*I don’t own any NFTs nor do I have plans to buy into the market. Apart from a broader interest in the mass adoption of crypto, I have no fiscal stake in the non-fungible revolution.

The right click and save meme is one of the most obvious critiques of NFTs. It’s just a JPG, skeptics claim… Why the hell should I pay $30 let alone $300,000 for an image? A valid question to be sure, worthy of a real answer. Here’s my opinion on the subject.

When a person buys an NFT they’re not paying for the image, they’re paying for authenticity and exclusivity. Buying an NFT confers upon the purchaser the ownership of a unique, unduplicatable digital good. The idea of authenticity = value is neatly summarized by the following counter-example.

With a couple of grand you can buy a conversion kit which turns a regular car into a “Lamborghini.” When assembled correctly, a kit car can end up looking surprisingly like the original and yet… I think 90% of us would agree that a Kitborghini is in incredibly poor taste. Who the fuck are you trying to fool? Are you that desperate for validation? Driving a Kitborghini is like trying to buy love.

Returning to NFTs, right-click-and-save the JPG is the digital equivalent of a kit car. Sure, your saved JPG looks the same as the NFT, but it’s a false god. The point of a high end NFT or a Lamborghini isn’t solely ascetic appreciation or tight cornering, ownership is about status and cultivating an image. I’m sure you could buy a nearly perfect replica of the Mona Lisa for a few hundred bucks, but who’s going to hang it in their living room and feel pride in ownership?

In our digitized world an online reputation is like a curated museum. Reputation matters, and to a certain subset of the population (the younglings) it matters an awful lot. Having an original, authenticated NFT is not meaningfully different than having a Lamborghini in the garage. A real NFT is a flex.

This is not to say that all NFTs are valuable, easily 95% of NFTs on OpenSea could be no-bid in a few years. Even if we’re in the midst of a massive bubble though, that doesn’t mean that the underlying technology is going to zero. People (myself included) care about prestige, status and projecting an image to the world. NFTs fulfill that need and, bear markets aside, I expect that the ecosystem will continue to grow.

Twitter recently announced that they’re working on an NFT verification service. Any user who sets their profile picture to an NFT can get a checkmark proving that they’re the owner of said image. Encountering a user with a verified Crypto Punk as their profile pic (Crypto Punks are currently worth hundreds of thousands of dollars) is the digital equivalent of seeing someone drive by in a Lambo.

I expect that within a year or two, most other social media platforms will follow Twitter’s lead. Facebook, Instagram, the little picture in your email profile. We will invent ways for people to show off their NFTs and in this world, the right-click-and-save image has a flex value of zero.

Credit where it’s due, the phrase “mercenaries vs. missionaries” comes from the formidable Ryan Selkis. Maybe he borrowed it from someone else, I can’t say. In any case, it’s a great way to express an idea that occurred to me a month or two ago. Let’s have a look.

The Problem with Ripple

Ripple (the company) is hiring a bunch of mercenaries to work on their project. A mercenary is a homo sapien whose allegiance is to the dollar not the project. Not that I’m friends with many mercenaries, but I speculate they rarely feel much love for the cause. Let a check bounce and see how long they stick around.

So we see Ripple dishing out $100 million to get XRP integrated into video games, on the smaller side we see a $1.5 million investment into Coinme, more recently, and this is the one that really made me think, they’ve bought Logos Network and tasked them with creating a DeFi ecosystem based on XRP. How artificial!

The real DeFi movement, the one happening on Ethereum, is driven by passion. Sure, loads of projects are taking in funding but there are also thousands of talented developers volunteering their time to build out the space. Also, the companies getting funded, they’re getting that cash because they have an innovative idea that could make DeFi better. That’s the opposite of this XRP DeFi deal where Logos Network was working on something else, then Ripple bought their souls, and now they have to work on what will benefit XRP.

That’s not to say none of this works out for Ripple. When you throw $500 million (that’s half a billion) at a problem you generally tend to get a few solutions. And, ironically, I actually have a stake in XRP and will materially benefit if it takes off. Yet… To me it feels like it’s all wrong: people should work on a project because they’re passionate about it, not because their paycheck demands it.

The Holy Writ of Bitcoin and Ethereum

More than anywhere else in crypto we see a fantastic community of missionaries contributing to these two projects. Thousands of passionate people who believe so deeply in the ultimate success and benevolence of these currencies that they’ll give up their weekends in order to debug code. Or whatever programmers do, I’m not one myself. There is money of course, but nobody is handing out $100 million grants the likes of Ripple’s offerings.

So now, the final point. What has become clear in the last year or so is that the best technology does not guarantee success. Bitcoin, by a huge margin, is the largest crypto even though fees are high and transaction are slow. In terms of developer activity and Dapps being built, Ethereum decimates the competition even though it can’t clear 20 TPS. There are a dozen viable competitors for the top spots, all with ostensibly better technology, but where are they now?

What Bitcoin and Ethereum have are huge communities and this, I believe, is perhaps the best predictor of a project’s eventual success. Imagine you have to move to a new town and you have two choices.

  1. The town with a thriving community and abundant social resources, but the internet is slow and the power goes out sometimes.
  2. The high-tech town with fiber optic and reliable infrastructure, but only a few people live there and they don’t talk to each other.

Which one would you choose? In deciding which projects I’d like to be affiliated with, it’s pretty clear to me what matters most. I’m with the missionaries.