NFTs

Over a year ago I pointed out the portents for bitcoins to be outlawed by the federal government and replaced by single federal version, a CBDC, due to the power and control this gives government, and the privacy and security of your money that it removes from you. Later, I noted that historical precedent indicates that some forms of underground currencies and/or barter markets would likely arise, and that techies, a number of whom have always relished breaking rules and exceeding boundaries (and committing sophisticated systematized crime) via hacks, and cyberattacks, may contribute to the monetary rebellion this time around.

Non-fungible tokens (NFTs) have experienced a surge in interest recently. These are crypto tokens with unique identification codes that distinguish them from other digital entities and each one is unique; not just as a unit of value but also in the value it carries. This is what sets them apart from ‘fungible’ assets like dollars or bitcoins, wherein each note or coin has the same worth. They are being used as electronic tokens for trading unique collectable assets. So far, the NFT asset trading has been done using a fungible currency, usually a bitcoin, to make payment. Making an electronic market purely in tangible barter would be a great challenge for the software developers, and the market would likely need many participants for much clearing to occur. Because in barter, its much harder to pair-up transactions by finding two combos of assets forming a trade pair, each of which: (1) amount to equitable value, and (2) consist of assets that both parties to the trade are willing to accept as payment.

So far, most of the assets traded with NFTs have been ‘virtual’, but the interest was vigorous. An online artist named Mike Winkelmann who calls himself “Beeple” sold a piece of e-art, a digital collage of all the images he has posted online for the past several years, for $60.25 million in an online Christie’s auction. Digital music, online sports card trades are some other examples of the types of frivolous stuff (as-compared to tangible necessities like food, anyway) that have been NFT-traded so far. But with a mechanism for purchases to take delivery of their purchase added, this ability to trade unique assets with digital tokens can be used to trade physical tangibles. And the blockchain allows it to be done securely and anonymously. Think of people at a traditional auction who make their bids by writing them down on a card that they just hold up, without ever identifying themselves: “Sold to the gentleman in the third row for…”. The first tangibles for NFT-trading would likely include art, real estate, and precious metals, all of which would eliminate frictions in their trades with the blockchain, particularly real estate with its need for trusted third parties like banks and title companies.

NFT trading is new, and it will take some time to see where it goes. Meanwhile, we get to stare-down the most irresponsible fiscal management since Zimbabwe with Biden’s new multi-trillion dollar infrastructure plan, which will create four tax increases worth around $1.8 Tr (!) Smart capital is already beginning to flee the USA; selling has caused the 10-year rate to rally to around 1.72. The era of floored rates (and the fed believing that it can maintain them there) looks to be ending over the next year and a half or so. The border policies and others, all implemented without representatives of the American people being able to vote on any of them, are deepening the internal rifts in both political parties sufficiently that party-splits are becoming possible. Also, keep an eye out for war (Ukraine) that this administration would likely get involved in, followed by more restrictions of the freedoms that have been our natural birthrights until recently. It’s a hard environment to navigate, and a hard time to discern what is reliable news and information.