An Invisible Tulip Bulb in Plain View
Will you heed the warning from NFT scammers?
In 2021, believers in the old technology of blockchain finally succeeded in gaining the attention they long craved, with mainstream awareness of NFTs (non-fungible tokens). Yet, from the beginning, NFT marketers have made conspicuous displays of the dishonesty at the heart of their projects.
The graphics attached to many NFTs boldly acknowledge, and even celebrate, the similarity of NFTs, and the cryptocurrencies that enable them, to dangerous speculative bubbles and disastrous financial scams.
Prominent among these displays are images that evoke the tulip mania of the 1600s. Images of tulips and tulip bulbs are commonly associated with NFTs. One NFT shows a tulip inside a bubble. Another NFT goes even further, offering a token of code in association with a completely blank image, which it claims is the picture of an “invisible tulip bulb”.
The message is difficult to miss. It seems that people who are invested in the NFT market are eager to communicate that there’s nothing underneath all the blockchain hype, that NFTs are a sham.
What’s going on with this? Why are NFT sellers so enthusiastically referencing the greatest pump and dump scam of financial history?
The Appeal Of The Open Scam
One of the most terrifying performances, and yet also among the most beguiling to behold, is a scam done openly, in broad daylight, with no apparent sleight of hand.
When con artists announce that they’re doing a grift in the middle of their grift, it’s a sign that they know they’re untouchable. They’re announcing that they’re going to get away with it, and that confidence draws us in. It makes the scammers seem heroic, rebellious, and somehow on our side, to the extent that often, their victims believe that they’re in on the scam, benefitting from it somehow.
For many, the very boldness with which the fraud is announced makes it seem all the more trustworthy. Scammers, after all, are generally supposed to try to hide their scams. If a person declares themselves to be dishonest, the thinking goes, it’s a sign of their honesty.
This is the reason that scams are often referred to as confidence schemes. Ironically, the confidence with which the fraud is committed can make it seem not to be fraudulent at all.
NFT Markets Are Literally Selling Digital Tulip Bulbs
The tulip mania of the 17th century is the classic example of the dangers of a speculative market in which prices are disconnected from practical value. Shortages of certain new varieties of tulip bulbs in the Netherlands led to competitive bidding. These bids quickly escalated far beyond any reasonable expectation of profit from the bulbs themselves. Speculative investors soon accumulated what seemed to be massive fortunes, but when the bubble collapsed, they were left with nothing but tulip bulbs which they could sell only for the equivalent of a few pennies a piece, if they were lucky enough to sell them at all.
There’s a certain sort of person for whom the story of tulip mania is exciting and encouraging, rather than terrifying or cautionary. This sort of person is looking for opportunities to enter early into a market that’s going to go to the moon, outwitting all the other fools who buy in too late.
This hunger for the opportunity to exploit the foolishness of others is the emotional motivation that fuels the grift of the NFT markets. NFT sellers openly flaunt their tulip bulbs, announcing that they’re selling things of no real value for outrageously high prices. It sounds ridiculous, but because the display is made so confidently, it appeals to speculative investors looking for opportunities to bid low on tulip bulbs and sell high, to pump and dump.
That the scam is obvious is an essential part of the appeal of NFTs. The original scammers do little to obscure the con, and in doing so, they advertise to other, would-be con artists that there’s a new opportunity to make easy money. The first hand scammers show that they’ve made money by making a public performance of fooling gullible people, and then offer the second hand scammers the chance to do the same by buying in to the NFT marketplace.
All it takes are some initial set up fees to get involved in the get-rich-quick scheme. Those initial set up fees can quickly run into the thousands of dollars. If you see an NFT selling for less than hundreds of dollars, that NFT is almost certainly being sold at a loss. That’s what’s happening to the vast majority of NFT speculators.
Nonetheless, we don’t hear about these losses. What we remember are the seductive stories of people selling nothing for something. We can’t help but wonder: Could we get away with that too?
What About That Artist Who Made Millions From NFTs?
At this point, you may be thinking back to the beginning of 2021, when the NFT craze really got started. That’s when the artist Beeple sold NFTs loosely connected to his portfolio of work for tens of millions of dollars.
Surely, you think, if Beeple made tens of millions of dollars, other artists can make a good living from NFTs too.
If that’s what you’re thinking, you’ve bought into the scam.
The truth is that the sale didn’t really take place in an honest open market. Beeple’s NFTs were bought by Metakovan, a person who was at first anonymous but then was discovered to be Beeple’s own business partner. The auction was rigged as part of a scheme to give Beeple’s work the appearance of economic worth, and to give the appearance of value to cryptocurrency held by Metakovan.
The auction was a set up, the equivalent of your son putting up a lemonade stand at which glasses of lemonade are auctioned off to thirsty passers-by. As a crowd gathers to see what the heck is going on, your daughter walks up and begins to bid high on a glass of lemonade. She ends up paying a hundred dollars for one glass of lemonade. People in the crowd get the sense that some really special lemonade is being sold. They may not pay a hundred dollars per glass, but some will pay five or ten dollars, and your son makes a killing.
That’s what Beeple got away with, and it’s what created the surge of interest in NFTs. Most NFTs are sold not to strangers, but to business partners or to sock puppet accounts in auctions populated by fake bids that create the false appearance of rapidly escalating value.
The whole idea is to manufacture the appearance of a genuinely hot market to the gullible general public while nodding and winking to those who are clever enough to understand that it’s a con game they can profit from too.
Thus, we see the NFTs of tulip bulbs. They’re a lure to attract people who hope to get in on the scam.
Yes, Actual NFTs of Tulip Bulbs
The NFT mechanism is technically complicated enough to fluster the average person, and the average journalist, into befuddled acceptance that something impressive must be going on. The tulip bulb symbolism used in NFTs is a separate signal to other hucksters that they can buy in early to a new speculative investment hustle.
The trick is that both the general gullible public and the secondary group of gullible wannabe scammers are victims in this grift. While the general public is being conned into buying worthless bits of blockchain code, the second-line scammers are being conned into believing that they can replicate the scam. They pour money into the accounts of fee-collecting blockchain middlemen such as OpenSea, and perpetuate the NFT hype for long enough for the small number of original scammers to make an immense profit that no one else will be able to replicate.
So it is that we have the saddest NFT creators of all: Those who seem to believe that they are at the top of the NFT pyramid scam, even though they havefailed to successfully replicate the grift.
The Crypto Tulipa NFT collection is a good example of this.
Earlier this year, the NFT collection’s creator, Marcel Boer, wrote knowingly of the similarities between NFTs and tulip bulb speculation in his promotional material for Crypto Tulipa. He described his NFTs as “digital collectibles of tulips that live on the Ethereum blockchain.” Abandoning reason in favor of crypto hype, Boer claimed that tulip bulbs sold on a blockchain were somehow exempt from the ordinary risks of a speculative investment bubble. He wrote:
“The dramatic increase of its previous value testifies the significance of tulipa and validates them as an investment chase. As Crypto Tulipa are based on decentralization, an institutional burst based on institutional marketplace restrictions cannot happen.”
Basically, Boer made the circular argument that people’s willingness to invest in his NFTs proved that his NFTs were a good investment. Then, he sprinkled in a little mention of decentralization, an object of faith among blockchain believers, who treat decentralizaiton as something like holy water in its ability to magically banish all economic risk.
Next, Boer brought in the idea of scarcity as a source of value. “The Crypto Tulipa collection is inimitable and no new generations will be planted. Prices are increasing exponentially due to this shortage.”
It’s been over half a year since Boer made these claims. So, we can now ask: How did that artificial scarcity work out for the Crypto Tulipa NFT project? The data are clear: Marcel Boer’s faith in the magic of blockchain didn’t hold up in the actual OpenSea marketplace.
Despite what Boer claimed, the prices of the NFTs in the Crypto Tulipa collection were not increasing exponentially. They decreased or flatlined. Seven months ago, for example, Crypto Tulipa minted the Lutea Aureis NFT, and set a price of 0.3 Ethereum. No one made an offer on the NFT, and so before long, the price was lowered to 1/6 of the initial asking price — the equivalent of about $185. There have still been no offers on this NFT.
The Crypto Tulipa collection wasn’t really a scarce resource. Contrary to Boer’s boast, the Crypto Tulipa NFTs are infinitely imitable. There is no inherent economic value or functional originality in the NFT blockchain code behind the Crypto Tulipa art. Anyone can create a bit of NFT code and attach an image of a tulip bulb to it, but nobody really seems to want either the NFT code or the tulip bulb images.
In quality, the Crypto Tulipa project’s art is unremarkable, and because it’s online, it can easily be stolen to create new NFTs. A huge portion of NFTs are fronted by stolen art, not original creative work, and NFT exchanges such as OpenSea and Crypto.com are failing to take significant action to stop in the traffic of stolen art. That makes the artwork less scarce, not more scarce, less valuable, not more valuable.
Marcel Boer’s initial circular logic was that his NFTs were worthy investments because people were investing in them. The truth was that Boer had no investors. No one was interested in his NFTs, and his Crypto Tulipa project has had no buyers in the seven months since it was launched.
Boer claims to be a “data driven investor”, but the data from his own NFT project clearly show that NFTs have not been a worthwhile investment scheme for him. Boer put in time and money into creating his Crypto Tulipa NFT project, and it hasn’t paid off.
That’s been the experience of the vast majority of people who have tried to make money with NFTs. They’ve gained nothing but frustration, and lost a good amount of money in the process.
If Boer were really data driven, he’d write about this experience, just as he wrote about the project’s launch. He hasn’t done so. Why not?
It’s Time To Share The Shame
I can’t pretend to see into Boer’s mind and know what he’s feeling as an individual. However, I can observe more broadly that con artists rely on the shame that people feel when they realize that they have been the victims of a scam.
People love to brag when they think they’ve found a way to make lots of money. However, nobody feels good when they’ve been tricked into giving their money into fraudulent investment schemes. People hide their victimhood, because it doesn’t match the identity that they want to project.
Victims of financial exploitation schemes such as NFT marketplaces often feel that they are responsible for their losses. They feel ashamed of their foolishness. So, they want to hide their losses, and pretend that they never happened.
In keeping silent, they fail to grasp their true sense of responsibility as victims of a scam. They have a social responsibility to stop concealing what happened to them, and share their stories of being tricked. They have the power to prevent other people from getting hurt by being honest about the suffering that they have endured.
If we heard the stories of all the people who have lost money in NFT and cryptocurrency schemes, the world would have an accurate picture of what’s really happening in blockchain markets. Instead, we’re getting loud voices of those who claim to be profiting from blockchain investment schemes, and silence from everyone else.
Given that there’s nothing of inherent value in cryptocurrency and NFT markets, their valuation depends on the maintenance of faith. The silence of the victims of blockchain schemes facilitates this faith, and encourages more people to become victims of the scams. It perpetuates the con of confidence.
The truth is out there, if we look for it. Blockchain insiders themselves admit that they’re making money from speculative investment scams. They acknowledge that they’re selling nothing more than invisible tulip bulbs.
It’s time that we listen to what they’re saying.
It’s time to put down the bulbs, and pop the bubble.
