Welcome to part 2 of the 3 part series on how NFTs might impact the wargaming industry.
- In part 1 I muddled through the basics of the technology and why they might arrive earlier than you think.
- In part 2 I will list every issue with the current technology stack.
- In part 3 I will start to dive into the future for them.
Where were we last?
We were experimenting with a call and response style blog post, where the reader asks a question which I format in bold and then I answer them.
Why are we still talking about NFTs?
Well you know how the wargaming industry has been buzzing about 3D printing and it’s disruptive effects for the last 10 years, despite 3D printing being 1) hard to use, 2) environmentally damaging, and 3) full of IP infringing material…
So let’s talk about NFTs again.
So you’re saying that NFTs are great and will bring about a golden age of the internet?
No. There are a number of issues to overcome.
I sense a list coming
- Climate damage. The energy cost is very high at the moment. However it’s a lot more complicated than media sources would have you believe for a number of reasons: NFTs use more eco-friendly blockchains than Bitcoin, energy sources do not all have the same environmental impact, crypto miners move to cheaper energy providers to use excess energy that would otherwise be lost, crypto is designed to replace the massive energy costs of the visa network and the Ethereum blockchain will move to proof of stake which will reduce its energy consumption by 99.95% in 2022. As you can see, I recommend a lot of reading around this rather than just throwing out the often touted headline of “it uses more energy than Norway” which, while correct, doesn’t factor the traditional finance sector which has a significantly more devastating ecological and human impact due to it being backed by, oil, gold and war. It also shows how little energy Norway uses in the scope of the world.
- Jargon. The amount of jargon in the sector is overwhelming, a new user stumbling onto a NFT website would probably assume it was written in another language. Mint. Gas. Airdrop. Rugpull etc. Eventually these words will either filter into general use (like Tweet, Emoji or Podcast), or people won’t need to know them as they will be hidden behind whatever front end the Web3 sector uses (the average user doesn’t need to understand IP addresses, https protocols, catalytic converters or graphics cards).
- Popularity. Despite being talked about non stop for the last year, they might not actually be that popular. Directly quoting https://twitter.com/Nifty_Table here: “There are 6.8M NFT collections on OpenSea (Ethereum + Polygon). Only 15k have ever had a sale (0.2%). People love to talk about how 99% of NFTs will go to 0, but 99.8% of NFTs already have no market value 😅.” In fact 5 projects capture almost a quarter of the NFT market value on Opensea.
- Multiple currencies. Do you want to buy an NFT on the Ethereum, Solana, Tezos or Wax blockchain? Well, you’re going to need to buy it in the appropriate currency. ETH, SOL, XTZ or FLOW. Oh and and you’re going to need the appropriate wallet as well. This is a lot to take in for a lot of people.
- Legacy issues. On the above note, we still don’t know how long some blockchains will keep running 10 years, 50 years or hundreds of years in the future. Who knows? Not me. But do you still have a VHS tape player, or even a CD player, let alone Betamax?
- Gas. Gas is the fee you pay for a transaction and currently they are way too high. A $80 fee for a transaction on Ethereum at peak times is too much. The visa network fees are so low you don’t notice them. Fortunately thereare fixes on the way but they might take a while.
- Stigma based on misunderstanding. The sector is quite complicated and there is a lot of nuance, unfortunately most people only get exposed to the headlines which are designed to be as emotionally charged as possible. To make matters worse, the headlines get repeated with specifics removed and reposted on other sites. Let’s look as an example here: OpenSea had a tool that allowed new users to mint a limited amount of NFTs without paying gas (like a trial account), unfortunately 80% of them were either spam, frauds or knockoffs, so it disabled the feature. This news gets reported as -80% of all NFTs hosted on OpenSea- are fraud. . And then the news moves to another platform which claim that -80% of all NFTs period- are fraud.
- Stigma based on tribalism. Unfortunately evolution has led us to be highly tribal people. You can be categorized as part of the ‘wargamer’ tribe or the ‘football fan’ tribe or the ‘Magic the Gathering’ tribe so, yes, the NFT crowd is a tribe as well. They even have their own language (see “Jargon” above). Unfortunately there are articles like this which are specifically designed to ferment hatred against people. It reminds me of the “Warhammer is heroin for middle class nerds” debacle. I know it’s just journos on minimum wage trying to fill their quota of articles for the week but it’s dangerous, divisive rhetoric and it doesn’t help anyone.
- Fraud part 1 – IP issues. Stealing images from Deviant Art and posting them as NFTs is a thing. Its being worked on, and the fix is to both cool off the market, require some form of pre-listing period for being added to a platform and moderate everything that gets listed on a NFT marketplace. Unfortunately with large popular sites content moderation is a problem that no one seems to want to do. But if you were Opensea and you got valued at $13B, what on earth could you possibly do to fix something like this… Oh…
- Fraud part 2 – Phishing. Imagine being one password away from having your entire bank account drained. No insurance, no coverage of any kind. These transactions are non reversible so there is no buyer protection like if you use a credit card. Until the current system changes you really need to be confident in what you are signing.
- Fraud part 3 – Fakes. On the topic of content moderation if you search on Opensea for a popular project you will likely get one result with a blue tick and a bunch of other similar named projects without blue ticks. They projects are scams mean to entice new users to buy them. But what on earth can Opensea do about this? (Editor note: Reuse the quote about Opensea being valued at $13B here)
- Fraud part 4 – Rugpulls. Say a game or metaverse project sets a mint price at 0.05ETH (‘minting’ is used to mean triggering the code to create a NFT) and then lets say the code only allows 2000 mints. That’s 100ETH. If we assume 1ETH is around $3000. Our example project just made just made $300k (£220k). Now if the project team is anonymous they could just run off with the cash. This is a rugpull. Kickstarter fixed these kinds of issues a while back, and the solution is moderation for projects that end up on these platforms. The fascinating part is that at least one project has been ‘derugged’: Essentially another team led by the marketplace has hopped in to fund refunds and build the technology that was promised.
- Bears. The market is due a massive cool down and no one yet knows what happens during a multi year NFT bear market. Do all projects, even the existing ones just stop getting brought and the market dries up. Who knows? Not me. The hype around technology like Drones, VR and 3D printing eventually cooled off and left a lot of companies high and dry.
- Metaverses. I honestly have no idea how this is even a thing. No one watched Ready Player One and thought the OASIS was a good idea. Second Life is not a thing anymore. Walking down a digital street to get to a digital shop or club sounds like a massive pain. Even if it was a thing, nothing short of a major aaa game company with tens of billions could build one. Not the Apathetic Penguin Clubhouse NFT discord.
- Tax implications. Selling an NFT is a taxable event, so you’re going to need to pay tax. So far so good. However lets look at a fun situation: You are playing an P2E game and sell a powerful sword for £5,000. A week or so later you are feeling bad about selling so you buy it back again. The game slowly looses players over time and as such you can’t sell your sword again because no one wants to buy it. You still have to pay the tax on the original sale. Which means you just lost money playing a game. To make matters worse, if everything in the game has value and are you are trading all the time, you are going to need some serious book keeping to work it all out. If you are not careful you could easily get yourself into serious trouble with your local tax authority.
- Opensea looks like crap, part 1: Buying crypto and NFTs is still not a great experience. Even if you create the worlds most legitimate NFT project backed by well known and respected people and it brings in serious first time investors, if its hosted on Opensea, they are only a few clicks away from seeing NFT projects full of dickbutts and cyberdongs. Its the equivalent of sticking a Lamborgini dealership next to a crack den. (Editor note: reuse the quote about Opensea being valued at $13B here).
- Opensea looks like crap, part 2: If you haven’t used it before, Opensea is like Amazon but worse. Product owners have no control over what is displayed. To make matters worse, there are no sales metrics, no reviews and hidden buy it now buttons… But honestly, what -could- Opensea do? (Editor note: reuse the quote about Opensea being valued at $13B here).
- Wallets. Crypto wallets are still not the best, its passable on a PC or laptop but the mobile experience still isn’t there yet. You have to download an app, then go into the app and open up its own browser and even then its a bit hit and miss. Reminds me a lot of dialup modems in some ways.
- iOS. iOS doesn’t integrate with them properly yet for a number of reasons, mainly because Apple wants a cut of all sales on their platform. This is the reason Fortnight is no longer on the app store.
- Massive irretrievable data loss. Bugs are still being found in code that could have lost companies hundreds of millions of dollars.
- Disappearing art part 1. This is complicated but basically you can make your wallet display a different image depending where you view it . You can sell a NFT that looks nice on a website and looked like a poo emoji in your wallet. Interestingly the response to this is here where Vitalik Buterin, a co-founder of Ethereum chimes in to give a few solutions.
- Disappearing art part 2. Some, but not all, NFTs don’t actually store the actual art or metadata in the NFT. Some just use URL links to other storage environments which aren’t on blockchains and can (and have) been deleted. Technically this is a feature not a bug, it allows the foundation that controls the art to actually make changes to it over time.
- Self Pumping part 1. Step 1, buy an NFT. Step 2, take out a DEFI loan using your existing crypto as collateral. Step 3, use this money to buy the NFT from yourself on a marketplace. Step 4, pay the loan back (because you bought from yourself) with a bit of interest. You just own an NFT which appears to be significantly more expensive than it was, also you have raised the average sale price of that collection. Now wait for people to think that this was because of outside interest and watch the offers roll in. This is known as wash trading in the traditional finance sector and as you might expect, is illegal.
- Self Pumping part 2. Step 1, Use photoshop layers and a bit of code to create a generative PFP project (google will help here). Step 2, post results on Twitter for a quick run of 10 images. Step 3, Set the attributes that community likes to rare (less that 1% for example). Step 4, advertise it as a 6000 drop with a 0.05 ETH fee. Step 5, setup a white list and only allow people who promote your project on it. Step 6, launch, and make 300 ETH in a few hours. Step 7, abandon project and sit back as your 10% royalties generate passive income in as your buyers offload their “art”.
- Politics part 1, Regulatory hurdles. China has fully banned bitcoin mining, other countries can theoretically follow suite, weirdly China actually seems to be ok with NFT’s, however who knows what the future holds for them in either China or the west.
- Politics part 2, the Right. This currently applies to the right of American politics, they love Crypto for a variety of reasons. Due to the polarisation of politics, if you lean against this ideology then it’s a good chance you will be against crypto.
- Politics part 3, the Left. This currently applies to the Democratic Party of America and left leaning media like the Guardian in the UK. They hate crypto for a variety of reasons. Due to the polarisation of politics, if you lean towards this ideology then it’s a good chance you will be against crypto.
Yes, sorry that all kind of came out in one go.
Is that it?
Kind of, there are a few more I haven’t added to the list, but while I’m here I may as well mention:
- Money laundering. While you can do it, it’s a really stupid thing to do and you will get caught. The transactions are public and the regulatory checks are some of the most intense in the world.
- Extreme Money = Extreme Opinions. I’m just going to flat out launch an opinion here, but if you are still reading hopefully you’ll forgive me. If the total returns in the entire crypto sector had been just slightly higher than inflation over the last 10 years, and the most expensive NFT was only around £2,000, then the level of hatred in the sector would be reduced by 99% and no one except fringe tech sites would care about them. As they continue to be valued in billions of dollars people will hold stronger and stronger opinions around them.
That’s pretty thorough, it looks like a open and shut case. NFTs are a dead technology
Well, not really. Most, if not all of these points could be overcome given time and development. But since i’m going to launch into an article about how they could benefit people I thought I should get this all out of the way first.
But you just made a 27 point list…
Yes. But if I put my mind to it I could create a list just as large filled with the problems with the automobile industry, but you wouldn’t want to ban them.
- The environmental damage caused by extracting oil
- Environmental damage with extracting lithium for batteries
- Physical keys can be given to anyone or just stolen
- Key fob cloning
- No verifiable proof that the person driving has passed or is insured
- Drink driving
- Drug driving
- The petrodollar propping up corrupt states
- Pollution causing cancers and dementia
- Emission defeat devices
Ok, I get it, please stop.
That’s just as well, I need to publish this article before the entire NFT space changes and it goes out of date.
Are we done?
Yes for now. I will return soon for part 3, how NFTs could be used in the wargaming sphere.
Are you excited?