SLEEPWALK This will make you cringe. In 1985, I bought my first CD in London: The Collection, an album of Ultravox’s greatest hits. Although I did not have a CD player at the time, I knew I was being seconded to Tokyo where I’d get one cheaper and kick off the transition of my music collection to crisp digital, leaving my analogue vinyl LPs behind in the attic. By 1992 I had amassed a decent CD collection, the year MiniDisc arrived, an expensive technology offering 60-80 minutes of audio on a tiny silver disc. I moved my favourite tracks to that format. I still have a pile of MiniDiscs in a box along with the CDs I never play, but with no new MiniDisc players being manufactured, technology has moved on and made them worthless. Also in 1992, I was clearing my house in the UK ready to move to Hong Kong and throwing out junk. My dad held up the two plastic cases of vinyl records containing everything from The Sound of Music – bought when I was six years old – and my amassed collection of teenage Deep Purple and Black Sabbath LPs to the Duran Duran and Simple Minds classic albums I listened to in my early 20s. Original pressings. “What shall I do with them?” Dad asked. “We’ll take them down the dump, I no longer have a record player, everything is on CDs.” I said it would make you cringe. DANCING WITH TEARS IN MY EYES So you can imagine what went through my mind when I read about a recent non-fungible token ( NFT ) sale where an auction house in New Zealand , a respected dealer in art, vehicles, and jewellery, auctioned two historical photographs with the original glass plate negatives and NFTs of the pictures, then recommended the buyers smash the fragile glass negative plates making the photos permanently and exclusively digital. The photographs under the hammer were portraits of an important New Zealand artist born in 1870, Charles Goldie, at his easel mid-painting, which sold for NZ$51,250 (US$34,100). The second one, in his studio, went for NZ$76,250 (US$50,700). The photos, and negatives, are at least 110 years old and historically important. Writing’s on the wall: why the overhyped NFT market will collapse This followed the rather curious sale last week of NFTs of Beatles memorabilia. Julian Lennon saw fit to mint NFTs of some items given to him by his dad, the legendary John Lennon – whose records, I’m ashamed to say, also went into the dump along with Paul, George and Ringo. Among Julian’s NFT offerings were the handwritten lyrics to Hey Jude which sold for US$76,800 and the digitised ownership of five other familiar Beatles goodies including John Lennon’s “ Help! cape”, his Magical Mystery Tour Afghan coat and a lovely 1959 Gibson guitar. The total sale raised just over US$158,000 for Jules. However, there was a catch. With an NFT, the buyer does not actually get access to the physical items – Julian gets to keep those. These two auctions raise several questions: • I was an idiot with my record collection, but how can a respected antiques dealer justify advocating wilful destruction to create rarity value? • Is the NFT market sot hot that there is a ready supply of fools willing to part with cash for digital ownership of things they can never get? • Do investors no longer ask: What am I buying? Who from? And what do I get for my money? What concerns me even more is that traders are starting to use cryptocurrency and NFT-friendly Hong Kong as a hub – and you will be offered these investments following substantial NFT advertising recently spotted in investor-rich Central. Beatlemania: screaming Hong Kong teens welcome Fab Four in 1964 MR. X A non-fungible token is essentially a digital receipt to say you own something, like Lennon’s guitar, but you are just buying the receipt that says you own it, not actually the item itself. It is not a physical receipt either, you can never touch it, hold it or put it in your pocket as it is stored on a blockchain – much like cryptocurrency . However, unlike cryptocurrencies, or physical money, they are not exchangeable for goods. Blockchain-based, an NFT offers the same security against fraud as cryptocurrencies, but only the receipt of ownership – so it makes sense to destroy the original on which the NFT is based so no one can make more copies. Out of curiosity I looked up “funge” in the dictionary and in old English it meant “fool”– I am on the right track, I think. ‘The art never matters’: why the NFT art market is full of stolen work Since the first NFTs appeared in 2014, they have come in many forms, but generally represent digital and physical art such as images, games, music and film and have been used by genuine artists selling genuine artwork, but the popularity of the tokens are pulling in scammers as they are easy to make and use establish blockchains such as Ethereum. However, being a wholly digital record, computers are now autonomously creating arty NFTs and flicking them into the Ethereum blockchain in vast numbers to tempt investors. REAP THE WILD WIND In my humble opinion, investment NFTs, hailed as an integral part of the economy of the much-hyped metaverse , are a time bomb – and a very large one at that. Nothing lasts forever online as links break, services disappear, or technology simply moves on. NFTs could be the new MiniDisc in the making. In 2021, the NFT market was widely reported, including by Bloomberg and the Financial Times , to be worth an estimated US$41 billion, about the same as the fine art market, according to an analysis by New York-based Chainalysis. Another estimate from platform provider DappRadar put the estimate at US$22 billion, and turnover estimates are being passed around now at half a billion US dollars per week. The bottom line is that nobody really knows how much money is changing hands and, most importantly, it is unregulated and easy to create a false market. For example, much of the reported volume could be though wash trades – where a group of traders, acting in collusion, buy and sell at increasingly higher prices creating a false market. There are also instances of front-running before the NFT is “dropped” in a public marketplace, which would be illegal if it were an IPO. Hong Kong NFT buyers emerge as targets of hackers, scammers The pull of cryptocurrencies, and crypto assets including NFTs, in 2022 will be strong as investors see a period of high inflation ahead. As recently as yesterday crypto was once again pitched to me as “new gold” , I would favour real gold rather than a digital impostor of anything, as you constantly need to find a “bigger funge” than you to offload your holdings onto when you want cash to buy your dinner. LAMENT I can’t describe how much I regret that stupid decision to send my record collection to a landfill site – dumping them was me being idiotic and trying to show off. I don’t know how long PVC lasts – by some estimates it could be more than 1,000 years – but I hope some curious digging of the Thurrock Thameside Nature Park in future by a piloted android treasure hunter recognises what is in those 12-inch plastic cases and spins up the original LPs once more, a long time after the digital representations of the real things and associated NFTs have become worthless.