NFT word with paper money and a coin image of Bitcoin

Signal app creator Moxie Marlinspike proves NFT signal-to-noise ratio is low

In the middle of what can only be deemed the NFT (aka ‘Web3’) craze these days, it is good to see that finally some blockchain token applications are arising which doesn’t use the token as a fund raising mechanism (see ICOs and how they will all be getting in trouble with the SEC soon). NFTs are very loosely blockchain tech used in order to associate a digital unique token to a real world piece of property. This property may be physical, or digital in nature, such as digital art, or an in-game virtual good. Since these types of tokens are only used to allow online trading of the associated property or item, it is likely not going to be classified as securities under existing laws. But that in and of itself does not mean all uses of the technology can be absolved of any shady intent.

Recently the founder of Signal, a popular privacy chat app wrote a piece about his exploration of the technology and its merits, which was a good sign that mainstream tech companies are getting interested in the technology behind Bitcoin and blockchains for the first time, and not just for their get-rich-quick appeal.

Firstly, Moxie is by and large correct in his piece (which if you haven’t read, go ahead and do that now, I’ll wait), as he laments about the term ‘crypto’ being misappropriated by certain elements of anarchist society, making the catchy term to mean all things digital assets and blockchain token related. ‘Crypto’ used to mean ‘cryptography,’ and since that term literally means ‘secret writing’ or ‘writing in code’ it carried with it the mystery and allure to those who wanted to appeal subconsciously to everyones desire to do stuff in secret, or out of sight. Perhaps that means to avoid paying taxes, or perhaps it means buying illegal recreational drugs, whatever. But certainly the ‘crypto’ term caught on, more than even ‘Bitcoin’ (meaning ‘data based money’) thanks to the former term being more inclusive to all the other Bitcoin copycat projects which used to just be called the pejorative ‘alt coins.’

People don’t want to run their own servers—absolutely right!

They absolutely don’t. Most people want things to work, and aren’t willing to sacrifice usability for the sake of some poorly qualified measure of ‘extra security’ just in case the Apocalypse comes tomorrow. Most often parroted is the defense against a corrupt government coming after your freedom or privacy. While that is an honourable goal, most people won’t want to pay the cost of running all the needed infrastructure themselves in order to get this insurance policy. 

People CAN run their own routers, email servers, web servers, and use only open source apps, and even hand roll their own hardware and linux distribution if they didn’t want to trust their hardware and operating systems. But at the end of the day, you have to draw the line, and realize that you HAVE to trust in something. Nobody can really live the oft mentioned meme “Don’t Trust, Verify” lifestyle. Do you verify that your can of Campbell’s chicken soup isn’t laced with cyanide before eating it? Well, then why would expecting non-technical people to run their own operating systems, email servers, web servers and internet routers any different? The good news is that you don’t need to run everything yourself in order to have ‘good-enough’ security, if you do your risk-calculus right. That is what Bitcoin is about.

The idea of ‘trusting no-one’ is just ludicrous. We all need to trust many things. It’s just a question of ensuring that we don’t put TOO much trust into too few entities, which may have mis-aligned incentives from our own.

We can see now that people want to trust experts, so long as they are seen as not ‘the establishment.’

This is the other hypocritical thing which I, as industry insider, observe quite often. It isn’t that people don’t want to trust, it is just that they don’t want to put their trust in something or someone deemed ‘untrustworthy’. This normally means the establishment. As Moxie points out, most people using Ethereum and OpenSea actually have to trust a lot in Infura1 the company to maintain their ‘view’ on the public blockchain. And unlike say, our trust in Dropbox or Google, if you are not a paying customer of Infura or Alchemy, then you really have no recourse if they suddenly stop providing you blockchain access services one day. So it seems that people don’t mind trusting these companies, but just not big companies like Google, Apple, Amazon or Microsoft.

People don’t need ‘decentralization’—it is just smoke and mirrors.

Another crypto truth that Moxie discovered is that decentralization is a buzzword, and actually very few people really care about it2, outside of its use as a buzzword used to attract more people into the industry. Decentralization can be thought of having two aspect meanings: Firstly, it could simply mean network robustness from a business continuity perspective in the face of unexpected disruption. The other way is as in ‘nobody in charge’ of the system. 

I argue that the former is the more useful description of the term. Having a distributed network which does not have any one point of failure is a good thing, something which the internet promised and has delivered on for the last 50 years. But the ‘no-governance’ idea of decentralization I argue is actually a red herring. Who really wants nobody to be in charge or liable? There are very few services that I can imagine which would want no legally liable operator. An example often quoted is BitTorrent and the age of file sharing (aka software piracy). As a network protocol by itself, BitTorrent can’t be outlawed, as it is simply a way to communicate between servers. But when BitTorrent started looking into making a token that could be used to monetize their network, many people were against it. 

The act of creating a monetary asset/security to fund developers on your own platform is a centralizing act! It’s quite simple, if you used token issuances to raise money for your project, then your project isn’t decentralized the founders have decided the coin distribution and governance rules, and now have a moral and I argue legal obligation to its coin investors. But it is surprising how many projects fail to realize this and still wave the decentralization banner, despite trying to wave off responsibility when their projects mysteriously fail a year later.

People are happy to ignore the fact that all of their assets are actually on somebody else’s server. Somebody that owes no legal obligations to them.

This is the most worrying of all. NFTs are supposed to be digital representation of ownership rights, yet how many companies issuing NFTs have hired a lawyer? 

I have consulted with more than one company who when asked how big their legal team was, was surprised that they needed one. This is a clear red flag. If you are honest about the fact that you are really trading legally enforceable rights and deeds as NFT tokens, then you have to make sure that the legal contracts and documents are actually stored immutably on the public blockchain for all to see! (Or at the least a provable hash of the associated real-world documents). 

But as Moxie found out and proved with him experiment, most of the digital assets that are being traded today on these popular exchanges are no more than just digital copies of files sitting on a file service, and the pictures and rendering of the art is completely under the control of the website viewing them. There is nothing AT ALL preventing OpenSea, a centralized unlicensed exchange, from showing you a picture of X, and then actually selling you a copy of Y instead. Or worse, changing what X looks like sometime in the future. There simply is no verifiable link to the actual virtual assets in most cases. (This is what those high priced legal advisors job would have been if you had the sense to have hired them).

People don’t seem to care that what they are buying actually has NO ENFORCEABLE RIGHTS associated with it.

People just want to get rich quick.

That is the crux of it. 95% of the projects in NFTs right now are just the regurgitation of the DeFI hype investments of two years ago, which was just a regurgitation of the ICO hype and earnings of five years ago, which was just the regurgitation of the Bitcoin hype nine years ago, etc… you get the picture.

Bitcoin can be like email, if it is done right. But the key is to keep it a protocol, and not a business. Email is just a protocol, so it cannot be centralized, or decentralized. You simply decide to use it or not. The path of many crypto projects where the founders seek to pander to speculators or a community is breaking this cardinal rule and acting more like a general partnership, cooperative or a company. These crypto project founders and protocol developers benefit if you do not believe they have any liability or fiduciary responsibility.

Unlike Ethereum, and their mistaken design of trying to carry global state for all contracts, BSV based on the original Bitcoin protocol is just there to ensure transparent settlement of contracts. This keeps the protocol simple and the infrastructure of the network light and scalable. Whether or not you keep data or serve it is completely up to you, or services you create in order to serve a demand. Bitcoin simply allows that demand to be manifested and signalled to the market so that potential entrepreneurs know that there is money to be made. 

Moxie is right, though, there ARE a small minority of developers in this space who actually want to build something new with Web3, and to fulfill the promise of the internet. Free, open, capitalist… a portal to the global market in this business of information trafficking. And those of us in this space are working very hard not to succumb to the temptations of taking the easy path to just raise money, and sacrifice the long term success of the project in the process.

It is a gold rush, and during a gold rush, rationality is as scarce as shovels and pans.

But there are the few of us in the mix, working hard to make Web3 a real reality. This IS the new internet. There IS real promise. You just have to filter out the noise, and find the projects that aren’t in it just to make a quick easy buck, which are generally the ones that didn’t do an ICO or some sort of token sale to fund themselves. The problem is that because the gold rush is so distracting, the industry is filled with more noise than signal. But the few with trained ears can tune into the right frequencies, and can hear the sound of the real music while others just get drowned out by the white noise.




[1] Infura and Alchemy are platforms which provide service APIs so that clients can access the ETH blockchain, send transactions and get their balances. Sure sounds like a bank to me.
[2] Or even can explain what it means, quantitatively or qualitatively

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