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Comment by douglaswlance | Hacker News Reader

A Michael Jordan rookie card is worth tens to hundreds of thousands of dollars depending on grade. If I print a Michael Jordan rookie card onto cardstock, it will be worth basically nothing. The reason that something is valuable to collectors is the social contract between creator and recipient.

The value in NFTs exists by that same social contract. You can't ignore that relationship when criticizing them, otherwise you're attacking a strawman. Try attacking a steelman argument for NFTs, and you may actually convince some proponents.

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> The reason that something is valuable to collectors is the social contract between creator and recipient.

No, it’s because the valuable object is physically scarce, and exists as a material historical artifact independent of any ledger. NFTs have never and will never have these attributes.

You can't ignore this reality when advocating for them, otherwise you're peddling a fantasy.

> independent of any ledger

This seems an arbitrary restriction to me. Why must something be independent of a ledger to have value?

This is a property that NFTs can never have, so claiming that NFTs are equivalent to physical collectibles is certainly false.

If you are saying that something requires a ledger entry to have value, then you are simply proving that it has no intrinsic value.

From https://en.wikipedia.org/wiki/Intrinsic_theory_of_value :

> An intrinsic theory of value (also called theory of objective value) is any theory of value in economics which holds that the value of an object, good or service, is intrinsic, meaning that it can be estimated using objective measures.

If you use "what someone last paid for it" as a measure of intrinsic value, then they have intrinsic value.

> If you use "what someone last paid for it" as a measure of intrinsic value, then they have intrinsic value.

Clearly this doesn’t meet the requirements of an objective measure.

A single tulip bulb was purchased for 2500 florins in 1636. That represents 10 years of a skilled laborers earnings at the time.

If you believe that the price an NFT sold for on a ledger represents its intrinsic value, then you must also believe that a tulip bulb’s intrinsic value was equivalent to 10 years of skilled labor.

Obviously this is absurd, and history proved it so.

> objective measure

How would a bunch of subjective meatbags be able to come up with an objective measure?

If everyone agreed that X is an objective measure, it could still be wrong.

Give me a concrete example of what you think is an objective measure.

Sorry - I edited my comment while you were posting this. Feel free to reply to my full comment, since I address the consequences of this line of reasoning there.

Thank you for the response! And sorry for taking so long with mine.

I agree that the example you provided is a more "objective" one, more grounded in physical reality - a tulip costing the same as a 10 years' salary.

> Obviously this is absurd, and history proved it so.

Had the tulips kept their scarcity, and had social interest remained at such high levels, couldn't it have kept its value?

An example I have is gold: people have been hoarding and valuing it for millennia. Sure, it occasionally crashes, but so do a lot of assets. Is it in a constant bubble? Is it overvalued? What is the intrinsic value of gold? It is not very useful in itself, but it is in demand and scarce, as opposed to fiat currency, which is in free fall.

http://pricedingold.com/us-dollar/

I argue that value comes from what people attribute it to be. The markets are an aggregation of such value decisions from many people.

It seems like you are in full agreement with me that the way we value NFTs is exactly equivalent to the valuing of Tulips during the bubble of 1637.

> Had the tulips kept their scarcity,

They did.

> and had social interest remained at such high levels, couldn't it have kept its value?

You mean if the tulip bubble had never burst would we still be paying 10 years of a skilled persons salary for one? Sure.

It’s worth noting that the courts ultimately held the debts owed for Tulip futures to be ‘gambling debts’…

> You mean if the tulip bubble had never burst? Sure.

Exactly. There is no guarantee the NFT bubble will burst! People might keep enjoying these, and investing a significant portion of their lives.

Yes, just like with the Tulip Bubble! It might never have burst, and then we would never have needed NFTs because we’d still be trading tulips.

But I believe everything should be valued this way, including:

- stocks and real estate: people use "objective" metrics like discounting cash flow. But the time preference for discounting cash is subjective.

- precious metals and commodities: there are "objective" stock-to-flow metrics, but they all assume people will still desire precious metals, commodities, and the resulting products. This desire is subjective.

Everything is valued this way. All purchases are based on what people think the thing is worth.

Discounted cash flows, etc, are all ways people use to come to their ‘subjective’ conclusions.

It ends up being circular though - yes, human judgement is ultimately part of the equation, but that judgment end up being based on a prediction of future value, and often we can use understanding of markets or the intrinsic value of commodities to industrial processes to assess this.

Many people are arguing that the value of NFTs is in fact not based on an intrinsic value to future processes, and is purely a subjective bubble.

Arguing that all valuations have a component of human judgement and that people may just continue to like NFTs is not a counterargument.

A counterargument would be to explain how that will continue to be valuable independent of the subjective component.

Generally people seem to dodge this, and instead just say ‘everything is subjective’, i.e. the postmodern view.

And therefore... nothing has intrinsic value?

Only you and other NFT advocates seem to be drawing that conclusion.

I am not an NFT advocate.[1] But I do own Bitcoin, and I subscribe to the subjective theory of value.[2]

> It ends up being circular though - yes, human judgement is ultimately part of the equation

Well, I am glad you admit humans are who ultimately set prices on markets.

> but that judgment end up being based on a prediction of future value, and often we can use understanding of markets or the intrinsic value of commodities to industrial processes to assess this.

I interpret this as a more informed subjective value, but this discussion did not quite convince me there exists an intrinsic value.

The fact that you need X kg of flour to create Y kg of bread might be useful in knowing when the market prices for flour and bread are "consistent" - you call this "intrinsic value of commodities to industrial processes" - but I am of the opinion that demand prevails: the relative demand for bread and flour is what sets their relative price, and it can vary for reasons completely different from the industrial processes considered for an "intrinsic value".

Nevertheless, I thank you for going in circles with me, I feel like I have learned something, and I hope I expressed my own ideas clearly enough.

I will not follow this discussion for long; but if you feel like continuing, my e-mail is on my website which is on my profile. [3]

[1] - https://news.ycombinator.com/item?id=29663787

[2] - https://en.wikipedia.org/wiki/Subjective_theory_of_value

[3] - https://news.ycombinator.com/user?id=danuker

> and it can vary for reasons completely different from the industrial processes considered for an "intrinsic value".

Nobody disputes that bubbles and sentiment exist.

What is in dispute is the idea that they are the only things that determines value.

It’s ok that you are not convinced. Once you go down the postmodern rabbithole of believing that everthing is subjective, there is no way out through dialog.

>No, it’s because the valuable object is physically scarce, and exists as a material historical artifact independent of any ledger. NFTs have never and will never have these attributes.

Collectible cards are scarce by design. Manufacturers print millions every year. They could reproduce the same card for decades. They could also print them on demand. Whenever someone orders the card, print it for them, and ship it out. It is artificial scarcity.

Collectible cards must be graded and registered to be valuable. An unregistered Michael Jordan rookie card would be assumed to be a fake. They exist in a ledger.

The social contract between collectors and manufacturers is what creates the value. The manufacturer agrees to generate verifiable scarcity, and the collector agrees to purchase seemingly worthless cardboard and ink at a markup.

A card that people want to collect in your example is scarce because it cannot be re-created with the same properties that the ones that already exist have; all one could do is create a replica.

NFTs are artificial scarcity ahead of time with the purpose of emulating ETFs, hidden behind a fake 'new' concept of a digital deed (which is what a blockchain already is, no need for NFTs for that). Digital 'goods' however, are always replicas. There is no 'true' version. All they are is an attempt at monetary manipulation of people during the time in which they aren't as well-known and regulated as ETFs are.

A Michael Jordan rookie card is rare because only a certain number of them were physically made. An NFT is rare because we decide it is rare (the physical constraints are not the same as the rookie card), I don't know if they are exactly the same. The minted copy here is exactly the same, pixel by pixel, to the original.

I also find that when we start applying analogies to something as an argument we are detaching from the reality of what we have. It is meant to simplify, and appeal to people who are not familiar with the topic at hand. No matter how wrong the analogy is (or right) we are inherently shifting the conversations to something different. I know this analogy is trying to say an NFT is scarce, but it IS quite different than a Michael Jordan rookie card in its execution, management, and a lot of the things that make a Michael Jordan rookie card worth hundreds of thousands of dollars.

Funny part is that I don't think the actual image even has to be copied. What is on the blockchain is just metadata, including a URL (or multiple) where the actual image is stored. You can just copy the metadata.

A MJ rookie card is worth a lot because it’s MJ, the best ball player of all time.

How is a NFT drawn by a random artist of a random image worth so much?

If we're steelmanning the argument, then I think you'd have to ask what makes an NFT of a digital artwork by a famous digital artist worth so much.

A bubble inflated by people rich from crypto-currencies.

They are less than 1% of all the NfTS with inflated prices. No need to argue about the outliers

It’s sort of the same, but what I don’t get is how things like that rainbow cat and other famous internet pictures are NFTs. I mean, if the picture was around for twenty years before it became a NFT, then how is the NFT the “original”.

Going that line of thought, what happens if two people make the same picture into a NFT?

It depends who the people are.

Anyone can make an NFT of Nyan cat. That doesn't give it value.

If the original creator of Nyan cat creates an NFT of it, and only one NFT, suddenly it has a ton of value.

Clearly people believe it's something more than what you're saying, for some reason. I have no problem with the concept of collectibles and collectors. But "collectibles, but on a blockchain" doesn't warrant the current levels of mania and "entrepreneurial" exploitation.

That social contract is stored off-chain (if at all), and the work itself is stored off-chain. Combined with the fact that you can perfectly duplicate the thing that is stored on the blockchain and I think that all radically reduces the value proposition of NFTs.

This is not a good comparison, because an NFT gives you neither legal ownership nor physical access to the item it is for. For digital items, NFTs don't even provide the actual file.

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