Well... that was quick

As reported by CNN:

The NFT bubble might be bursting already

Non-fungible tokens, or NFTs, are all the rage. But their popularity may have already peaked. Prices of NFTs, the digital certificates that have taken the art and collectibles world by storm this year, have plunged about 70% from their high point in February.

[...]

NFTs have been an investing and pop culture mania for the past few weeks, leading some to wonder if the frenzy is a market bubble fueled by the wealthy and younger traders flush with stimulus money.

As always, I am surprised only that people are surprised.

 

NFTs, for the uninitiated, are non-fungible tokens, essentially digital certificates of authenticity for digital content. Because they're encoded on the blockchain, they can't easily be duplicated or counterfeited, and each is unique, which is appealing to people cursed with a compulsive collecting habit.

They aren't, however, the actual pieces of content that they're linked to; the blockchain is already enormous, and adding the entire piece of a digital work to the chain would be prohibitively expensive. The digital works in question are stored separately, and can be moved, altered, or deleted without altering the NFTs themselves, resulting in a digital certificate of authenticity for something which doesn't exist anymore.

So NFTs aren't actually certificates of ownership in any convention sense. Additionally, the licenses that they encode are almost always specifically worded to exclude any sort of copyright, so someone spending millions of dollars on an NFT can't even sell copies of the thing they've "paid for." In essence, NFTs are an elaborate mechanism for adding bragging rights to what is, effectively, Patreon. 

 

What could possibly go wrong? Apart from the environmental impact of bitcoin mining, of course, which is enormous.

A secondary effect of NFTs' collapsing value might also mean a collapse in the price of Ethereum. Most NFTs are encoded on the Ethereum blockchain, specifically, so a bursting NFT bubble might just burst the Ethereum bubble, too. That would make PC gamers happy, since a burst in the Ethereum mining bubble could mean a quick sell-of of the equipment used to mine that particular cryptocurrency, including tens of thousands of the latest PC graphics cards, which ease both the current supply shortage of those parts, and drive their prices down to something approaching MSRP.

Still... I have to shake my head at the whole thing. What were people thinking?