There is certainly a lot of talk these days about cryptocurrency and NFTs and the like. I couldn’t get through 10 minutes of the Super Bowl without a Hollywood actor making fun of me for being a wimp for not putting all my money into “crypto.” That sounds a bit too much like a crypt for me to be entirely comfortable with. I don’t want to put my hard-earned life savings in an early grave.
But I’ve heard all the smart people like Jimmy Fallon and Paris Hilton and Elon Musk talking about buying dog coins and bored monkeys and I like animals so I thought I should read up. You hate being the only guy who didn’t buy Apple Computer stock back in 1989 when it was 5 cents a share or whatever, and you can be damn sure all the crypto folks are more than happy to remind you of that will be the rest of their hopefully short lives. “I told you, man. I said She! Hey, do you want to go to Paris with me and the wife on Friday? Ah, I forgot. You don’t have the money.”
So I read and read and thought I got it mostly, but not quite.
When I was in fifth grade health class, they separated the boys and girls and showed us a reproduction slide show that was full of diagrams with lots of circles and arrows. After it was over, one guy said, “I don’t see how this all fits together.”
This is how I felt after reading all the explanations and trending articles about blocks, chains and tokens.
So I met up with my friend Frank, who’s pretty smart. He’s got a good deal drying out people’s basements. No pumps or anything like that; He moves dirt in her garden and the water just goes somewhere else. Frank has all the business he wants, which isn’t very much. Because once he makes enough money for the year, maybe including a year’s mud vacation somewhere sandy, he’ll stop working and do more interesting things.
Like I said, he’s pretty smart.
The thing is, he hasn’t had much formal education and doesn’t even read that much. So he can never explain anything to you, unless it’s about water, dirt or concrete. But he asks good questions and somehow after talking to him for a while you know more than when you started.
Frank actually brought up the topic of crypto because of all those Super Bowl ads. “Wasn’t that strange?” he said. “I’ve never seen anyone solicit money.”
“What do you mean?” I asked.
“Well, this stuff is supposed to be money, right?” he said. “The new world secret money or something?”
“Have you ever seen a bank advertise money to get you to want it?” he asked rhetorically. “People seem to want it pretty well themselves. There are no ads like, ‘US dollars are the best! People will work hard for you if you give them these.’” Or, he continued, “’Swiss francs: we know how to keep a secret.’”
I agreed: “Russian rubles! so much history Now cheap on offer!”
Frank gave me a look that said, “One step too far, Mark.” I understand that very much. But what he said was, “Can you explain to me what a crypto actually is? What do I get for my money?”
“Everything is token based,” I explained, “which is something like a unique ID, whether it’s attached to a cryptocurrency or an NFT, which stands for ‘non-fungible token’ and is usually an image. And there is a worldwide database that tracks these tokens and who owns them, except it doesn’t have your real name, so it’s anonymous.
“So it’s just like your username and password for something?” asked Frank. “This is a unique ID.”
“Exactly, except it’s in this worldwide blockchain database, with an anonymous identifier.”
“So how do you prove you own it?” he asked.
“You log into your e-wallet.”
“With username and password?”
“What if you lose your password?” Frank continued. “Or does someone find it written on a piece of tape on your keyboard?”
“It’s almost gone and there’s nothing you can do about it.”
“So who makes these tokens? How do you know they aren’t fake?”
“That’s the confusing part,” I said.
He interrupted: “The last piece was the clear part?”
I ignored his mockery and explained, “This is where the global blockchain database comes in. Everything is tracked there.
“Sounds like a lot of electricity,” Frank remarked. “Are these calculations useful to anyone?”
“Only the person who gets the new bitcoin.”
“Basically, your computer gets a gold star for solving some useless math problems, and you sell the gold star?”
“I’ve never heard anyone put it that way, but sure, I think.”
“Huh. So this Zoom money, what can you buy with it?” he asked himself.
“You can’t really go to a store with it or anything. There was a pizzeria in Shelburne that accepted crypto for a while in 2013, but not anymore. You just hope the value goes up.”
“Sounds like the stock market.”
“Except stocks stand for part of a company somewhere,” I said. “So its value goes up and down with the company. Crypto is exactly what it is.”
“Money that can’t buy anything? So who would you sell it to if you wanted real money again?”
“Someone else who wants bitcoin.”
“What if nobody wants bitcoin right now?” asked Frank.
“I think the price will go down until someone wants it.”
“Sounds like stocks again without the company,” he remarked. “Even in horse betting, there is a real horse to learn about. It’s like betting on horses without horses. Even Beanie Babies and Pet Rocks have something. I found a Beanie Baby at a flea market; my granddaughter liked it. Twenty-five cents seemed steep, but it was worth it for a smile. So I still don’t understand, what do you get for your money?”
“This is where NFTs come in,” I said. “They are tokens to prove that you are the original owner of something like a bored monkey picture.”
“I saw that with Jimmy Fallon,” Frank recalled. “He paid $270,000 for this ugly drawing. I don’t want them for nothing.”
“I guess it’s something to brag about to get people talking about you.”
“I tell you something. If you’d paid even $500 for a picture that looked like this, I guarantee everyone in Vermont would be talking about you.”
Frank thought for a moment. “So I think with all this stuff,” he continued, “people think it’s valuable because the computer token makes it scarce in some weird electronic way?”
“Exactly! Now you have it,” I said.
“Well, I’ve got money that’s even tighter.”
“How many are there?”
“There are none at all,” Frank replied. “It’s as close as possible. It has to be worth billions.”
“But there’s nothing you can sell.”
“That’s OK, I’m fine,” said Frank. “I’ll tell you what. How about I make one of these, the only Frank coin in the world. I’ll sell her to you for a million dollars. Just because you’re my friend.”
Well, I don’t have a million dollars, and Frank didn’t have any more questions, which is usually a sign he’s thinking about something. This was a long silence, a full beer and a half silence. Then he said, “Sounds like you’ve got a bunch of people who have so much money they’re bored with it. And they want to make it more interesting again, even if they might lose everything.”
“Okay,” I said, “I can’t deny that.”
“Well, we have a good old-fashioned way from Vermont to solve this problem,” Frank said. “These people just have to buy a farm.”