(classical music)
- [Narrator] At this point,
you've probably heard about NFTs.
And if you haven't, you've been living under a rock.
In the past year alone,
they've become a cultural phenomenon.
- And I want to give one to everyone in the audience.
- Everyone gets an NFT? - Yes, everyone.
- Everyone gets an NFT!
- [Narrator] Some people hate them.
Others think they're going to be the future of everything.
But no matter where you fall on this divide,
there's a lot to unpack here,
including a booming $13 billion marketplace
that's trying to become the Amazon of NFTs.
But first let's get on the same page
about what an NFT actually is.
Essentially, an NFT is a one-of-a-kind digital file,
like these here Bored Apes,
but it could also be a photo or a song.
- Largely they are digital files
stored somewhere on the internet.
- [Narrator] Mitchell Clark is a news writer at the Verge
and he wrote the Verge's NFT explainer.
He helped me,
who until a few weeks ago knew little to nothing about NFTs,
grasp the subject a little bit better.
- Most of what people think of as an NFT
are actually the digital files,
not what the NFT actually is.
So the NFT is the record on the blockchain
that stores the information about that digital file,
who created it, who linked it to the blockchain,
and then who bought it,
and who has owned it throughout its history.
And that is what the actual NFT is.
- Those transactions are noted on the blockchain,
which is essentially a public digital ledger
that records transactions on the decentralized web.
The fact that all the changes are made publicly
and there are so many computers
working on validating them all at once
makes it really difficult to hack or cheat the system.
Talk to me a little bit
just about some of the most ridiculous NFTs
that you've seen during your reporting.
- There's so many.
I think the first one that I thought (sighs)
was Logan Paul did trading cards of NFTs.
You'll find just things that look
like they were done in Paint by a child,
which generally people don't buy those.
Let's be clear, just because you've put an NFT up for sale
doesn't mean that people are going to buy it.
And then there's been the ones
that are just downright offensive,
like they're capitalizing on civil rights icons
or artists who are now passed away.
It's just like, I don't like that very much at all.
- On the flip side, have there been any that you've seen
and you're like, if I had a $100,000 to spend,
I might actually buy that?
- I don't think that there are any of the art ones
that I've been particularly interested in,
but I have kind of enjoyed some of the programmatic ones.
- [Narrator] This includes NFTs
that actually get you something a bit more tangible
than just an entry on a blockchain, such as video games
or even access to elite members-only clubs,
and there are even more sentimental NFTs.
- There was also kind of a heartwarming story
of these two cryptocurrency exchange employees
who got married and they had an NFT wedding ring.
Their wedding ring was written to the blockchain.
I thought that was cute.
- [Narrator] This is all well and good,
but how exactly do you give someone $69 million
for a JPEG on the blockchain?
While there are many marketplaces for NFTs,
including Rarible or Foundation,
there is one that is now valued
at over $13 billion, OpenSea.
- OpenSea's catch phrase for it
is they want to be the Amazon of NFTs.
- [Narrator] Russell Brandom is Policy Editor at the Verge.
He walked me through
how OpenSea became the defacto NFT marketplace
and some of the growing pains that came
with such tremendous growth.
- The difference between OpenSea and the other ones,
and I think part of what's made it so successful,
is a lot of the others kind of have this art gallery model,
where they have particular NFTs that they like
and you go there because you want this particular type.
And so it's very curated, it's very controlled.
Whereas OpenSea, it's basically this is a representation
of what's out there, this is everything on the blockchain.
And if it's on OpenSea,
you can use these special ordering tools.
So everything kind of eventually migrates there
and the fact that something's on there
doesn't really mean anything about it.
It doesn't have the OpenSea stamp of approval.
It's just the easiest place to buy and sell.
This is really the appealing thing about it
is maybe investing in NFTs themselves
is kind of like making the speculative bet,
but they're the casino,
they're the place where all of these bets are happening.
And the fact that there are a lot of bets
happening right now,
that's just a very good position to be in.
- Yeah and of course the house always wins.
- Right, right, yeah.
- [Narrator] But with OpenSea's growth came some bumps.
Since its inception, there have been a lot of issues,
ranging from security flaws to scams
to users allegedly purchasing their own NFTs
to artificially inflate their value.
- It's hard to put the insecurity on OpenSea specifically,
but you get a lot of these situations
where it's a totally unregulated marketplace.
There are lots of new things
that people are finding out how to do.
I don't know if that's a security problem exactly,
but it's a moderation issue
in this very chaotic marketplace
that, because OpenSea is kind of the broker of record,
they end up at the center of.
- [Narrator] Growing pains aside,
investors are betting on OpenSea moving
beyond hyped up pictures of Bored Apes,
although Russell isn't too sure.
- Put it this way, I think for any specific use case,
the case for NFTs is pretty weak for me.
I'm not convinced that it'll take off
in this particular area.
But then there's this other will it take off for something?
Will we find some reason
or some thing that this stuff is useful for?
I'm sort of a little bit more credulous on that,
where it's like, okay,
all these people that are looking for something
that this will be good for
and there's a ton of hype and a ton of energy,
so hopefully they find something at some point.
Which I don't know if I want to bet on that,
but it's at least plausible to me.
- But regardless of what NFTs could actually be good for
in the future, we might continue to see people splurging
on digital goods for months or years to come.
Do you think it had anything to do with the pandemic
and people just being stuck at home
and just not spending their money on normal other things
that they normally would have been spending it on?
- It's very possible.
Another kind of angle to it is that they were being pitched
and sometimes thrown out by some people as an investment.
And everyone had a rough 2020
and we're all trying to get to a better place
and if there's some possible way
that we can do that using this NFT,
we buy an NFT and we can flip it in four months
for so much money,
what if we could sell a million-dollar NFT?
That would be life-changing for almost everyone.
So it might be a little bit of, wow,
this is an interesting thing coming along
that's kind of hard to understand technically,
so you can get caught up in the sales pitch of it.
And then also kind of the gambling aspect
of this thing could soon be worth millions of dollars
if you're lucky,
and for some people it has worked out that way,
which only throws more fuel on the fire.
- With you, Russell.
I assume the answer is going to be no,
but are there any NFTs that you've seen
where you've actually said, yeah,
this could actually be like kind of fun to own?
- No. No.