NFTs, Explained

now to the latest trend that's sweeping the internet they're called nft they're now selling for huge bucks 69 million dollars so what's behind this latest craze that is the question to ask okay so there's some super strange stuff happening online right now and i need to tell you about it first look at this tweet the first tweet ever tweeted in the history of twitter the tweet was by jack dorsey i'm one of the co-founders of twitter and this tweet was somehow just purchased for two million nine hundred and fifteen thousand 835 dollars and 47 cents

[Laughter] you serious and it's not just a tweet just last month a single jpeg sold 469 million dollars oh my god the nba is selling little moments of basketball games for hundreds of thousands of dollars this is all sorts of digital things that people are purchasing a version of them for lots of money there are three simple letters that you need to understand to understand what's going on here those letters are nft until the latest trend is sweeping the internet what exactly is an nft so called nft y'all in the chat understand what an nft

is like does that stand for not safe for work what is this what does this mean why would you pay for an nft when you can look at it for free is this a gigantic bubble just waiting to burst i believe in this space with my whole heart i'm just fascinated by it all of it this story is much bigger than a six hundred thousand dollar cat gif or a three million dollar tweet it's a story about human psychology and how the way we value things is shifting because of technology a technology that some people

think may revolutionize our society while at the same time accelerating the climate disaster it's really nuts it's all of these things together and i want to explain it to you so let's do this [Music] officially insane lebron james nft stands for non-fungible token okay there it is that's the explanation non-fungible token makes sense right so the video's over now no one of my issues with this topic is that people throw around things like blockchain crypto art ledger nft and they just expect me to understand what they're talking about and i didn't okay i'm going to

talk about a tesla for a second customized by unplugged performance to be the most unique and high quality tesla there is oh and it's not just a tesla it's also 20 000 you can enter for a chance to win the tesla and 20 000 by going to omaze.com johnny harris when you donate 10 or more your donation goes to support two non-profits 501c3 is the first one they are an organization that seeks to mobilize the next generation to fight climate change by creating a global community that embraces low carbon culture the other one is called

give power which seeks to give clean drinkable water to the 2.2 billion people around the world who do not have safe access to clean water the nonprofit uses its deep solar expertise to power and provide clean water food security and light to regions around the world so to potentially win a tesla and twenty thousand dollars and to support these organizations go to omaze.com johnny harris to find out more so fungible let's talk about the word fungible it's this very specific word that economists use it has a very precise definition i want to use a different

word for fungible for a second let's just use the word replaceable non-fungible means non-replaceable you can't replace it there's only one of them it's unique non-fungible let me give you an example of something i feel very strongly about let's say you want to buy an orange jacket this is really absurd i've actually never counted these before um stop it get some help you want to buy an orange jacket from uniqlo you go on the internet and a jacket costs 39 if you purchase one of these jackets for 39 you don't care what specific jacket they

send to you they're going to make thousands of jackets in your size send them to stores send them to people and they will send one to you you don't care which one it is the jacket is fungible it's replaceable as long as you get one that's identical to the rest it's worth the same to you they're interchangeable however let's talk about one uniqlo orange jacket that has been with me for a very long time [Music] this is the original and for those who don't know i sort of have a strange attachment to this jacket i

just love it i love the color i like feel like an identity with this thing and it's sort of starting to disintegrate but i love it and i kind of fell in love this jacket is not replaceable if i went onto the website and paid 39 for a uniqlo orange jacket that was this exact same model it would not be this jacket this jacket is non-fungible it is the only one on the planet that exists it has emotional value it has significance it is a very valuable thing because it is scarce there's only one of

them it's valuable to me at least and i kind of fell in love okay we can put these down for a second everything in our economy is one or the other fungible or non-fungible a sack of rice is fungible you just want a sack of rice you don't care which one it is the mona lisa non-fungible there's only one unsurprisingly non-fungible things are way more valuable than fungible things so that's the nf in nft non-fungible now let's talk about the t which is token this is a very internety word and to explain this i have

to explain something i have avoided explaining for a very long time the blockchain luckily there's a way to understand this and i'm going to make it as painless as possible let's say i want to buy three slices of pizza from my friend anna she charges me six dollars for these three slices i don't use cash anymore so i pull out my debit card my bank card and i swipe on her little terminal as soon as i swipe this card a message is sent to my bank and it says hey johnny who has an account at

your bank wants to spend six dollars on pizza and that money needs to go to anna's bank this is like the bread and butter of what a bank does all day they document every transaction that comes in from all their customers they send out money to the other banks and at the end of the day they have a tally of all the money that went out of your account and into your account and they can give you a number they can say based on all of these transactions you have fifty dollars in your bank account

and so when that request comes in as i swipe my card my bank is like okay so based on all of your transactions you have 50 in your account i can send six dollars to anna's bank approved and they approve the transaction once that money comes into anna's bank anna's bank is doing the same thing they're like oh cool she had 80 and now she has 86 and they add it to her record more and more your money is just a number on a screen it's the result of a bunch of transactions you don't barter

with physical things and you don't use cash as much so the bank keeping meticulous records of every transaction becomes really important we trust the bank to do this correctly so thank you banks banks and other middlemen have been keeping stuff like this running smoothly for centuries i mean kind of absolutely the nasdaq everything and more has been the worst day on wall street what in the world is happening on wall street there have been a few bumps in the road with the rise of the internet people started to wonder is there a way that we

could do this same thing coordinate this transaction of transfer of money between two people without the bank the result is a very clever concept called the blockchain the blockchain fulfills the same thing the bank was doing but instead of doing this privately on my bank account and talking to anna's bank all of the transactions are actually recorded publicly on the internet [Music] so let's redo this example in a crypto world anna charges me six crypto coins for my three slices of pizza i go to swipe my proverbial bank card to say yes i want to

pay you six points instead of the bank seeing that request for a transaction and trying to validate it it goes on to this public record where a bunch of people's computers all around the world are keeping track of every single transaction of everyone always if i don't indeed have the six coins in my account to pay anna all of the people's computers who are keeping track of every single transaction will notice that there's a discrepancy they'll be like whoa whoa dude you don't have six coins we're looking at every transaction ever and you don't have

six coins your transaction is rejected if i do have six coins all of the computers looking at the public record will see that request for a transaction and they'll be like yep approved you have six coins and now anna has six coins and they'll write that transaction into the public record now anna having those six extra coins is now the business of everybody everybody now knows that the point here is that the group verifies the legitimacy of every transaction by keeping an eye on every transaction to make sure that it adds up okay i'm getting

hot at this point so i'm taking off my orange jacket okay so you're wondering what does the blockchain and this public record have anything to do with cat gifts that sell for six hundred thousand dollars well i'm about to tell you so in my pizza example we talked about blockchain as a way to verify currency transaction i pay you this much you pay me this much and everybody knows how much everybody has because it's all public but this is where it starts to bend my mind a little bit what if we apply this to something

that isn't money or currency let's say one day you're just looking at the ledger and the ledger's like johnny wants to give anna six coins okay he's got six coins approved and then a transaction comes up that's like a malaysian businessman wants to give three million dollars worth of coins to jack dorsey in exchange for a little token or digital certificate that says that the tweet is now somehow owned by the malaysian businessman the only thing that the blockchain cares about is does the malaysian businessman have three million dollars worth of coins and so a

bunch of computers all around the world look at the whole entire list of transactions and say like yeah this guy has more than three million dollars worth of coins approved they approve the transaction and now it is written in a public record that is unalterable that says that this malaysian businessman owns this tweet the token has been transferred to somebody new non-fungible token nft and if there's anything that gets human psychology to value something it's if an entire group validates that it's real and that there's only one of them there are tens of thousands of

nfts of all kinds some music is being given tokens lots of art is being minted as tokens and being bought and sold and then of course there's uh nba top shot who's taking advantage of this these highlight moments these top shot moments from your favorite nba players have been turned into non-fungible tokens jesse made headlines the other day when he paid 208 000 dollars for lebron james top shot it's the weirdest thing as soon as humans have enough abundance and have their basic needs met food shelter warmth etc the next frontier is to create value

in things that have no inherent value the value turns into psychological hype excitement around a certain thing we've been doing that forever i mean that's the whole art industry is based on the idea of a bunch of people deciding that this painting this little bit of canvas and wood and paint is valuable and thus it is valuable the only difference about now is we now have the technology to do this in a non-physical way using this very sophisticated internet technology that is maturing very quickly okay so this is a lot of hype and i know

you're probably thinking like cool there's a bunch of rich people online buying and trading digital art and there's millions of dollars worth of cards i thought you said that this was going to have the potential to change the world and i'm getting there but first i need to talk about the crazy flip side to the nft fad the reality is that the technology that is the backbone for all of this the blockchain stuff that we've been talking about relies on the public ledger thing that i talked about like that is the sort of heart and

soul conceptually but mechanically like physically what it relies on is computers doing a bunch of little calculations all day and night forever these computers aren't real computers they don't have any memory or screens or anything they all they do is just make little micro calculations all day all night most nfts are stored on a blockchain called ethereum and as of now in early april 2021 when i'm filming this the ethereum blockchain is using 33 terawatt hours of electricity and you're like what's a terawatt hour of electricity that's the same amount of power as the country

of serbia a reminder that generating electricity usually comes from power plants that are burning fossil fuels that are putting carbon into the atmosphere which is a big freaking problem a man-made disaster on a global scale the power consumption of the ethereum blockchain is exploding it is just it quadrupled in like eight months and it is showing no sign of slowing down it is a lot of energy and to think that that much energy is not being used to like move people around or produce things it's used to like crunch numbers in a weird computer warehouse

somewhere so that somebody can buy a fake token of a thing that we only oh man i just i can't it's just it's mind-blowing it's such an ironic moment where it's like this is all digital it's all fake it's not real but it's having deeply real world effects ouch i just want to finish this video now talking about what this might mean for our world going forward this is definitely hype and that's the whole point i mean these speculation markets are all about hype we see this all the time with new technologies and new things

that people get excited about and they swarm it with their investments and the price goes up and then something happens for example come on uncle phil this is the 90s man what's a web page something ducks walk on equal value so cash in on today's new account and it's the 90s it's hammer time in the 90s the internet was taking off and people were just realizing that you could like make money on the internet you could like make big businesses on the internet the stock market was surging 400 in five years mainly fueled by so

much hype and excitement around these new internet companies make the record as america's longest boom the new economy is it a boom without end this rise peaked in march of 2000 and then the bubble burst and a lot of these companies either went under or completely lost all of this excitement valuation that they had sort of it was down some but did that mean that the internet went away did that mean that internet businesses didn't come back no companies went on to reshape our world right now i think we are probably in that stage of

nfts it's hype it's novel it's exciting but what it's doing is it's pushing our minds to think differently about how we validate and verify things if i buy a house there is a whole thick stack of paperwork and a bunch of middlemen to make sure that it is very clear who owns the house and how that money gets transferred from one person to another it is like a nightmare of an experience if suddenly technology existed that took away the centralized middleman and made transactions between people able to be authenticated verifiable and much smoother that could

change our world i'm not here to say if the bubble's gonna burst or whatever i don't know i just know that this is a crazy moment where we're getting our heads around a new technology and what it means and eventually we'll adapt this won't be crazy this won't be novel anymore prices will go down but the technology that allowed it all to happen will probably stick around [Music] you