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22 April 2021

Why the NFT Boom Feels So Much Like Gambling - Decrypt

Why the NFT Boom Feels So Much Like Gambling - Decrypt

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When I was at Fortune in 2015, I closely covered the rise of DraftKings and FanDuel, the "daily fantasy sports" (DFS) companies that exploded in popularity and raised tons of money, then navigated legal challenges in New York and other states because their fantasy contests looked like gambling.

Five years later, a lot has changed: DraftKings went public via SPAC, FanDuel sold to an Irish betting company, and people hardly talk about DFS anymore because both companies have openly transitioned to legal gambling operations ever since May 2018, when the U.S.

The price of Bitcoin has skyrocketed to $60,000, and it feels like a matter of time till DraftKings and FanDuel begin taking bets in crypto.

For the uninitiated—though it would be near impossible to have missed this trend if you spend any time on the internet—NFTs are non-fungible tokens, crypto assets (but different from cryptocurrencies like Bitcoin) that live on blockchain and represent ownership deeds to a verifiably scarce digital or physical asset, from virtual trading cards to an art image to a video file to real-life concert tickets.

The most famous (or infamous) is a pastiche by the digital artist Beeple that sold for $69.3 million in auction at Christie's, but a more head-scratching example might be CrytoPunks: pixellated cartoon heads that predate the current NFT mania and are thus particularly valuable, since they're part of such a limited batch.

Billionaire investor and Dallas Mavericks owner Mark Cuban, who has gone all in on NFTs, says you have to "get over that perception that I have to physically be able to touch it, and realize that's more hassle, the joy of ownership is really what matters." But even once you wrap your mind around digital-only ownership, the prices are jaw-dropping, and look to many like a speculative bubble.

Earlier this week a series of 25 limited edition NFTs from EulerBeats (short music files named after the Swiss mathematician Leonard Euler) sold at auction, with every one of them selling above $85,000.

Some people have lost their NFTs due to security issues; other NFT marketplaces are not actually storing the NFTs on blockchain, which calls the whole game into question.

"This is what kills Bitcoin," says the hedge fund manager Ross Gerber, whose firm just started buying Bitcoin on behalf of its clients.

Whenever things start going well for Bitcoin, the criminals just come around like flies on poop?

During the ICO boom, I used to frequently use the analogy that those tokens were like casino chips being sold to investors for use in a casino that didn't exist yet.

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