Oddbean

What happens if someone puts child porn into Bitcoin as “NFTs”, commonly known as “Inscriptions” ? Will you still use Bitcoin? Will countries globally adopt it ? I think when this happens, it will completely destroy Bitcoin’s chances of becoming a global reserve currency or an internet currency. Earlier this year, NFTs were integrated into Bitcoin blocks, using ordinal theory and byte strings to track and display unique digital assets. Perhaps an adaptation of neoclassical economist theory based on ranks. Let’s look at this from a few angle 1. From an NFT perspective 2. From a traditional art perspective 3. From money laundering perspective 4. Based on madness of the crowd 5. Bitcoin’s core value as a 'Decentralized and Borderless Monetary System', and its potential as medium of exchange (Note : I wrote a chunk of this piece a few months back and it’s just been sitting around so I thought I’ll share it) 1. From an NFT perspective… Digital art has been around for a long time but there was never value added to it until NFTs (Non-Fungible Tokens) in recent years. The original goal of NFTs lies in the concept of artifacts, which imbues them with a sense of authenticity. This aspect of NFTs enabled greater discoverability for artists on a global scale. It helped a lot of struggling artists by bringing their art into the digital space - but it also put them in a vulnerable position of wider fraud. As rapid as the adoption of NFTs were in the mainstream market, the original meaning of NFT was undermined by the pump-and-dump schemes, driving crowds to seek quick profits, resulting in proliferation of deceptive tactics. NFTs also reproduced variations of similar art, reducing scarcity and authenticity. What was considered precious became a zoo of images. 2. From a traditional art perspective… Art is expensive for various reasons, but often boils down to 2 things : a) scarcity b) reputation Leonardo da Vinci's Salvator Mundi holds the record for the priciest painting, sold at $450.3 million in 2017. The art market is robust, with an estimated $67.8 billion in sales and a rapid 31% increase from pre-pandemic time in 2019 (source: Art Basel and UBS Global Art report). High-value art also offers several financial advantages a) Estate planning - boosts real estate valuation b) Diversified investments - asset, revenue source through sales/rentals. c) Offshore trusts protect from taxes, creditors, and legal claims. d) Tax-free method to pass down wealth through generations However, art lacks liquidity and has challenges with valuations. 3. From a money laundering perspective… This is common in the traditional art world. They buy and store the art in secure warehouses called freeports in Switzerland, Norway, and Singapore, where it can go unnoticed for years. There is no registration system, no tracking. When it comes to laundering, buyers tend to inflate the price through multiple rounds of purchases. The Geneva freeport alone is believed to hold $100-billion worth of art. In comparison to traditional art, the pump and dump of alt coin NFTs strike a similar resemblance to money laundering. But with a lack of scarcity, it loses authentic value compared to traditional art. Bitcoin’s NFT provides that scarcity (apparently…) as its indexed, and (fortunately or unfortunately) it is also traceable 4. Based on the madness of the crowd… While the benefits of NFTs are notable, this turned into an avaricious frenzy impacting the posterity of the creative world. The same goes for any shitcoin. When it comes to gambling, confidence is amplified and optimism becomes irrational. Yet, as history would show time and again, none of this is unusual or rare. Mass hysteria, speculative bubbles, and irrational behavior is written on many annals. The South Sea Company - in the 16th century, gained trading rights for African slaves in South America getting public to invest, but with false information, insider trading, and political bribery - led to a burst bubble. The bubble reached its peak in 1720 before collapsing, earning the name "South Sea Bubble." During the Dutch Golden Age - 17th century - tulip obsession led to high demands. Speculative trading / inflated prices became rampant as people were trying to make quick profits - unfortunately it led to inflated prices, people could not afford it and investors who purchased on credit went bust. 18th century in France - Scotsman John Law established the Mississippi Company to trade goods between France and North America. Driven by FOMO, people from diverse backgrounds invested their fortunes in the company, causing share prices to soar. To expand financial options, Law introduced unbacked paper money and bonds and got the Kingdom of France to adopt it. Apparently Law also contributed to the formation of central banks. But as expected the bubble burst, causing the scheme to collapse and panic ensued. Share prices plummeted and you know the rest. In recent times, we’ve seen many variations of this. Enron used a Special Purpose Vehicle SPV to artificially boost stock prices whenever a new product was introduced, deceiving customers into believing the product was gaining popularity. However, the scheme was exposed, resulting in both CEOs imprisoned. One of the CEOs died of a heart attack before the sentencing. Another popular one Charles Ponzi created a scheme of getting new investors to pay off a high interest to the old investors which seemingly appeared profitable. Elizabeth Holmes raised an investment of almost $1B in total on a false promise of a technology that never existed. Sam Bankman Fried who used assets based on his own creation backed by nothing, raised loans and duped investors. The list goes on.. If we have learnt anything from history, pump and dump always comes crashing in the end. NFTs or call it Inscriptions if it sounds nicer - unfortunately reek of this trait To think everybody in the world have genuine hopes and do not want NFTs price on Bitcoin to hike up like mad - is total bullshit. 5. A 'Decentralized and Borderless Monetary System', and its potential as medium of exchange To establish Bitcoin as a global currency and as native internet currency, it is important to focus on its practical applications and primary functions as a financial asset. Why ? Allen Farringtons “green eggs and hams” describes this perfectly “the flows of money have to be facilitating the pricing of capital and not just the movement of money for it” The harsh reality is, at present Bitcoin is also highly reliant on speculative yield. While it has peer-to-peer and trustless properties, and I love it to the bits, its functionality as a mainstream form of money falls short. Pump-and-dump schemes are not as obvious because it is costly, but it has happened several times before and can happen again. For Bitcoin-focused startups, survival is heavily contingent on the widespread Bitcoin adoption, which creates challenges for entrepreneurs in this space to survive the current times - the today and now. If banks today were to carry Bitcoin only, with no money circulation, the yield would heavily rely on market sentiment, amplifying delusions and the risk of pump-and-dump scenarios. So how do we fix this ? We need to create monetary value for Bitcoin. And how do we do that ? One way to achieve this is through regular buying and selling activities not anything that further promoted pump and dump. Let’s keep it real. With $30 trillion spent on global imports and exports last year, there are numerous potential benefits and possibilities to explore. Reaching out to more accepting countries like Vietnam, one of the major import partners of the US (besides China), and integrating Bitcoin into trade could foster its broader acceptance. This approach would benefit the thousands of companies involved in import-export activities by offering a native internet currency, eliminating the need for currency exchanges , multiple payment gateways, and bypassing the hurdles posed by traditional banks, particularly for small businesses worldwide. Similar possibilities can work for many other businesses and countries globally. The concentration of trade power among dominant players has often disadvantaged small businesses, leading to closures and loss of competitiveness. By decentralizing supply chains and enabling global participation in buying and selling, we can also empower businesses globally and create more economic opportunities. Additionally, there are countries facing high inflation rates and struggle with their own currency - Venezuela, Sudan, Turkey, Ethiopia and Zimbabwe. Another case is the Republic of Georgia, which faces geopolitical challenges between Russia and Western politics, where potatoes are preferred as a medium of trade over the national currency, the Lari. Yes, potatoes. Bitcoin entrepreneurs can focus on driving user adoption for Bitcoin as a pricing tool, and this is not just limited to import and export scenarios. For example, El Zonte in El Salvador and Boracay in the Philippines show an increasing use of Bitcoin as a medium of exchange targeted to specific locations. I read about Maderei in Portugal taking on this path today. A simple solution in promoting Bitcoin adoption is to enabling wallets that support both Bitcoin and fiat currencies, making Bitcoin more accessible and familiar to users. Cash App's successful ‘Bitcoin market’ during the 2023 Bitcoin conference in Miami, Florida highlights the potential for nationwide expansion. These efforts collectively improve the familiarity and usability of Bitcoin among people globally. With the restlessness of BRICS vs US currency, Bitcoin might also play a role in the future as peacekeeper for global currency. But pump and dump via NFTs, or NFTs as a singular industry alone consuming block size instead of enabling various financial usage, is the not the answer in our goal towards Bitcoin as global adoption. . If you see a value in NFT, or want to remain authentic to its original intent, create one of those chains alongside Bitcoin, but not on chain. Further hampering its chances with the possibility of child porn or alike that would deter any sensible human from using Bitcoin ever again. NFT makes Bitcoin highly risky for global adoption and it should not be ok. I know there have been a lot of inscriptions on Assange as well, those that got him in prison and those that people take to heart to be a permanent reminder that no government can remove. I have been a long Assange and Snowden fan, and I want them to be free as much as you do. Nostr can do the same in making the articles permanent and untraceable. There can always be a wikilink relay. Heck, why don’t we have this yet? The Bitcoiners community is a highly global conscious community and would not not hesitate to step forward and increase the buzz on pushing forth an open and free society. When people put pressure on the government, the government has to deliver what the people want. Fighting for freedom is never easy. But NFT on Bitcoin is not it