Non-fungible tokens

Non-fungible tokens (NFTs) first came to my attention just a couple years ago. Apparently, anything could be an NFT. Per Investopedia:

“Non-fungible tokens (NFTs) are assets that have been tokenized via a blockchain. They are assigned unique identification codes and metadata that distinguish them from other tokens.

“NFTs can be traded and exchanged for money, cryptocurrencies, or other NFTs—it all depends on the value the market and owners have placed on them. For instance, you could use an exchange to create a token for an image of a banana. Some people might pay millions for the NFT, while others might think it worthless.

“Cryptocurrencies are tokens as well; however, the key difference is that two cryptocurrencies from the same blockchain are interchangeable—they are fungible. Two NFTs from the same blockchain can look identical, but they are not interchangeable.”

Most of the NFTs I’ve seen have been digital images. Their utility depends on The Greater Fool Theory of investing. Again, per Investopedia:

“The greater fool theory argues that prices go up because people are able to sell overpriced securities to a “greater fool,” whether or not they are overvalued. That is, of course, until there are no greater fools left.”

Apparently, the universe of fools is large and expanding, and there’s no shortage of people willing to exploit them. Now, there’s a secondary market in lawsuits filed by those left holding the bag when the NFT bubble bursts:

“NFTs are used to transform works of art and other digital collectibles into one-of-a-kind, verifiable assets that can be traded via blockchains.

“Prices soared in 2021, with an NFT of Twitter founder Jack Dorsey’s first ever tweet selling for $2.9 million, a video clip of LeBron James making a slam dunk fetching over $200,000 and a “Nyan Cat” GIF going for $600,000. The first virtual NFT artwork to sell at a major auction house, “Everydays: The First 5000 Days” by a digital artist who goes by “Beeple,” fetched a record $69 million at Sotheby’s rival, Christie’s.

“The Bored Ape Yacht Club, a collection of 10,000 NFTs hosted on the Ethereum blockchain, launched in April 2021. The images feature cartoon apes with computer-generated features and accessories, such as gold fur, laser eyes, “hip hop clothes,” a “sushi chef” headband or a sailor hat.

“The lawsuit against their creator also names several other companies involved in promoting the NFTs, such as sportswear giant Adidas, claiming they conspired in a “vast scheme” to artificially inflate prices.

“Crypto payments company MoonPay is meanwhile also accused of market manipulation. The lawsuit says that Yuga Labs used MoonPay to “discreetly pay their celebrity cohorts” and make interest in the NFTs “appear to be organic” rather than the result of a paid promotion.”

Nothing new about this. See, e.g., Tulip Mania in the 17th century Netherlands. It’s remarkable to me that in the third decade of the 21st century, the supply of fools is as robust as ever.

NFT lawsuits