Why NFTs are bad: the long version

NFT Artist & Cryptobro Blocker (for Twitter)

PDF version of this article (LaTeX)

Table of Contents

Abstract

What are NFTs?

A summary of why cryptocurrencies and NFTs are scams

  • NFTs don’t prove ownership — ordinary legal contracts are just as good, and in fact better since they are heavily regulated and can be taken to courts for a central resolution when problems arise
  • Blockchains (which NFTs rely on) are in the best case no more secure than ‘normal’ relational database storage systems, and in most cases are less secure
  • Cryptocurrencies have no innate value and are only useful as a pyramid scheme, something big crypto influencers are knowingly using to profit from those who don’t realise it
  • Both cryptocurrencies and NFTs cause high environmental damage, and there are no viable systems to deal with this problem due to security considerations

An explanation of blockchains

An example linked list, via GeeksForGeeks.
An example of blockchain structure.
  • Centralised blockchains (only a central authority, or some group of central authorities, can write new information into the blockchain or modify it)
  • Decentralised blockchains (no central authority — any user can write onto the blockchain or modify it, so in effect the users as a whole are the central authority).

Blockchain consensus systems: how user voting power is decided

The Byzantine Generals problem.
  • Proof of work: a user’s mining power is determined by how much ‘work’ they have done (this ‘work’ is explained in the Proof of Work section below).
  • Proof of stake: a user’s mining power is determined by how much currency they ‘stake’ (in practice, this is generally equivalent to how much currency they own)
  • Delegated proof of stake: Same as above, except a user’s mining power is not used to determine writing or validating blocks directly, but is used to vote for the ‘delegates’ who will write and validate blocks on behalf of all users.

Proof of Work (Bitcoin, Ethereum, Dogecoin and others)

Proof of Stake (some smaller cryptocurrencies)

Delegated Proof of Stake

The underlying fatal flaws of all these consensus systems

51% attacks

  • Proof of work: controlling ≥51% of the hardware used to mine
  • Proof of stake: controlling ≥51% of the currency
  • Delegated proof of stake: controlling ≥51% of the currency, allowing you to fill the group of delegates with your subordinates

False sense of security in PoS and DPoS

PoS: Why slashing is useless

DPoS: ‘Democratic’, in all the wrong ways

Proof of Work: Tragedy of the Commons

  1. New coins
  2. Transaction fees

Recovering from blockchain takeovers

Byzantine Fault Tolerance, and its weaknesses in decentralised blockchains

  • Software failure
  • Hardware failure
  • Human interference (e.g. a soldier tampering with sensors on an enemy warplane)

Why decentralised blockchains can’t scale

An example of ‘sharding’, or horizontally partitioning a relational database.

Why alternative consensus ‘algorithms’ are not feasible

The basic concept of the Snowball algorithm.
Political gerrymandering, explained visually. Via the Washington Post.
An excerpt from the Avalanche article.

Blockchain conclusions

The basics of cybersecurity, and why only the ‘weakest link’ in a security system matters

Security flow, from most secure (encryption) to least secure (user).

Malware

Phishing

Distributed Denial-of-Service (DDoS)

Man-in-the-Middle Attacks (MotM)

Credential Stuffing & Password Spraying

Users are the weakest link 99.9% of the time

Why don’t NFTs work?

NFTs are not ‘unmodifiable’

  • Centralised blockchains (only a central authority, or some group of central authorities, can write new information into the blockchain or modify it)
  • Decentralised blockchains (no central authority — any user can write onto the blockchain or modify it, so in effect the users as a whole are the central authority).

It isn’t physically possible to prove ownership of an item

A comedic example of the problems of decentralised disputes: without a central authority to decide which party is correct, one party can disagree forever irrespective of facts or evidence.

Environmental impact of NFTs

NFTs and crypto are forcing other businesses out of renewable energy

The misleading narrative of “other things that pollute as much as NFTs/crypto do”

  • NFTs add absolutely no intrinsic value (unlike YouTube and gaming, both of which provide entertainment to billions of people, NFTs are solely artificial in value). Almost every other carbon-emitting sector provides significant utility and value; NFTs do not. In addition to this, YouTube serves far more customers than NFTs do; if they were comparable in size, NFTs would be orders of magnitude higher in carbon emissions.
  • Cryptocurrencies account for a small % of global emissions right now, but are one of the only solely artificial things to do so — and will continue to become bigger and bigger in their emissions, as they already have done, because of the nature of the proof-of-work systems on which most cryptocurrencies rely. This can be seen in the University of Cambridge graphs as well.
  • As of September 2021, a single Bitcoin transaction uses more electricity (1810 kWh) than one million Visa transactions. According to the US government, a single kWh of electricity costs 13.90 cents, meaning each Bitcoin transaction would cost $251.59 to process. There is no viable way to make this more efficient (techniques like sharding, and alternate consensus mechanisms like proof of stake just make the blockchain much less secure to bring about faster transaction throughput, so that isn’t helpful either).

Why the hype for NFTs?

Greater fool theory and tax evasion

NFTs as bets on the price of cryptocurrency

Outright crime

Source
As stated previously in the article, proof of transaction doesn’t equal proof of validity, resulting in this obvious and foreseeable problem. If they *could* prove validity, ‘stolen’ NFTs wouldn’t be possible.

Why cryptocurrencies don’t work

Impossible to regulate transactions

Default rates

Chargebacks: adult content, and all other kinds of purchases

Brazzers membership form (as of 30 Oct, 2021). Note the RealityKings offer at the top, pre-selected, with small print at the bottom.
TeamSkeet membership page — see the pre-ticked box on the right. This is considered invalid for consent purposes under GDPR rules, to take but one example of how this practice is viewed.

Appendix A: Art stolen and minted as NFTs

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Computer scientist. https://twitter.com/antsstyle

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Antsstyle

Antsstyle

Computer scientist. https://twitter.com/antsstyle

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