From Bankruptcies to NFTs
How did we get here? Where we are going? Prepared for Adopt-A-Youth Foundation in Jamaica....
Why are NFTs worth so much money?
Inflation. Culture. Giffen Goods. Metaverse. Money Laundering. Not in that order.
Let’s step back for a moment.
TABLE OF CONTENTS
A Brief History of Bankruptcies
How did we get here?
The Invention of Bitcoin
The Cambrian Explosion of Bitcoin Copies
What’s Ethereum?
What’s an NFT?
How do I create an NFT if I’m not an artist?
What if I don’t have a community?
How do I make sure my NFTs don’t get stolen?
I need help with NFT strategy. What do I do?
If you find yourself getting stuck, don’t worry. Ease your way into the topic of digital assets by listening to clips curated from The Digital Mercenary Podcast recorded on TwitterSpaces. Some people are better at listening to information than reading it.
A Brief History of Bankruptcies
From 1890-1910, a lot of banks in the US went bankrupt. You might ask yourself, how does a bank goes bankrupt?
Q1: How does a bank make money?1
Q2: Why might a bank go bankrupt?2
Q3: How did the banks resolve this situation?3
In fact, some banks loaned over 100x what they actually had in their bank vaults. Can you imagine lending out 100x what you own? Those kinds of moves require an elaborate backup plan for when things inevitably go south.
When you understand how banks avoid bankruptcies, you’ll understand why decentralization is at best a dream and at worse…at hoax4.
HOW DID WE GET HERE?
9/11 Attacks -> Interest Rates Lowered -> Easier to borrow money -> Interest Rates low for almost 20 years -> ?
Q: What is inflation? What's an interest rate? What's the relationship between interest rates and inflation? What is the short-term effect of low interest rates? What is the long-term effect of low interest rates?5
The Invention of Bitcoin
In 2009, the Bitcoin Blockchain was born. The first operation ever performed on the Bitcoin Blockchain contained a hidden message:
The Times 03/Jan/2009 Chancellor on brink of second bailout for banks
You can actually still see the details of the first operation using this link:
https://blockchair.com/bitcoin/block/0
Let’s review.
Q1: How does a bank make money?
Q2: Why might a bank go bankrupt?
Q3: How did the banks resolve this situation the last time?
Q4: Why do you think Bitcoin's Creator, Satoshi Nakomoto, chose to cite this news article when The Bitcoin Protocol was established?6
Now it's not like we're some geniuses finding this out for the first time. People have been trying to invent new forms of money for a long time. The reason that Bitcoin survived is because it leveraged a new technology called Blockchain.
Commentary: Who do you believe Satoshi Nakomoto is?
The Cambrian Explosion of Bitcoin Copies
Blockchain is the technology underlying Bitcoin. Blockchain was created to solve the Byzantine General's Problem of coordinating transactions among people who don't necessarily trust each other by accounting for every transaction on an unchangeable - immutable - ledger.
What’s a ledger? A ledger is a book with transactions. Without a ledger, our economy would grind to a halt. Ledgers are the primary tool that Accountants use to track money. In fact, the creator of Bitcoin Craig Wright aka Satoshi Nakomoto was a former Accountant.
When people discovered Bitcoin, they started copying the code and making their own versions of Bitcoin; the most significant forms of Bitcoin are BTC, BCH, and BSV.
The more they changed the code, the more they came up with new product names. The more the price of BTC went up, the more people thought about creating similar products. Soon, the prices in these new products like Ethereum and later Polygon and Solana began to rise in value as well.
NFTs are products created on Blockchains like Ethereum, Polygon, Solana, BSV, etc.
What’s Ethereum?
Ethereum is a blockchain created by Vitalik Buterin who went to Waterloo University and was paid $200k to quit school by Peter Thiel and the PayPal Mafia to create Ethereum. Consider that Peter Thiel had sold PayPal by then, which means he already knew a thing or two about transaction processing before this entire show began.
Ethereum today is the number one platform upon which NFTs are bought and sold.
What is an NFT?
When might you need there to be ONLY ONE of one thing? Your will. The deed to your house and land. A pre-nup. See, NFTs can take you through your whole marriage. Let me explain.
When I was a kid, I used to be in love with baseball. I was so in love that I collected baseball cards.
One time, I got a baseball card WITH A SMALL DIAMOND embedded in the card. The card had a unique serial number that read, “697/1000”. That meant that there were only 1000 of these cards in the world, and the card I was holding was printed 697th.
I put that card under class and every now and then I would take it out and just look at it. I had a personal connection to an inanimate object because I felt like I was owning something that nobody else had; #697 out of 1000.
NFTs are like digital baseball cards with unique serial numbers. In fact, the reason that Bored Ape Yacht Club NFT Collection is so popular is because they are SCARCE. There is value in scarcity.
Think about stockx. Stockx is a marketplace for rare shoes. Who cares about rare shoes? Enough people to drive up the place so high that scalpers are now buying entire shoe releases and reselling them like toilet paper during a pandemic.
An NFT is a unique digital object, but it's unique in a very specific way.
A dollar in your pocket is the same as a dollar in my pocket. If we exchange dollars, we essentially have the exact same thing in both of our pockets. That's what makes dollars fungible; each unit is the same as every other unit. Think of a dollar coin like a fungible token that can be used to buy things in the American Economy.
An NFT is a digital object that can contain unique identifiers. These unique identifiers can be used to different one digital object from another. If were were to exchange NFTs - even if they looked the same - we would be exchanging DIFFERENT THINGS from an accounting perspective.
How do I create an NFT?
Create Metamask.io Wallet. You can’t hold something of value without a wallet.
Create account on OpenSea.io using your MetaMask Wallet to login. OpenSea is the Amazon of NFTs.
Upload your NFT to OpenSea, the Amazon of NFTs.
Mint your NFT.
What if I’m not an artist?
Visit tiny.cc/icanuseAI and follow this tutorial:
What if I don’t have a community.
You’re wrong. You do have a community. Look around at the people on this call. If all of you went on TwitterSpaces at the same time to talk about your project you’d have 100 people in the room within 30 minutes.
How do I make sure my NFTs don’t get stolen?
Follow NFTsareworthles.
I need help with NFT strategy. What do I do?
Follow Mr Moon.
How do I learn how to hack the system?
More More I want More Information
Listen to the best of the Digital Mercenary Podcast from this past week by clicking here.
A1: Lending money.
A2: They lend too much money and their Depositors cash out.
A3: Bailout via Taxpayers. Federal Reserve created to make sure banks became anti-fragile by controlling the monetary supply itself...and it was created by the banks themselves. (Further reading: The Create of Jekyll Island). Commentary: Imagine trying to trade with someone who could invent money; good luck. That's why they moved away from the Gold Standard...and you can't argue it didn't work as intended.
Quote by Ahmed Masud
Inflation is when a dollar today buys less tomorrow. Deflation is when a dollar today buys less than it does tomorrow. In the short run, low interest rates make it easy to borrow money. Given that banks print money out of thin air, when a lot of people borrow money, that means more money comes into supply. Some say that taxes are so high because they need to offset inflation.
A4: Satoshi Nakomoto cited this news article because the purpose of Bitcoin was really to prevented crashes like the one we're in right now.