Why “NFTs Are a Poverty Trap”

YouTuber Dan Olson has gone viral for a video essay where he offers a wide-ranging analysis–and takedown–of cryptocurrency and NFTs, entitled “Line Goes Up.”

Olson had long been established on YouTube for creating analytical but accessible videos on a number of different topics and cultural phenomena like 50 Shades of Grey and Detective Pikachu. Olson had amassed a following of over half a million followers by the time he released “Line Goes Up.”

The 2-hour long video, which Olson had been working on for nearly a year, spread across the internet like wildfire since its release on January 21, 2002, which eerily coincided with a huge crash in the crypto market.

Olson’s video, which deftly explains the rise of cryptocurrencies and the successive rise of Non-fungible Tokens, has stoked a larger conversation surrounding what people call “the Problem with NFTs,” which Olson more sharply states as “NFTs are a poverty trap.”

Olson explains that people feel motivated by “deflationary incentives” to buy cryptocurrency, telling Vice that people believe “you’ve got to get in now, because down the road, it’s going to be harder and worse to get in because whatever you get later is going to be, by definition, worth substantially less,” Olson explained that this deflationary aspect is intimately linked to the finite nature of cryptocurrencies, which valorize scarcity, and thus, hoarding.

YouTuber explains that NFTs are a “poverty trap” due to being deflationary

When asked what he would tell people if he had to articulate the most important takeaway from the NFT craze, Olson said this:

“Deflationary economies are a poverty trap that are built to recreate serfdom. That’s what cryptocurrency is built for. If you’re constantly hearing people tell you that you’re going to regret not getting in early, that’s your number one sign that getting in late is a trap. You have to ask: What are the power dynamics of a system like that? What does this look like to somebody who didn’t have the option to buy in earlier? What does this look like in five, ten, fifteen years? ”

Non-fungible tokens certify the ownership of a one-of-a-kind piece of digital media — most commonly art, but can include anything from photography, music, memes, podcasts, tweets, etc — when NFT’s are purchased at auction, they are subsequently “minted” on the blockchain, where they become a file that cannot be manipulated, edited, deleted, or copied in their original form.

NFTs exist on the Ethereum blockchain (ETH), and this information about who owns them, what kind of media they are, and who created them makes them exist differently than an ETH coin. Another crucial aspect of this difference is the token’s non-fungiblity.