preference from older generations. Maybe people are being trapped in doors through COVID and just crave some kind of relationship with other human beings through non-physical means. And this is just the perfect storm for this increasing sentiment for longing of digital ownership. Right? So that's the first thing that could be true. 

[00:20:24] But the second thing that could be true is that there is also just not a good understanding for what exactly you are owning. So are you actually getting the IP through an NFT transaction? Do you truly have an immutable access to the artwork you're purchasing? This is a question that we'll be raising later. There's a viral tweet going around about how, in your example, Andrew, about people deleting his artwork. The Christie's NFT that was previously sold for $69 million actually pointed to some kind of URL instead of the hash to the artwork. So that means theoretically whoever hosts that URL could actually delete. So anyway, the bottom line is I think two things could be true at once. Number one is people do want some kind of digital ownership in this sort of vague sense.

[00:21:14] And number two is that, however, there's not a good understanding for exactly what is being purchased here. And maybe it's a matter of not actually getting the IP. Maybe it's a matter of not actually having immutable access to whatever goods you are purchasing there. Maria feel free to chime in here as well.

[00:21:31]Maria: [00:21:31] Digital Value and Assignment of OwnershipOkay. Yeah. Two things I wanted to dig into that I thought were super interesting questions. So the first is like this idea that value derives from scarcity and physical goods are by the laws of physics scarce versus digital goods are in some ways replicable.

[00:21:47]I think this is true to some extent, but we do currently assign value to digital goods today in the sense that Google is worth more than like mariashan.com, right. Which is not even a website that exists, I think, but there are millions of websites, but some are worth more than others and

[00:22:02]I'm curious. How do you think about, digital value today and then a corollary to that question is   genuinely what are other ways to assign digital ownership? I, I think it's a reality at this point that we do live in a largely digital world.

[00:22:16] And, we do need some way of assigning ownership or, kind of parsing the information that we have. And so, Edmund brought up this idea that we can assign ownership through a spreadsheet,  which I feel like was rather tongue in cheek. So I'm, curious. What are some of the other ways besides NFTs besides using blockchain that might actually be a feasible way of assigning ownership in a truly immutable way where it can't be, tampered with, and it can't be contended with later on.

[00:22:46]Edmund: [00:22:46] Thank you, Maria. And thank you, Andrew. I think I need to be clearer on what I mean by scarcity, right? So your example with, you know, websites having different value, this is not in the technical sense. A case of something not being scarce and still having value. The scarcity here is that Google has property rights over the usage of that name.

[00:23:15] Over its service. Over the domain registration. And so this is valuable because it's scarce. Right. And so yes, all of these websites are, worth much more than edmundschuster.com of course. Right. But that is not despite them being kind of available to everyone and plentiful, but because there are property rights in relation to that, and we've recognized that, centuries ago, right.

[00:23:44] We realized that the problem with information is that, it is non-exclusive by nature. So if we want to give people a way to treat information in a similar way that they treat other proprietary items, we need to change our legal system. And we've done that, right. We've said, your invention ultimately is just information.

[00:24:12] You will know how to, build a steam engine or something like that. And so your natural reaction is to keep it secret. You don't want others to know because once others know it, it's no longer scarce. It's no longer exclusive to you. So what can we do? And what we did was we created a system of intellectual property rights.

[00:24:33]We granted patents and we said, okay, here we will enforce your quasi ownership over these ideas, even though they are just ideas and non-exclusive in nature and we will punish other people for using it without permission. And so we made them scars by enactment of law, and then it worked right. And I don't share, Andrew's point that we live in a crazy, communist, world. And I'm not sure I'm convinced by the examples. Right? 

[00:25:07]So if you look at, the gaming example, right? So you have a Fortnite Skin, for instance. Now it's true that if they don't like you, they might exclude you from the game. But that is also true if you have an NFT of whatever dating game item you have, it is true whenever the usage of the item is part of something that somebody else created. It's part of a game. And if it's part of the game, then of course they can just exclude the NFT version of your skin or whatever. They can't delete the NFT itself, depending on the protocol you use and the smart contract design. But they also can't delete the screenshot you took, off your Fortnite Skin or whatever it is of any other in-game item, but they can change. They can remove the enjoyment of it. 

[00:26:04] And that kind of goes back to my previous point that I don't believe that people enjoy the NFTs for the NFTs own characteristic, but only for their use for its usage in some other environment. And that environment will depend on other people's promises. Now, Maria said that I must have been broking with the spreadsheets and in a way I'm not right, because if I'm. If I drew a cat for you and, I mint the NFT and I transfer the NFT. To you, the question then is what exactly am I transferring to you?

[00:26:45] And it could be the IP, right? In which case I could also do that via email, or it could be a more kind of metered way of giving this to you. And that would only mean that by minting and transferring the NFT to you, I somehow embrace my own conviction that I, as an artist, want to treat you as if you had the one and only original copy of that item. And if that is what I want to do, then I could do that in an Excel spreadsheet just as well. Right. Because all that would be necessary for your enjoyment is my, the creators opinion about, you being the owner. 

[00:27:29]Richard: [00:27:29] Thank you. So, let's latch onto that transfer of property point a little bit with an NFT purchase. Something like NBA top shot, something like Beeple, right? What exactly from an NFT bull perspective, Andrew, what exactly is the buyer getting access to there?

[00:27:51] Andrew: [00:27:51] Yeah. So you're able to, buy the, buy NBA top shot or a Beeple piece of your purchasing, a token that exists on a certain blockchain and that states that you have ownership over that asset. And so the metadata, which is like the image and all the other properties of the asset that can either be stored on chain or off chain. And if it's on chain, that means exists entirely on the blockchain and it exists entirely on that token. So it's like, basically the argument of like, don't be evil versus can't be evil. So that ends in instance, no matter what happens to the company, that issue that NFT or Beeple or whatever, it's an exist on the blockchain, as long as that blockchain still around forever.

[00:28:27] Okay. On the other hand, if your image is, existing off-chain, then there could be an issue where, okay, the servers go down and then the image can be blank. And there could be all sorts of issues with that, because then you're relying on a centralized third party to host all that metadata.

[00:28:43] And I kind of like in this issue that we have today with blockchain scalability as a whole. Right now, blockchains are not super scalable and I'm at least decentralized, blockchains are not super scalable. And people are always saying like blockchain will ever be adopted because it's so slow. Which in its current form today, it is quite slow. But it's going to take some time for, to ask their technology will improve. And I kind of like in that too, right now, most images and most mitigate it is hosted off chain because it's too expensive to put it on the blockchain. Right. And so that's a big issue.

[00:29:13] That's a big, point of weakness for NFTs, but what's going to happen is over time, just as technology improves, we're going to build decentralized, infrastructure. And so some of that decentralized hosting infrastructure could be like Filecoin or something like that Filecoin. It's basically, it a decentralized server. And in theory, you can host, all your game, you could host your on your metadata, but again, it's kind of mitigating that risk. I have my NFT exists on the blockchain and they're like own it. But what about meta data? Where does it point to? The centralized server on Amazon or in the future is going to be okay with this decentralized server where we're, who's secure in our kind of rights and properties, and owns the asset. So I will agree that today there is a lot of danger, in certain assets that we're buying don't be evil, can't be evil. And that's really what this is all about.

[00:30:02]Edmund: [00:30:02] Sorry. Can I just one quick comment on the hosting point?

[00:30:07] Right. So, I think, you can't just distinguish hosting on and off chain because even if you have a decentralized file storage system, like the one built around file coin. This is not a guarantee of the availability of the file itself. It just means that the file itself could be available if people choose to make it available, which is a function of the incentives.

[00:30:35] And in fact, there are a lot of decentralized storage solutions out there, including file coin where a large number of files that are theoretically available are simply not available because nobody sees any value in hosting them. You still need somebody who puts it on and makes it available, makes the bandwidth of it available. And so on which in itself is a function of the utility. And I find to be honest, this is the point where I don't always fully understand the critics because in a way. I mean, whether this file is stored centrally or in a decentralized system, if it's really about enjoyment of the artwork itself, I mean, you just store it on your own computer.

[00:31:24] Right. So I don't see that as a problem. It's not like you would lose access to the actual artwork by having somebody withdrawal the hosting. Right. So what this is about is, then being able to quickly transfer that NFT with the link to the original file, even though we know that originality doesn't mean anything there, it could be just put back on based on your copy. That's just a feature of the digital world. That copies are exactly the same. Not just more or less the same, like with a photocopy.

[00:32:02] Richard: [00:32:02] Yeah, actually Edmund raises a good point, Andrew. So if let's say I am a big fan of NBA, I want to purchase a copy of the top shot. Why would I not just download a clip of that? I can pay for it too. Right. But why do I care about whether the NBA top shot video clip is stored in a decentralized, censorship resistant manner?

[00:32:26] This might be a bad example because this is actually one place where the videos are not censorship resistant, but, suppose in the NFT world where people do want that. Why can't I just download the video and save it on my computer for my own enjoyment?

[00:32:38] Andrew: [00:32:38] I think it just goes back basically to human nature and how humans like to collect stuff. I know it's  a very simple argument, but I really do think that a lot of what we're seeing today is driven by this human nature. The human, kind of desire to be a part of a community, the human desire to collect stuff, the human desire to connect to something larger than themselves, like, community and whatnot.

[00:32:59] And so I think that sure people can go and save their gifts of NBA top shot and save them on their computer. Totally fine. But I think it really comes down to ownership and the need and wants for people to collect. And I think that that's just been a part of, people since the dawn time. And I feel like it's one step above just collecting that clip. It's like, okay, well I can put the clip and save it on my computer, or I can click the NFT, which is  within this community of other people recognized as something that's more, it's better. It's kind of improved over just kind of cutting that, single copy or gift or something like that. And so that's, how I would  

[00:33:37] Maria: [00:33:37] I actually think that this, question of, how are NFTs owned? What is the origin of the file? Where's the file stored is actually a very critical question. I think one of the, key things that need to be standardized in the industry, and certainly a whole today in the inactive space.

[00:33:53] And I think actually the reason why ownership is so important is that, or kind of establishing the foundation of ownership is so important is that it's a foundation, right? Once you have a rock solid bedrock of, Hey, I own this thing. Then the real unlock for NFTs, is what you can do based on that primitive, based on the primitive that you can own a digital asset.

[00:34:17] Now you can, enjoy it on your own, certainly, but you can also lend it out. You can also fractionalize it. And you can share ownership with other people. You can earn interest on it in different ways. You can, issue insurance against it. You can get loans against it. I mean, I think there are a million productive things just like we can do in the physical world.

[00:34:39] Once you own a house, right? Once you own a house, you can refinance it. You can use it as collateral from our loans. You can have fractional ownership of the house. I think the ownership aspect is you know, I that's got both, both of your questions, Edmund and Andrew. I think they, I believe how you own something in the NFT space, is incredibly important and a hole right now that we kind of need to fix and we need to have standards in place. I kind of agree with Andrew in that this is a fixable issue, but then I also, disagree. I guess with both of you that  this is fundamentally like, not that big of a problem. I think it's a primitive that we need to agree on in order to unleash the actual power that I think I'm pleased with the actual transformative change that has been bringing.

[00:35:26] Edmund: [00:35:26] if I may, I just want to make clear, I mean, I, kind of agree with what Andrew said about the NBA token. And so my, example here would be, Reddit right on Reddit by, commenting a lot or something like that. I don't know, really, you get different badges and your name is kind of in a different color, bigger, or whatever. And so you could say, that's really easy, you know, I just, I can always just look up the HTML code and then I can write my name in whatever color I want and look at it and enjoy it.

[00:35:56] And people would say, well, that's not the same because you haven't earned it. You don't. Own the right to, write your name in red because, you haven't done what is necessary within that community to earn this right. And that, I think that that's a fair point. It's just that you simply do not need NFTs for that.

[00:36:18] Right? I mean, I think that is a clear technical point that everything that the NBA, top shot or whatever it is called, is doing, can easily be done and has been done in the past without any problems in a centralized manner. And of course, all the enjoyment that you get from your NFT is. Subject to the owners of the IP, letting you do that.

[00:36:46] And of course they kind of promise that they will continue to let you do that, but this is not, you know, this is a promise you need to trust ultimately, and to Maria's point on ownership, I think we need, we just need to be clear on what we mean by digital ownership. If we're talking about ownership of the IP rights.

[00:37:08] Absolutely true. Right. But that is not a problem that is solved by NFTs because it's not a problem that exists without the NFT. We can, so if I draw something and it's really, really pretty, which is fairly unlikely, but let's say I drew something fantastic and you want it. I can sell it to you with, or without an NFT.

[00:37:29] Now just think about what that means. Typically you will buy the IP rights in my drawing or whatever it is because you want to use it. And how do you use it? Let's say I have a fantastic cat drawing and you like it. You buy it from me. And then the cat magazine wants to put it on its front cover. You can now give it to this cat magazine and say, yes, I allow you to print it on your cover.

[00:38:01] Now what you've just done is an off-chain encumbrance of the IP. And that off-chain encumbrance will exist under the terms of the agreement, which is an off-chain agreement, or at least can be an off- chain agreement, whether or not you keep the token. So if you sell it on, if you sell on the token, you will simply not be able to transfer the unencumbered property rights.

[00:38:29] What that means is that for all its trustlessness, the blockchain system build on top of something that by its legal nature, depends on trust between the transferee and the transferer just doesn't add anything. It would add something. If we had a change in the law, that says the IP rights of a minted artwork are unseverably tied to the NFT and therefore, the only way how you can legally give, for instance, a license off that NFT is by publicly encumbering, your NFT, but that is simply not the law, right? And so if you want that from an NFT, what you need to do is you need to advocate for a fairly fundamental change of our intellectual property legislation. 

[00:39:23] Maria: [00:39:23] I feel like that is actually a super interesting central question around, you know, the motion is, are NFTs dumb, but I feel like  the debate has gravitated toward this question of are NFTs necessary.  Andrew, I'd be really curious to hear given, I guess Edmund's argument is that given that we do have a legal system today that supports intellectual property and we have intellectual property rights.

[00:39:47] Why do we need something outside of the legal system? Why do we have the system to try to enforce, digital property ownership, given that we also have a parallel legal system?

[00:39:58] Andrew: [00:39:58] Okay. Yes. So on the intellectual property rights side, when you buy a painting from Banksy or like buy gear from Nike or whatever, you can't just suddenly use their IP for commercial profit. That it wouldn't make sense for you to be able to buy and then suddenly be able to use that NFT promise type of commercial activity.

[00:40:16] So, so that kind of argument doesn't make sense in my opinion. I don't think that, NFTs should necessarily come with, IP rights and I must create a one-side to would've been totally fine, but really for me, it just goes back to like, yeah, so like are NFTs necessary? If we were living in a world where we were spending very, very minimal, minimal amounts of time on the internet.

[00:40:36] Now let's say, I don't know, maximum one hour a day, like everyone spends one hour a day on the internet and that's it. Then I would say maybe NFTs are not necessary. But the fact is people today are spending seven to eight hours and this, this, and this state seven, eight hours per day on online, whether that's, you know, phone, computer, whatever TV, or, smart TV, whatever.

[00:40:54]People are always connected online. And right now, the internet is one big communist system where we have no control over any of our data, any of our property, any of our, we just have no rights. So we're living in, some world that is a command economy where we just, we can't control anything.

[00:41:11] It's it. We're up to the platform owners know,  Google, Facebook, et cetera. We're up to these. People's kind of decision-making we have zero inputs. And, it's been shown multiple times that a lot of these major companies cannot be trusted. And so it makes sense. Okay. If we're going to be living inside, living figuratively, you know, spending most of our time, meaning like most of our waking hours online, if we're going to be in that world where, let's say seven, eight hours per day, and that number is increasing by the way, I'm sure.

[00:41:36]In a couple years is gonna be 10 hours per day and 11 hours per day. Well, who knows what, but from that world, I want to be in that world that has rights. I don't want to be in some command and control economy where I can't choose to say what I mean. And also I can't actually own my stuff. Now. I would hate a world where I work all day. And then at the end of the day, I, I get nothing for it. And that's kind of the internet that we live in today. And so NFTs and blockchain more broadly. What they do is they make this system. So it's not sure we, you know, we have lost today and they're very active in, in many countries, but, eventually those laws to break down.

[00:42:09] And this system of blockchain and decentralization means that it goes back to the argument again of don't be evil versus can't be evil, you know, like it's, it's not possible to cheat a blockchain based system because of the way it's currently designed and, what you're doing vice basically saying, okay, you know, we don't really need NFTs is basically giving up by saying, okay, like trust these guys. I'm sure that these big tech companies will totally listen to us and like, be super friendly with us when in reality that hasn't been the case and going forward, there's no way they're going to know become more friendly. They're going to only want to control more. And so, I think NFTs are absolutely necessary in the world that we're heading towards, which is a world that's very intertwined with internet.

[00:42:47]Edmund: [00:42:47] My reaction to that would be that your argument is one in favor of decentralized file storage and decentralized infrastructure. I think the NFT part of that is an unnecessary addition. It's not necessary to have NFTs to live in the world you just described. Apart from that, I really do have questions about the desirability of that world, because there will certainly be people who want a non-censorable, permanent lawless in a way storage system to save pictures of,  child pornography, dangerous stuff, stuff that is harmful and ultimately. 

[00:43:35] The way storage works is that there must be somebody who physically owns, the storage system that is used for that. And they will always be subject to the law. So you cannot, unless you think about the world, uh, take utopia without governments, which I personally would not see as a desirable end state. There is simply no way to completely get rid of what you may call censorship. What other people may call the rule of law.

[00:44:07] Andrew: [00:44:07] Yeah. Yeah. So, in that instance, if there was a race, so let's, let's use the example of the central line, which is a virtual land platform with go in, you can buy pieces of land that I have to use and kind of build anything you want. So that platform is actually governed by a Dao and which is basically key members of the community. And they decide if someone who starts putting up no Nazi symbols or whatever on the pieces of land, they can actually decide to erase those types of symbols. And so I think that, that is a major issue of, people putting child porn up there or not the symbols or whatever. But people are, developing solutions and keep in mind that this, all this technology is like, five years old.

[00:44:43] So it's super, super, super early days. And so people are, people understand the problems that are, and they're working towards solutions. But if we have this talk in five years from now, I'm sure people are going to be like, Oh, well, there's a solution for this problem with here. And there's a solution for this problem there.

[00:44:56] And, right now people are already discovering, solutions that work. So if this example it's a Dao, the people that exist in this community that know this community, and they're kind of enforcing the rule of law, there without  a government. And I think that that's really exciting. And yes, I guess in some senses it's a quasi government, but I think that it's important that the people within that kind of system have ownership over this world and ownership over kind of what's happening. And, I think that's kind of a more equitable system, but, yeah, I I'd say that there are issues, but people are solving, people are working towards, you know, ways to solve those problems.  

[00:45:30] Edmund: [00:45:30] I think it's a principal problem that cannot be solved because there will always be questions where people disagree on. Right. Disagree on the right solution, disagree on whether Nazi symbols should be outlawed. Right. I grew up in a country where they are outlawed. I know that you live in a country where they aren't. Right.

[00:45:48]Richard: [00:45:48] So, I do think there's some kind of slippery slope here. Once the platform gets to censor certain types of messages or signals, maybe then they can start imposing their worldview, which might not be the majority view, as a result. But in any case, I, it feel like a lot of the response to some of the issues we're facing today with NFTs is somehow in the future, there will be solutions, even though it's not quite clear as to what the solutions are. So I'd like to point out that Marc Andreessen one of the pioneers and visionaries of the internet, right?

[00:46:22] Which also did not receive much love in its early days. He actually went on clubhouse two weeks ago. And he said this, the value of digital goods being emotion of feeling a sense of tribal identity self-expression once we have our material needs taken care of is when we start to think about what it means to express ourselves.

[00:46:41] So. In this quote, Mark didn't specifically say why NFT itself is necessary. I think it's more talking about just a feeling of digital ownership and belonging to a digital tribe. But I know for a fact that his fund is bullish on NFTs and they are actively investing in this space, including OpenSea the NFT platform. Edmund this question's for you. Why do you think folks with these futurist credentials, such as Marc Andreessen, and why do you think they're missing the mark?

[00:47:09]Edmund: [00:47:09] I mean, I wouldn't say that he's necessarily, missing the mark on saying that there is some emotional component at play and or desire to have some emotional connection with digital content, right? I wouldn't argue with that. I would simply say that, specifically, looking at NFTs, they are unlikely to create this feeling of, this emotional connection to a specific artwork. I just don't believe that to be true. And I think if you look at the recent valuations of those assets, this is a strong indication that this can only be, speculation at play at the moment. This is not the intrinsic enjoyment of those, paintings or whatever that may be.

[00:48:00]It must be something else because if it were the case that these digital art works somehow elicits the type of emotional response that makes them so valuable, we would have seen the usage of other technology that has been around for a long time, to distribute them. Right. We just didn't see that. And I think we didn't see that because people haven't seen that as an investment object.  My personal prediction is that before long, there will be SEC action on some of the NFT stuff, because people do treat them and regard them as investment objects.

[00:48:39] Richard: [00:48:39] Okay. I'll just follow up by saying that so far, what I've been hearing is that obviously there's a lot of interest in this space and some of the more quote, unquote, legitimate visionaries have also voted with their feet by putting capital down into the space. But it sounds like a lot of the development in digital ownership and the initiation of platforms to satisfy that need, doesn't necessarily require the facilitation of a blockchain or whatever this NFT technology hinges upon. 

[00:49:15]But is it not possible, to allude to Andrew's earlier point that human beings are herd animals, we enjoy being social. We enjoy being identified with certain tribe. So let's just say that there's a collective delusion. There's just this collective fable, right? It's like people believe in astrology and say, I mean, even Christianity, to be honest, right? So a lot of the stories aren't necessarily scientifically sound and a lot of the principles are actually even considered morally repugnant by some of today's progressives.

[00:49:53] But in any case, the bottom line is, is it not possible, there is this party where you sort of can only join if you believe in a certain thing. And, that fundamental thing doesn't necessarily have to be true at the end of the day. And the value being assigned to being a part of that party is just the fact that there are many people in that party.

[00:50:15] So this is what I tweeted about a semi credible story that got enough people into the door that people want to stay inside the party room. So Edmund, the question is for you. So, regardless of whether the NFT technology itself is truly revolutionary and, provides the decentralization, whether it's necessary or not, and whether it actually achieves that goal or not, is it not possible that people are enjoying this just because they can find like-minded people?

[00:50:43]Edmund: [00:50:43] No, absolutely. I mean, here's what I hear. I created a new, slightly pinkish paper with unicorns printed all over them, and I say it's really valuable. And when people say, when people challenge me and say, come, come on. I mean, nobody needs this nonsense. Then I say in response, but I could print some really valuable contract on that paper.

[00:51:10] And then the contract is valuable. And therefore this proofs the value of my idea with the paper and the answer is of course, no, you're just adding something that adds no value to something that is intrinsically valuable and we already know that. And so I think that is the description that there is at least how I view all the NFT projects that I've seen, where I can understand where the value proposition comes from.

[00:51:38]If we then take this one step further as you, I believe just did, and also did in your tweet, I think what we end up with, is a detachment of the artwork from the actual crypto assets. And we just say, as you kind of implied now, in order to be part of the party, we need to participate in this game. And the interesting aspect I think is that this collapses then to cryptocurrencies, right?

[00:52:07] This is exactly what cryptocurrencies are. This is Bitcoin. There is nothing underlying it. We all know that this is. Just, you know, these are just strings of numbers, but we still choose collectively. I mean, not me personally, but a lot of people to assign value to this intrinsically worthless assets, because in a way we observed how grown up intelligent people look at a piece of paper that has 10 pounds or $10 printed on it by some specific party. And we treat it as if it's a voucher for getting a back rub or, I dunno, entry to the cinema. Right. And so in that way, yes, you're absolutely right. It's possible that we treat NFTs or related crypto assets as valuable in their own right detached from anything underlying it. Even after we understand that there is nothing underlying it. So in that sense, we don't even need a semi credible story about the underlying. We just need a semi credible story about the participation in the system. But then my point is, well,  NFTs are not a good way of doing that, right. We have Bitcoin, which is fungible. Relatively fungible anyway, and a million other cryptocurrencies. That is all that we would achieve here.

[00:53:25] Maria: [00:53:26] Yeah. I, think we've gotten to a really interesting point in the argument where we're saying, let's set aside for a second how much technologically NFTs makes sense or why we need NFTs plus the legal system. And just, settle on this idea of a free market effectively, right? If there is demand and there is supply, and then it meets in the middle to create some value, then that value is legitimate. And we need to recognize that value. I feel like that's a good place to leave it. And I wanted to bring it to an earlier point Edmund that you've made that I thought was really interesting.

[00:53:58] You said that it would be great if we could have a file system in order for files to kind of live on forever, right. If we could have a well incentivized decentralized file system, which obviously a lot of teams right now are trying to build whether that's Arweave or Filecoin, or other incentive systems on top of IPFS. 

[00:54:19] But putting that aside, let's say we had a perfect incentivized decentralized file system and we could store files there. What you were saying is that, that would be a great way for files to kind of live on forever. And I feel like that was just one step. Like you're just like one tiny, tiny step to NFTs at that point, because I'm curious.

[00:54:38] I mean, once we have, let's say in this theoretical, great technological world where we have that system, everyone has kind of files stored in the system. Wouldn't we want to assign ownership to who owns these files. Like wouldn't I want to say, "Hey, I'm Maria. I want to own this file." I want to make it known that I own this file of a cat and I'm not going to necessarily host it myself, right? It's in an incentivized system. I'm going to host it with someone else. I'm going to pay them something. But I want to mark in a digital way that I own this cat. And it probably needs to be outside of the IP system as well, because this is a purely decentralized system, which means to global system, which means that IP rules across the world might be different.

[00:55:21] And so I want some sort of unified digital way of marking ownership. That's outside of the IP system that this, bring it back to this point of like a shared delusion that everyone in this society, everyone in this bubble, can believe. Don't you think once we have a file system, that's decentralized and we want to preserve these files, that there actually is a need for us to assign ownership to it. And are there other ways that you can think of that maybe a better way of assigning ownership?

[00:55:49]Edmund: [00:55:49] I think it's a small step for an NFT person. It's a huge leap for a lawyer, right? So we have here a situation where ultimately what you're saying is the fact that something is stored globally and in a decentralized fashion. So the first point you make a one point you make is that this would be, would have to be outside the IP system. Which I don't think it's true. Right. We have a lot of IP that is widely available globally. It's not currently stored in a decentralized way, but effectively it's the same because you have copies of it all over the place. So for the user, there is no difference between this being centralized on one hand.

[00:56:38]But centralized in a way that everyone, like so many people host it, that it is always available and it being decentralized and therefore not stored centrally in principle, right? Even technologically, that's not really accurate because even if it's something is stored in a decentralized file system, it is still stored on somebody's hard drive.

[00:56:58]Somebody needs to pay for the hardware that will keep the zeros and ones. Right. But in any event, the question that I would come back to, and this is just probably my legal training speaking, the question is what do you mean by ownership? And in a way, for me, what you say by referring to digital ownership, it's a bit like me saying, you know, I took a mental picture of the Mona Lisa when I went to Paris and now I kind of feel like it's mine. Now, could there be a mass delusion where people say, yes, Edmund really has taken this mental picture. And so let's all say it's his. Well, I don't see that happening. I don't see any reason for that.

[00:57:41] And the value of anything you own is that you have something that other people do not have. And if you have a globally available file, that means that there's just information out there, information available to everyone. Information in the typical example, an artwork that can be enjoyed in the very same way by every single person on the planet.

[00:58:09] I think the principle or the concept of ownership simply doesn't mix with this idea with information as such. And so I think that also correlates with something that Andrew mentioned earlier, when he said, I can buy a pair of Nike's and I'm not allowed to use any of the IP. That's absolutely true.

[00:58:30] I couldn't agree more. But I can wear them. Right. I can go and play basketball, wearing those shoes. try selling a picture of Nike to somebody else. They will say, well, okay, what do I get? Do I get the rights on the picture? No. Do they get the rights to the IP, to the swoosh logo? No. So what do I get? Well, you can say it's yours.

[00:58:56] And so I think it's a very hard value proposition and, that the mass delusion that would be required to assign value to this form of ownership, which is meaningless by design. It's just a bridge too far, I believe, to be credible. Now as an object for speculation, I believe in the short term, it makes sense, right?

[00:59:21]As we have seen with cryptocurrencies, right? This can work, but just don't see. The story that you would have to tell that at the same time, detaches to the value of the NFT from any right. From any exclusionary rights that is attached to it and still distinguishes it from just native crypto assets, such as, Bitcoin. I think it's a very thin line and very hard to see how this will work.

[00:59:51] Maria: [00:59:51] Hmm. But couldn't I just make a copy of Nike sneakers too. Or like I can repaint the Mona Lisa, right. And make it almost an exact replica in the physical world as well.

[01:00:02] Edmund: [01:00:02] I mean, I can't make an exact replica of Mona Lisa, but I agree that some people can. And, I think that brings us back to the original question. Namely, what is special about physical object? And it kind of, for me, it brings. It really brings me back to the t-shirt worn by George Clooney or the napkin that is signed. Of course I can replicate this.

[01:00:29] And in a way it's you could say it's absurd that somebody would assign more value to a t-shirt that has been worn by whoever then to a brand new t-shirt. But yet we do it right. We do it because we are probably hardwired to do so I think, that absent, any example where this has ever worked in the history of humanity, where it is not connected to physical item. It is very hard to see how this works.

[01:01:01] And so I would encourage also people who are interested in this stuff, right. Go online and try to buy a Picasso. You may say, well, I can't afford it. It really depends on what you mean. They are. Picasso's right. Prince of Picasso's where these are not replicas. It's just Picasso was very productive. Right. And in his productivity, he also created a lot of prints. They were all limited edition prints. But if you make a lot of limited edition prints and the limitation on each edition isn't that, that small, then you end up with a lot of artworks, right. And some of them are fairly affordable.

[01:01:38] Right. And so this kind of for me, and it shows you have these replications, or if Picasso actually touched the canvas, it's worth a lot. If Picasso created the print, but then had it printed 200 times. Then each print is probably worth a bit less. If you take a scan of that print and print, it it's worth more or less the value of the paper plus a bit. Right. And so I think the NFT will always be in the last of these camps.

[01:02:11] Andrew: [01:02:11] Well, I feel like NFTs are just like, in this example, it being a digital piece of artwork, let's say Picasso was alive today and he was making physical prints and also digital prints through NFTs. I feel like those are both equally valuable, cause it's still from the same creator. It just like the medium is different so we can make a painting. You can make a statue, we can make a, an NFT. It's all just like, it's all art. It's just like the medium is different.  So can you explain how NFTs are just not as worthwhile comparative to the other pieces? 

[01:02:38] Edmund: [01:02:38] Absolutely. I mean, there's one specific difference and that specific difference is that the print. So if you limit the addition of your print, you commit to that, and then you destroy the original, right? So you destroy the print plate. If you don't destroy the print plate and you just keep printing, then these principles are nothing, right?

[01:03:00] So you enforced the scarcity again, by reference to the laws of physics. You make sure that first of all, each print is slightly different because the print plate changes a tiny bit. So if you compare the first print with the last print, you will see that, things like minor details are worn out by the printing process and so on. And then you destroy it to ensure that these prints that you have created have some value. They have some value because they are unique. They cannot be replicated one-to-one. And that is just a feature that cannot exist in relation to digital assets. Because if I look at your hard drive, I can see the zeros and ones of your specific artwork, and I can copy each zero in each one, and nobody would be able to distinguish.

[01:03:50] And in fact, you know, it's not even, if you wanted to kind of translate this to the digital world by saying, but you know, the electrons who led to the zero and to this one are kind of the original ones. That's also not true because of the way our file systems work. Files get copied all over the place all the time. So I think there is a fundamental difference. 

[01:04:12] Andrew: [01:04:12] Also Picasso could make a hundred prints physically, right? And then he could destroy those plates and yeah, those prints are, you know, unique one through 100, et cetera, but he could also make a hundred through 100 NFTs and have T prints of that same piece of art. And then he could lock the contract address up. So he's not able to ever make more of that series left. Sure. He could take another picture of it and they make a new series. But within that explicit, you can do the same with, you know, you can take a picture of his physical prints and then make new prints of that. Right. So it's the same kind of idea. It's just the medium is different. 

[01:04:44] Edmund: [01:04:44] It's not the same idea because the printing plate cannot be destroyed in the digital world. Everyone who has the NFT has a perfect, not just an approximate, a perfect copy of the print plate. That is it's impossible to remove that feature because that is what digital assets, what digital files are all about. So there's just no equivalent to destroying the print plate.

[01:05:10] Andrew: [01:05:10] Yeah. but it's, it's kind of grasping. It's like, you know, to human eye, no, one's gonna be able to tell if you take a picture, a perfect, a perfect picture of the Mona Lisa and make prints of that. People are not going to be able to tell it's pretty, you know, unless you've got a microscope out and whatever, that's kind of like what you're grasping at here, which seems, pretty, a flimsy argument. 

[01:05:29] Edmund: [01:05:29] It is a flimsy argument because it's an argument that is based on the empirics of our psychological understanding as it has built up over centuries. Right. And that brings me just back to the, to the initial point. I don't want to argue, I don't want to discuss the rationality of that. But that is what we do, right. That is how we view it. We don't have a good reason to distinguish between, an original and a near perfect copy. But as soon as we learn that something is just a copy. We're no longer interested in it. I've heard interesting stories about, master forgers who had their works put in all sorts of museums. And then once we learned that this is just a forgery nobody's interested anymore now, is that rational? 

[01:06:19] As I've said, I think it's just not open to an argument about rationality, but it's a fact. And I think it's a fact that is connected with our intuitive understanding of something being special and unique in in the very essence of every physical object. The idea that somebody has touched something, right? The idea that somebody has actually with his or her own hands, manipulated an object. Things like that do play a role. I just think, and this is, I agree that on this particular point, this is an empirical question, right?

[01:06:58]I don't think that this is replicable in the digital world. And I think the strongest argument supporting this view that it's not replicable is simply that you could have done this before. You could have said as an artist, from my perspective, the one and only true digital copy of this digital artwork is the one that I sent via email to Andrew on Monday. Right. And that would make you the original owner in the eyes of the artist and nothing else can be achieved by NFTs.

[01:07:35]Richard: [01:07:35] Okay. So, I really think at this point, this, debate has sort of evolved into a bit like, is this will provoke backlash, but is astrology relevant? There are communities of people that believe that just because they are Libras, they're born in certain months of the year, they, some certain sorts of fate await them and they need to mate with certain types of people and they're very enthusiastic about it. This has therapeutic effects on their lives. And it just seems that this isn't just about the older generation, the younger generation subscribed to it as well. And it just seems that this comes back to this semi credible story that gets the party going sort of mentality. So maybe let's pivot very quickly.

[01:08:21] We do have somebody that wanted to ask about money laundering for NFT. This did come up on Twitter quite a bit. 

[01:08:29]Edmund: [01:08:29] I will just quickly answer your question on money laundering. So, yes. NFTs are very, very good for money laundering as is any object with zero marginal production cost and, a non objective value. So that is true for physical art as it is for digital art or digital assets of any sort really. And we've seen that with the dumbest of ICO's right, where I have the suspicion that these were not done because the people didn't understand what they were doing, but perhaps they went done so that nobody except for, the people with whom you want to loan the money would ever buy these coins.

[01:09:09] And the same could be true for NFTs. Right. If I have some money to launder, I can draw some, picture. And then by my own picture, at a crazy valuation, and then I will have created a kind of semi credible to use your expression, origin of funds.

[01:09:24] Andrew: [01:09:24] Can I touch upon the money laundering point really quickly? So, yeah, so the FBI in the United States calls Bitcoin essentially or any, sort of blockchain based assets, anyone who's laundering money within that. They call, they call them prosecution futures. Because everything is totally, it's like the worst thing that money launder on, because you can see everything that's happening on the network. So if you're trading a Bitcoin for something else, or if you're trading this NFT art for something else, everything is completely transparent and trackable. So that's why they call them prosecution futures. Because all the silk road drug dealers, a lot of them are getting prosecuted and caught in the past year or so. 

[01:09:59] So yes, it did take some time for them to get caught because that was happening like 2012, 2013, et cetera. But it does catch up with you. Cause everything's totally transparent. If you're going to money, launder, then you've got to go physically, you have to use physical goods. You, you gotta use art, diamonds, gold money, cash. Because obviously that, that cannot be traced. No one has any idea. If you're, you're driving with a piece of art in the back of your car or have, you know, a whole bunch of stack of money in your sock, like no one has any idea. 

[01:10:24] So, I think that the money laundering argument, I'm sure, I'm sure there's some people laundering money today just within crypto related products. Just like how they're doing already in physical goods. But again, those people will get caught. It's a matter of time because everything is completely transparent.

[01:10:40]Richard: [01:10:40] Okay, great. Hey, so we're actually at time. So Andrew, would you like to make your closing remark.  Go ahead and synthesize your thoughts, mentioned how you've shifted your position, if any, what you've picked up from the other side, or how much more of a believer you are in NFT as a result of this debate. Go ahead. 

[01:10:58] Andrew: [01:10:58] Yeah. Okay. So I would say, I think Edmund had some really great arguments. I think he did a really incredible job, debating a lot of points. But no, I mean, obviously my position on NFTs has not really changed. I still believe that they are absolutely necessary for us to kind of continue forward in the world that we're heading towards, which is a digital one.

[01:11:15] And if we're going to be spending all the time, money, and effort that we do online today. It makes sense that we have rights in that world. I don't want to live in a system that is essentially controlled by people, whether they'd be good actors or bad actors, because one day maybe they're good today, but maybe tomorrow they're bad. So I'd rather, go by the motto of, can't be evil versus don't be evil. So that's where I stand. And  I just want to say, again, Edmund thank you so much for doing this and Maria huge thank you for you as well. And Richard, thank you so much for organizing this. I really appreciate it.

[01:11:45]Richard: [01:11:45] No problem. Edmund, go ahead.

[01:11:46]Edmund: [01:11:46] My closing remarks, I still don't see how this works, how this can ever work without us correlating ownership, the digital ownership in a non-legal sense with ownership of something of value in the legal sense, while at the same time distinguishing NFTs from just the naked cryptocurrency that we all know and some of us love. So on that basis, I don't see the utility of these assets. Now, I think  what I have to concede is the implicit point made by both Andrew and Maria, that sometimes, and also by you, that sometimes people just do crazy stuff they continue doing it, and there's nothing rational people can do about it. And I'm happy to concede this point. And I think maybe as a, as an outcome of the debate, we can stick to what you suggested that NFTs are the equivalent of astrology, just on the blockchain. 

[01:12:50]Richard: [01:12:50] Maria, if you want to say a few things, go ahead.

[01:12:52] Maria: [01:12:52] No, I just wanted to say this was such a great debate. Edmund and Andrew, you both did fantastic. And Richard, this was so much fun. Thank you for inviting me to co-host. 

[01:13:00]Edmund: [01:13:00] Thanks Richard for organizing this, this was fun.

[01:13:03]Richard: [01:13:03] Great. Thank you. so listeners, we'd love to hear from you and have you join the debate via Twitter, definitely vote in the post debate poll, also feel free to join the conversation with your comments on Twitter. We look forward to seeing you in future episodes of the Blockchain Debate Podcast. consensus optional, proof of thought required. 

[01:13:16] Edmund: [01:13:16] Thank you. Bye.

[01:13:17]   Richard: [01:13:18] Thanks again to Edmund and Andrew for coming on the show and thanks to Maria for co-hosting. After hosting this debate, I came to a new realization. Humans are social animals, looking for belonging and community. Even if NFT doesn't give them the same kind of uniqueness and exclusive access, as you'd expect from a physical piece of art, it gives people a special feeling. And that special feeling backed by a semi credible story could be valuable. The same way with astrology and religion. 

[01:13:49] What was your takeaway from the debate? Don't forget to vote in our post-debate  Twitter poll. This will be live for a few days after the release of this episode and feel free to say hi or post feedback for our show on Twitter.

[01:13:59] If you like the show, don't hesitate to give us five stars on iTunes, or wherever you listen to this.

[01:14:04] And be sure to check out our other episodes with a variety of debate topics. Bitcoin's store of value status, the legitimacy of smart contracts, DeFi, POW versus POS and so on. Thanks for joining us on the debate today. I'm your host Richard Yan. And my Twitter is @gentso09. Our show's Twitter is @blockdebate. See you at our next debate.