What three-card monte can teach you about NFTs

NFTs are easy to understand if you examine their core utility.  Unfortunately, there are thousands of NFT promoters spending millions of dollars to make sure you never look at that.

This episode is a departure from our standard format, but it's an important topic. I want to explain what NFTs actually are and how you can best make money with them -- if you really want to.

Our Japanese founders will be back next episode.

So let’s get right to it.



Transcript
This is it, gentlemen. This Queen of Hearts is the winning card. Watch it closely.

Follow her with your eye as she moves. Here she is, and now here, now here, and now—where?

The Queen of Hearts. My hand is quicker than your eye.

If you find the lady, you win, and I pay; if not, I win and take your money.

Who will go me twenty dollars?
Yes, this is in fact, Disrupting Japan. Straight talk from Japan’s most successful entrepreneurs, but today we are going to be talking about Three-Card Monte, or more specifically what Three-Card Monte teaches us about NFTs, or non-fungible tokens. 

You all know three-card-monte. Even if you don’t know it by that name. The dealer places three cards on the table, flips over one to reveal the queen. He flips the queen back over and begins shuffling the three cards around the table. He does this quickly, but not too quickly. You can just follow his movements. You confidently point to your card, and the dealer flips over a seven.  

You lose your money! 

Of course, you never really had a chance. The dealer slipped the queen up his sleeve when he started the shuffle. All that patter and shuffling is just there to distract you. The three cards you see on the table are all decoys. The important card had already been taken off the table.

And you see, just like in three-card-monte, the key to understanding NFTs is looking at what’s missing. In this podcast we are going to grab the dealer by the wrist, dispose of the distracting patter and decoy cards, and take a hard look at exactly what’s been taken off the table. 

And to be clear, I have absolutely no opinion as to whether you should invest in NFTs or if you personally will make money from them. Today we’ll just be talking about what they are; their reason for existence. In startup terms, we’ll be defining NFT’s true value proposition. 

However, by the end of this episode it will make perfect sense to you why a jpg of a robot with a green mustache is worth $2 million, while the same robot with a red mustache is only worth $50. In fact, you’ll understand why NFTs could not possibly work any other way.  

And before we dive in, I want to let you know that although I spent a lot of time checking my facts and making sure what I am about to explain to you is accurate. I am most emphatically not a lawyer or a financial advisor. I am a founder, podcaster, author, hacker, picker, grinner, lover, sinner, and if you are even thinking of taking legal or financial advice from me, you are being an idiot.

Stop it! 

OK, with that out of the way, let’s flip over these decoy cards. 

 
Misdirection & the NFT Decoy Cards 
Card #1: NFTs Prove Ownership

NFTs are usually described as something like “digital certificate of ownership” or “a digital receipt” or  “virtual goods with the blockchain providing proof of provenance and authenticity.” NFT promoters love to claim that they are a “permanent, distributed, publicly-auditable, tamper-proof record” of ownership.  

But no. They are not any of that. That’s misdirection, that’s one of the decoy cards. 

NFTs absolutely provide a “permanent, distributed, publicly-auditable, tamper-proof record” that you gave your money to a crypto promoter, but purchasing an NFT gives you absolutely no copyrights, usage rights, or ownership rights to the artwork. It’s not a receipt because you haven't actually bought anything but the receipt itself.

The terms of service a some NFT marketplaces hint at such rights,