Moxie Marlinspike: “My first impressions of web3”

Instead of storing the data on-chain, NFTs instead contain a URL that points to the data. What surprised me about the standards was that there’s no hash commitment for the data located at the URL. Looking at many of the NFTs on popular marketplaces being sold for tens, hundreds, or millions of dollars, that URL often just points to some VPS running Apache somewhere. Anyone with access to that machine, anyone who buys that domain name in the future, or anyone who compromises that machine can change the image, title, description, etc for the NFT to whatever they’d like at any time (regardless of whether or not they “own” the token). There’s nothing in the NFT spec that tells you what the image “should” be, or even allows you to confirm whether something is the “correct” image.

So as an experiment, I made an NFT that changes based on who is looking at it, since the web server that serves the image can choose to serve different images based on the IP or User Agent of the requester. For example, it looked one way on OpenSea, another way on Rarible, but when you buy it and view it from your crypto wallet, it will always display as a large 💩 emoji. What you bid on isn’t what you get. There’s nothing unusual about this NFT, it’s how the NFT specifications are built. Many of the highest priced NFTs could turn into 💩 emoji at any time; I just made it explicit.

After a few days, without warning or explanation, the NFT I made was removed from OpenSea (an NFT marketplace):

Moxie Marlinspike

I saw this pointed out elsewhere as well – that a NFT is merely a link to a file, and while the link may be ‘crypto-secured’, the file itself may change at any point in the future and you’d be left holding something else than you originally ‘bought’ – but I think it serves to underline that the whole premise of NFTs is a massive scam. In the flurry of reporting about this latest craze, it’s easy to lose perspective – keep in mind that more people own items in Second Life than own NFTs. The article also explores the poor privacy of the protocols and the increasing centralization around a couple of companies that others use to interact with the blockchain – and recent news about a database outage at OpenSea confirm this covert centralization. This whole system feels like a ticking bomb of speculation and absurdity waiting to burst.

Motherboard: “SpiceDAO Roasted for Spending $3.8 Million on Jodorowsky’s ‘Dune’ Book”

For months now, members of the SpiceDAO—a decentralized autonomous organization dedicated to buying and developing projects based on Jodorowsky’s vision—have been ecstatic about the possibility of buying the pitchbook and finally bringing Jodorowsky’s unfulfilled vision to the public. Jodorowsky, who directed surrealist films such as El Topo and The Holy Mountain, was at one time slated to direct the film adaptation of Dune, but the wildly over-budget project died and the creative work allegedly went on to inspire sci-fi film for decades to come. Jodorowsky’s struggles making Dune were rehashed in the 2013 documentary Jodorowsky’s Dune.

Over the weekend, SpiceDAO reminded the internet that it won the auction in November and had plans to make the book public (to the extent permitted by law) as well as create an original animated limited series inspired by the book to sell to a streaming service and derivative projects from the community. It was quickly and widely ridiculed.

One such derivative project proposed on January 14th featured burning the book to enhance the value of NFTs made from images of its pages. In the group’s forum and DAO, this particular proposal has become a lightning rod for a host of arguments over whether this (and the rest of the project) are legal considering SpiceDAO doesn’t actually own the rights to the contents of the book, just the physical copy.

Edward Ongweso Jr

The initiatives arising from Bitcoin mania are becoming increasingly bizarre and dumb. It’s almost fascinating to watch this level of idiocy unfold – if not for its gigantic carbon footprint. ‘Jodorowsky’s Bible’ is in fact available online for a couple of years, so I’m not sure burning their copy would increase the value of digital scans – it will likely increase the value of the remaining physical copies though.

The Guardian: “The disastrous voyage of Satoshi, the world’s first cryptocurrency cruise ship”

The difficulty in starting a new form of government, said Friedman, was simply a lack of space. All the land on Earth was taken. What they needed was a new frontier, and that frontier was the ocean. Let a thousand nations bloom on the high seas, he proclaimed, with Maoish zeal. He wanted seasteading experiments to start as soon as possible. Within three to six years, he imagined ships being repurposed as floating medical clinics. Within 10 years, he predicted, small communities would be permanently based on platforms out at sea. In a few decades, he hoped there would be floating cities with millions of people pioneering different ways of living together.

---

The final entry on the FAQ page, regarding the possibility of having pets on board, gave a bracing insight into the tension between the idea of freedom and the reality of hundreds of people closely cohabiting on a cruise ship. The answer linked to a separate document, containing a 14-point list of conditions including one that declared no animal should exceed 20lbs in weight, and any barking or loud noises could not last for longer than 10 minutes. If a pet repeatedly disturbed the peace – more than three times a month or five times in a year – it would no longer be allowed to live on board. Any pet related conflict, instructed point 13, shall be resolved in accordance with Section V (F) of the Satoshi Purchase Agreement or Section IV (F) of the Satoshi Master Lease, where applicable. Dogs would only be permitted in balcony cabins, and it was advised that owners buy a specific brand of “porch potty”, a basket of fake grass where your pet could relieve itself. (Pet waste thrown overboard would result in a $200 fine.)

Sophie Elmhirst

This bizarre and unlikely story initially remined me of Jules Verne’s novel L’Île à hélice – mostly the general outline, as I read the book decades ago in my youth and I wouldn’t consider it one of Verne’s best works. But I doubt some of the characters mentioned throughout the piece ever encountered his books. One of them recounts how he used to work 17 hours a day – that doesn’t leave much room for reading, or anything else for that matter. If they had a more diverse education, maybe these people would reflect a bit on planning and consequences before launching such projects doomed to failure. The idea that a pocket of people could exist completely isolated from modern society and without a set of rules regulating the community is utter fantasy. By the end, I was happy to read that the cruise ship they bought survived this whole adventure and is awaiting better days for tourism, whenever the pandemic finally subsides.

Stephen Diehl: “The Intellectual Incoherence of Cryptoassets”

Crypto tokens are not all that dissimilar from equity investments in companies, except the underlying company has no business. This is strictly inferior than assets like stocks which either pay dividends from their revenue, buy back their own stock, or have mergers and acquisition events which introduce new cash in the system to reward investors for holding their stock. There are no fundamentals to any crypto token and it’s discounted future cashflows are all strictly zero and thus its present value must be strictly zero. It does not sell or do anything to bring in external revenue, it exists purely to grow the pool of greater fools to buy the token so that early token holders can be paid out by later token holders. There are no underlying cashflows in the enterprise by which to value the token. It’s effectively as if a penny stock company existed solely to pump, sell, and dump its own penny stock.

---

Setting all these models aside, there are two far more coherent perspectives on the crypto assets that have far more explanatory power for the behavior we see. Crypto assets are the synthesis of a speculative mania and a financial scam built around an opaque technology, phoney populism, with a tolerance for intellectual incoherence at its core. And it is a novel type of a scam, one that we don’t have a precise term of art for. They share the obscured and circular payouts of Ponzi schemes, the cult-like recruiting of multilevel marketing schemes, the ephemeral nature of high-yield investment fraud, and payout mechanics of pyramid schemes but strictly speaking they aren’t exactly like any of the classical scams. They’re something entirely new that we don’t have a word for yet.

Stephen Diehl

Bitcoin: neither currency, nor commodity, vaguely similar to securities for an inexistent company with no business – and thus zero value – or an absurd work of art masquerading as something else… The second paragraph though captures the essence of Bitcoin perfectly.

CNBC: “‘Black Swan’ author Nassim Taleb says bitcoin is worth zero”

The author of “The Black Swan” said in a recent paper that the largest cryptocurrency by market cap has failed to satisfy the notions of it as a currency without government, as a hedge against inflation and as a safe haven investment.

---

Taleb noted that in March 2020 bitcoin dropped further than the stock market and recovered with it upon the massive injection of liquidity. That’s sufficient evidence that it cannot remotely be used as a tail hedge against systemic risk, he said.

He said bitcoin tends to respond to liquidity and that it’s unclear what would happen if the internet experienced even a regional outage, particularly if it took place during a financial collapse.

---

People also conflate the success of bitcoin as a digital currency with the success of bitcoin as a speculative investment. To be a currency would require it to have some stability and usability, Taleb said.

Tanaya Macheel

You don’t say? 😏

Bloomberg: “Sam Altman’s Worldcoin will give Free Crypto for Eyeball Scans”

With Worldcoin, the startup promises a new global digital currency that will launch by giving a share to every single person on earth, according to an online job description. The company aims to help economies transition to cryptocurrencies through a novel approach: a dedicated hardware device ensuring both humanness and uniqueness of everybody signing up, while maintaining their privacy and the overall transparency of a permissionless blockchain.

The device is a silver-colored spherical gizmo the size of a basketball that can be carried around and used to scan people’s irises in order to ascertain their unique identities, Blania said. Worldcoin has already started testing the orb on a small scale in various cities, he said. The Worldcoin currency itself is not yet ready for distribution, so the company is currently offering volunteers other types of digital coins, mostly Bitcoin, in exchange for scanning their eyes and giving feedback on the process.

The company has fewer than 20 prototypes in circulation around the world, Blania said. A prototype orb costs about $5,000 to make, but the price will decline steeply as the company refines the process, he said. Worldcoin will eventually be headquartered in San Francisco, though its employees are currently scattered because of the coronavirus pandemic.

Ellen Huet & Gillian Tan

To be filed under ‘ridiculous ideas from Silicon Valley billionaires’. I had to double-check if I read the size comparison correctly, because carrying around a basketball-sized sphere sounds absurd – and I still think (hope, even!) this is a typing mistake.

Jalopnik: “Tesla loses a Lot of Money selling Cars, but makes it all back on Credits and Bitcoin”

That second point is particularly interesting, as Tesla purchased $1.5 billion worth of BTC, announced that the company would begin accepting BTC as payment for its cars, which drove up the value of BTC, then sold enough BTC to make a hundred million in profit. Strange how that works, eh? Surely nothing untoward going on there. Not at all. DOGE TO THE MOON! #hodlgang

Without the $619 million in credits and BTC sales, Tesla would have actually managed to lose $181 million in Q1. In that time, the company shifted 184,800 3/Y units, and while it didn’t build a single X or S in Q1, it sold 2020 units from previously-built inventory. That means the company lost around $970 per car sold in Q1.

Bradley Brownell

Confirmation on the previous assumptions about Tesla’s reasons for investing in Bitcoin: short-term gains through speculation to offset losses from what should be its main business, electric car manufacturing. A loss of $970 per car sold does not seem very impactful though; compared to Model Y’s price of around $50.000, it represents only a 2% loss, so it should not be hard to overcome with increased efficiency.