NFTs are a scam: Change my mind | 19.–25. October 2022

Back in March, out of some sort of morbid curiosity, I reviewed Seattle’s very own NFT Museum. The review was not favorable: I finally concluded that NFTs were, for all intents and purposes, a scam.

NFT enthusiasts, entrepreneurs and publicists flooded my inbox for a short period afterwards. Not one of them had read the article, and all wanted me to write about their NFT, which was definitely “the next big thing.” At least they proved my point, I guess.

Recently, I got another pitch, one from a woman named Rachel at a fancy-sounding agency called Maneuvre (you know it’s fancy because it’s French for maneuver). She had read the article and her email contained complete thoughts on it.

“I understand your point about NFTs,” she wrote, “but I’d also like to introduce you to a completely different perspective on them—not having ‘exclusivity as an end goal,’ as you wrote, but actually having charity, community and do it well as the main purpose.”

Any journalist can tell you that part of having your byline online, especially when your email is attached to it, is getting a never-ending stream of bad pitches. If you’re lucky, they may be tangentially related to your beat; most are just what meets an account manager’s quota of sent pitches. If you’ve written articles about how much you hate meat, you’ll receive a custom barbecue mail order subscription box. Conversely, if you’ve posted about how much you love meat, you’ll get pitched vegan dog treats, and that’s doubly likely if you’ve ever posted anything about hating dogs.

This is all to say that getting a pitch that isn’t functional spam is pretty refreshing, and I was so surprised that I actually agreed to do what Rachel asked: meet with Danny Yang, the co-founder and CEO of a company which is called Metagood.

Before getting into NFTs, Yang launched Taiwan’s first cryptocurrency exchange and ran a crypto analytics company. The idea for Metagood arose when his friend and co-founder, Bill Tai, a venture capitalist known for being the first investor in Zoom, tried to organize a fundraiser for sea turtles. Tai did this via another of his investments, Dapper Labs, which bills itself as “The NFT Company.” The company minted him an NFT, people bought in and presumably some turtles were saved.

“Since then, he’s been looking for the right time to start a company that can take it and scale it up,” Yang said. “Not just one NFT, but how can we scale it to many communities that can do well with NFTs?”

Tai, Yang and co-founder Amanda Terry were excited by the idea of ​​generating big money for nonprofits in the metaverse, raising money by creating NFTs instead of hosting inspirational breakfasts and sending soliciting emails to donors. Since its founding in 2021, Metagood has launched several collections, raising money for a number of charities, mostly in the climate and conservation arena. While the environmental impact of NFTs itself is another article in itself, this is probably a good place to mention that Metagood’s first NFT collection, OnChainMonkey, was minted in a single blockchain transaction, greatly reducing its environmental impact.

One of the Metagood community’s more notable projects was to use funds raised during the sale of the first collection to help relocate Sharbat Gula—the woman who became famous when her portrait, called “Afghan Girl,” was on the cover of a National Geographic from 1985 – to Italy after the US pulls out of Afghanistan in 2021. Metagood has a high-profile list of backers including Apolo Ohno, Woody Harrelson and Owen Wilson, and the company recently created an NFT for Sean Penn’s non-profit. OnChainMonkey’s website boasts that “the community is stacked with crypto experts, entrepreneurs, engineers, designers and investors with unlimited access to capital.”

Yang lives on the east side, so we decided to take a few laps around the gravel path at Bellevue Downtown Park. While Rachel really nailed the pitch, she forgot one key component: to tell Yang anything about her pitch or my previous work on the theme.

That said, when I told him I was actively not interested in what he was up to, he was a very good sport about it.

“Give me your lift,” I suggested. “Then I’ll tell you why I don’t trust NFTs and you can try to change my mind.”

To his credit, Yang did not hesitate to admit that NFTs have been a hotbed of scams and fraud.

“Most NFTs are pretty dodgy and terrible, and it’s all about speculative greed,” he admitted. “People buy it just to play the pump-and-dump game.”

“Pump-and-dump” usually refers to the act of inflating the value of something in order to sell it and leaving the buyers with a useless asset – like a jpeg.

The NFT space also led to the beautiful phenomenon known as “rye pulling”, which is when NFT creators generate a lot of hype around a gathering, raise money for it, and then abandon ship. To avoid such an appearance, Metagood refused to contract with influencers to promote its NFT collections while waiting for interest to grow organically. It probably helps to have a lot of famous friends signing up, but still some points for integrity.

“It’s a harder road to travel down,” Yang said, “because the NFT game is really about pumping up the project and maxing out your war roll and then figuring out what to do next.”

It helps in this case that the target audience for an NFT fundraiser aimed at funding charity is people who are interested in running charity, i.e. wealthier people. Many scam NFTs, Yang noted, are looking to exploit people with more dollar signs in their eyes than in their bank accounts. If all NFTs are a scam, at least Metagoods are the kind we like: stealing from the rich to give to the poor. Or at least to a skatepark project in Brazil.

It was determined as part of a microfinance effort by the OnChainMonkey group’s DAO, or Decentralized Autonomous Organization, which is a separate fund generated by an NFT’s sale that is then collectively managed by the holders of that NFT. Being able to determine projects to fund and quickly deliver resources to them is one of the benefits of the NFT charity model, Yang said. As someone who has witnessed the application process, I can only agree. Who doesn’t love the idea of ​​a democratically run, global direct aid system that can deliver money in minutes?

When I asked how a “NFTs for good” project could address larger, more structural problems, such as the fact that poverty is the single greatest health risk in human history, his arguments became a little more vague. While I enjoyed talking about ideas around NFT-based universal basic income systems, and I certainly enjoyed the idea that you could build a global, digital financial system with built-in limits on inequality, these are still just ideas.

Metagood released its second NFT collection, “OCM Genesis,” for free, so a low-income person with an Internet connection and an incredibly good knowledge of the Web3 landscape could have gotten in on the ground floor. They are now listed on the NFT marketplace OpenSea for around 0.7 Ethereum (a cryptocurrency), or around $1,300, which would represent a pretty tidy profit.

As promising as Yang’s redistribution ideas are, Metagood’s collections do what NFTs already do—make their owners look cool to other people online, only with a charitable component.

That brings up my main criticism of NFTs, which is that their core value is exclusivity. They are the idea of ​​it distilled down to a product, really. Even if you own one that’s successful – even if it saves sea turtles – you still own the idea of ​​having something that no one else has but everyone else wants. To me, it is one of humanity’s worst impulses.

In response, Yang pointed out that selling exclusivity as a product in itself is by no means unique to the NFT space. He’s absolutely right: The infamous skate shop-turned-fashion brand Supreme was selling red clay bricks emblazoned with their logo for $30. After they sold out, one popped up on a dealer site for $1,000. What a brick.

But of course you don’t buy the brick – you buy the brand.

Branding is another thing that, while unpleasant, is by no means exclusive to NFTs. I pressed Yang a bit on using charity as part of your presentation and the ethical concerns around it. He happily pointed out that art auctions for charity are not new either. They just haven’t happened in the metaverse.

At the end of our conversation, I agreed with what I think Yang’s main point was: NFTs are inert. They are not in themselves the downfall of society. Rather, they are a new form of digital art with a very complicated proof of ownership and a slightly nerdy collector’s club angle. How they are used depends on the user, which I think understands why people, myself included, have been so quick to judge NFTs as inherently bad.

If we begin to think about why such technology has allowed a few lucky or well-placed people to become rich instead of democratizing wealth, defrauding many hopeful innocents along the way, we need to take a look in the mirror. Technically, cryptocurrencies and NFTs exist outside of the major financial and political institutions that we often blame for inequality in our society. In an eerie demonstration of Mark Fisher’s concept of capitalist realism – “the widespread feeling that not only is capitalism the only viable political and economic system, but also that it is now impossible to imagine a coherent alternative to it” – we got the chance to recreate our socio-economic system online, and we recreated what we already had.

Yang, for his part, remains hopeful that the metaverse may be different.

“I agree with you that there are crazy things going on [with NFTs], and that’s not good,” Yang said. “But I think what’s good is this technology … it’s new and powerful for the future, and that’s what we’re building into it. There’s no guarantee that it’s going to be like the Internet where it kind of transforms the world 10 years from now, but it’s a good opportunity.”

It can be a slim one. According to crypto news source CoinTelegraph, NFT sales have fallen 98 percent since January of this year.

Read more about the edition 19–25. October 2022.