I work in tech and know just enough to not be an enthusiast about any of it, so while I understand the concept of NFTs, I don't really understand how any of it works in practice.
I keep seeing these pictures, like a monkey cyborg or the ugly cartoon lions, that have sold for huge amounts. I understand people are paying in Ethereum or whatever, so it's not exactly like they're selling for millions of dollars, but what is stopping me from making a bunch of crappy art, turning it into NFTs, selling it all for Ethereum, and cashing out the Ethereum? Is there some special significance to the NFT art I'm seeing that makes dumbasses want to buy it? Like the artists are well known, or the images are well-known memes or something? I'm guessing I can't just start doing it too because if it were that easy everyone would already be doing it. Help me understand
I don't think it's a coincidence that crypto completely jumped the shark when the art world got involved. The fine art market is infamous for price manipulation, money laundering, tax evasion and monopoly/cartel behaviour. Here are the kinds of things that people could potentially be doing with NFTs:
I owe you $50 million for a shipment of cocaine and sex slaves. I can't just transfer $50 million to your bank account, because people will probably start asking questions about why I'm gifting huge amounts of money to a suspected human/drugs trafficker. So instead you make some crappy MS Paint art, we get our friends to generate loads of buzz around it, we hold an auction, our friends bid at various prices, and I swoop in and buy it for $50 million (and if some idiot comes along and outbids me, that works out even better for both of us).
I create an NFT and sell it backwards and forwards between different accounts and fake identities, making it seem like it's worth $1 million. I donate it to my charitable foundation which teaches kids to code. I now get to deduct $1 million from my income when I calculate my tax payment.
I create a series of NFTs and get a bunch of accomplices to buy most of them for huge sums of money, which I pay back to them. Then some gullible people come along and assume that the remaining NFTs in the series must be worth huge amounts of money too, and buy them.
The reason why this works is that it's very hard for anyone to tell the difference between a piece of art whose price has been inflated for nefarious purposes and a piece of art that just has a lot of hype around it. You couldn't do this with, say, oil, because everyone knows how much a barrel of oil is worth.
I think you generally have to pay to create it and market it, and the vast majority don't sell for very much or at all. What you definitely shouldn't do is spend large amounts of money buying NFTs and hoping that their price will continue to go up. At some point the market will almost certainly crash. There were people who invested their life savings into Beanie Babies and got caught out when that market crashed.