The U.S. Securities and Exchange Commission (SEC), led by crypto-skeptical Chairman Gary Gensler, is reportedly investigating NFT creators and marketplaces for securities violations, according to a report from Bloomberg.
Anonymous sources in the report claim that the SEC is investigating whether: “certain nonfungible tokens… are being utilized to raise money like traditional securities.”
Throughout the last few months, attorneys from the SEC’s enforcement unit have reportedly sent subpoenas demanding information on specific NFTs and other token offerings.
While crypto lending products have been the subject of great regulatory scrutiny over the past year, this report marks a major move into investigating the NFT sector. The inquiry shows the SEC is taking a particular interest in how fractional NFTs are being used. That’s where a more valuable NFT is tokenized into smaller pieces and onsold.
The warning signs have been clear for a while, with Hester Peirce, also known as Crypto Mom, stating back in Mar. 2021 that selling fractionalized NFTs could be breaking the law.
“You better be careful that you’re not creating something that’s an investment product — that is a security”
This investigation is the latest in a wave of clampdowns that seek to govern the cryptocurrency market more firmly. Most recently, the SEC ordered that New Jersey-based crypto lending company BlockFi pay a record fine of $100m for failing to list “high-yield: lending products as securities.
While Bitcoin and Ethereum have been able to avoid scrutiny owing to the fact that they aren’t considered securities by the SEC (at least, not yet), other digital assets have not enjoyed the same reprieve, most notably Ripple Labs the parent company of XRP, which has been embroiled in a legal case over selling “unregistered securities” since late 2020.
NFT sales have continued to grow, flouting the current market decline — with the top two NFT exchanges LooksRare and OpenSea sharing $10.7 billion in trading volume over the past 30 days.
In his monthly crypto tech column, Israeli serial entrepreneur Ariel Shapira covers emerging technologies within the crypto, decentralized finance and blockchain space, as well as their roles in shaping the economy of the 21st century.
Jack Dorsey, Twitter’s ex-CEO and Bitcoin (BTC) aficionado, is not a big fan of Web3 — or at least of what its grand vision is shaping up to be. Users won’t own the next iteration of the internet, he asserts again and again. Instead, venture capital funds pumping millions into blockchain and Web3 projects will be the ones to hold the reins. But, will they, though?
The reality, as usual, is not as partial as either side would have you believe. In essence, Web3 is the dream of an internet free from the grasp of centralized platforms such as, well, Twitter. Different commentators also include other features such as an end to pervasive surveillance, more decentralization, data that’s understandable to both people and machines and AR/VR functionality. But, at the core, it seems, the Web3 movement is about bringing down the big fish.
In its current shape and form, after all, the internet is indeed quite centralized in a lot of ways. Just four companies run almost 70 percent of the global cloud infrastructure that is home to millions of web pages and applications. All the familiar faces are also encroaching on the crucial infrastructure making up the web’s backbone. And, platforms like Twitter and Facebook have largely centralized the way we consume content, becoming the window into the wider web for many — just look at Facebook’s standoff with Australian news publications.
Jack argues that the whole Web 3.0 brouhaha is ultimately a lot like a coup. A group of upstarts comes together, striking up a plot to overthrow the royalty, but they are only doing that out of self-interest. They have no thoughts to spare for the layman out there. And, should they win, little would change in the kingdom other than the banners flying over the capital.
So, is there anything in Web3 for the laypeople of the centralized kingdom? The reality is, as usual, complicated.
It is undeniably true that Web3 is a hot topic in the VC world. It’s not just a16z bringing forth this vision. There’s also Iconium, a private investment fund focused on digital assets and decentralized projects, investing in networks like Secret and Terra and dozens of other funds large and small. All in all, VCs pumped $33 billion into blockchain startups in 2021 and this figure speaks for itself — but not necessarily with the implication of control.
In the digital world, you reap what you code. Code is the law, blockchain enthusiasts like to say, and even though the crypto community itself didn’t always live by this principle, it is a rallying cry for some of its more purist advocates. The idea behind it is that the code is a more unbiased judge than any centralized entity could ever be, and so, in code we trust.
While the sentiment may be a bit naive, this focus on the code is worthy of further discussion. Things like the pervasive surveillance that users deal with today stem from the code powering the platforms they use. The reason why Facebook and Twitter services pull in your data is that they were coded that way. This design, for its part, stems from a specific business model from the Web2 era: You pay for the free service with your privacy.
By extension, though, an app without hard-coded consumer surveillance is fundamentally incapable of spying on the users. Neither is it capable of exercising any form of control over anything it’s not built to control in the first place. And, as long as it happens to sit on a public blockchain where its code is open for review, users will be able to inspect its limitations themselves. Those who don’t speak Solidity will still be able to hear from those who do, as the open-source community is generally always abuzz with insightful discussions and opinion-sharing.
The changing tides of investing
Don’t be mistaken: VCs are not charities, they are very much interested in returns on their investment. The question is, though, where do these returns come from? In this respect, things are different from project to project, but in most general economic terms, blockchain projects are all about tokens. Sometimes, it’s not positive, as victims of any of the recent rug pulls may testify, but for VCs, that’s essentially how they cash out. They invest by buying tokens from the project and profit from selling it when it takes off. More often than not, it’s that simple.
A VC investing in an invasive app taking a jab at the established giants fits into Dorsey’s argument. And, yes, a decentralized application (DApp) can hypothetically be as invasive as a centralized one. A VC investing in a privacy-first open-source project in hopes of cashing out on its token does not. Neither can accrue any kind of outsized power in the hypothetical decentralized internet of tomorrow unless projects they invest into explicitly hand them this power — which is something the community can keep tabs on.
Furthermore, the face of investing is changing. The push for decentralization has given rise to decentralized autonomous organizations, or DAOs, which often come together around a specific vision or an investment. In a somewhat similar vein, projects like dHEDGE, a social asset management protocol, give retail investors a chance to pool their assets together under the guidance of a skilled manager or algorithm and put them to work. Both approaches will ultimately lead to more democratized and more conscious investing, which also runs against what Dorsey is charging.
All in all, the tale of Web3, as it often happens with big ambitions and big words, is now marketing buzz and speculation as much as it is genuine technological ingenuity and a push for a better web for all. Something like this inevitably takes a bit of cynicism to process without falling into any of its many caveats, but it is just as important to look out for the diamonds in the rough. That is exactly what investors are doing. There may never be a single tectonic shift in the Web3 foundations, but as more and more decentralized projects take off that offer users genuine value beyond purely financial terms, the Big Tech grasp on the Internet may indeed give way to a new paradigm, one that won’t ultimately give us more of the same.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Ariel Shapira is a father, entrepreneur, speaker, cyclist and serves as founder and CEO of Social-Wisdom, a consulting agency working with Israeli startups and helping them to establish connections with international markets.
Bullish optimism returned to the cryptocurrency market on March 1after a majority of tokens turned green and Bitcoin bulls telegraphed their intention to hold the $40,000 level as support going forward.
Data from Cointelegraph Markets Pro and TradingView shows that the price of Bitcoin (BTC) has surged 20% from a low of $37,409 on Feb. 28 to an intraday high at $44,951 on Tuesday.
BTC/USDT 4-hour chart. Source: TradingView
Here’s what several analysts are saying about the sudden bullish reversal in Bitcoin price and what crypto traders can expect moving forward during this time of increased global tensions.
A revisit to $34,000 is “not out of the question”
Prior to Tuesday’s price surge, BTC sellers were firmly in control of the market according to a report from Delphi Digital, which posted the following chart and noted that “in the wake of recent events that have unfolded, being cautious over the last two weeks has indeed proved to be the correct course of action.”
BTC/USD 6-hour chart. Source: Delphi Digital
According to Delphi Digital, the major lower support level to keep an eye on is $34,000 based on the amount of support seen there back in January when a hawkish Fed caused markets to tumble “before staging an impressive rally.”
Delphi Digital said,
“Since then, price has failed to sustain momentum and returned to this $34,000 region as Russia announced its invasion of Ukraine. Price has since bounced to $38,000 at the time of writing, but a revisit of the $34,000 support level is certainly not out of the question just yet.”
Hodlers are hopeful
A more bullish projection was offered by on-chain analysis firm Glassnode, which noted that “despite a 50%+ correction” since the highs in November, a majority of the buyers that had entered the market throughout the August to November rally “have not liquidated their positions.”
Bitcoin URPD on Feb. 27. Source: Glassnode
According to Glassnode’s analysis of the URPD metric, which shows the distribution of coin supply at the price it last moved on-chain, “the primary redistribution appears to be coming from investors who bought the $60,000+ range” and have recently been selling in the $35,000 to $38,000 price range.
Glassnode said,
“This spending behavior describes a market dominated by price insensitive HODLers, who appear unwilling to liquidate their coins, even if held at a loss. Meanwhile, top buyers have been significantly fleshed out, and represent a far smaller proportion of the investor cohort when compared to May-July 2021.”
A final bit of insight with a bullish bent was offered by options trader and pseudonymous Twitter user John Wick, who posted the following chart noting that “you can see we have a clear double bottom with a nice sign of strength.”
BTC/USD 1-week chart. Source: Twitter
John Wick said,
“We also have a confirmed reversal. Stops should always be set under the signals wick. I would be surprised if this setup takes us over $60,000.”
The overall cryptocurrency market cap now stands at $1.93 trillion and Bitcoin’s dominance rate is 43.2%.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Global trade and financing suffer from inefficiencies because of traditional infrastructures. However, according to Martha Reyes, the head of research at Bequant, crypto can fix this issue.
In an interview with Cointelegraph, Reyes shared her thoughts on the state of global trade and financing and how crypto makes this more efficient. According to Reyes, despite the growth and magnitude of global trade, areas like remittance payments still suffer from the number of intermediaries that transactions have to go through. This leads to lengthy transaction times. Reyes notes that legacy systems for cross-border payments make global trade a “prime candidate” for blockchain technology adoption.
“Digital ledger technology can make complex trade transactions more efficient and secure. Smart contracts allow parties to specify the terms of an agreement and ensure that those are immutable and transparent.”
Reyes adds that the traceability of ownership for documents and agreements stored within smart contracts makes security tighter. Apart from this, the researcher notes that transaction settlement within blockchains is a lot faster and reduces friction.
Apart from global trade, Reyes thinks that tokenization helps in the aspect of financing as well. This may add benefits for small and medium enterprises (SMEs) in the form of access to capital.
“Tokenizing trade finance assets can facilitate access to capital for SMEs looking to trade as well as investors searching for yield, matching supply and demand more efficiently.”
Reyes also cited XDC Network as an example. “The smart contract transactions feature a digital coin, XDC, which represents the value of off-chain, bank originated assets that have yield generating capabilities,” says Reyes.
The research head believes that this is a way to “break through barriers” and give SMEs access to financing that’s outside of the sphere of the traditional financing system. Reyes notes that this “can also increase competition among lenders.”
Adding to the topic, the Bequant head of research also discussed the rise of hybrid protocols and what sets them apart.
“As more institutions take an interest in DLT, and they are often required to keep the information in their transactions private, this can present a dilemma in using a public blockchain. Some institutions are even creating their own private centralized blockchains. This is where a hybrid model becomes useful.”
Reyes notes that within hybrid networks, transaction details can be private while limiting data that’s given to the public network for the confirmation of the transaction. According to Reyes, “The technology combines the speed of private blockchains with the security of public ones, drawing on the strengths of both while minimizing any disadvantages.”
A set of 30 crypto wallets from 12 exchange accounts that have been linked to the terrorist group Hamas based in the Gaza Strip were seized on Monday by Israeli authorities.
Crypto exchange al-Mutahadun held the wallets where 12 accounts were allegedly being used by Hamas leaders to fund terrorist efforts against Israel. The Times of Israel reported that Israel’s Defense Ministry said on Feb. 28 that al-Mutahadun has helped Hamas’s military wing “by transferring funds amounting to tens of millions of dollars a year.”
The exact value of the seizures and specifically what crypto assets seized is not yet clear, however, Israeli officials believe Hamas uses “tens of millions of dollars” in crypto funds to fund its military. Israeli Defense Minister Benny Gantz said in a Feb. 28 statement
“We continue to expand our tools to cope with terrorism and the companies supplying it with the economic oxygen pipeline.”
Law enforcement agencies and banks around the world such as BNY Mellon have been increasingly tracking crypto transactions to pinpoint and drop the hammer on financial criminals. Blockchain transaction tracking firm Chainalysis has determined that only a small portion of crypto funds are used in criminal activity, however.
Hamas has been accepting crypto donations since 2019 when economic sanctions began severely constricting its ability to fight against Israel.
The seizure of wallets was conducted with help from Israel’s National Bureau for Counter Terror Financing (NBCTF). The NBCTF conducted a similar seizure of Hamas crypto funds last July when it confiscated wallets containing Tether (USDT), Ether (ETH), Dogecoin (DOGE), XRP, Binance Coin (BNB), Zcash (ZEC), Litecoin (LTC), and other assets.
Crypto tracking firm Cyphertrace confirmed that the funds seized in July were used by al Qassam Brigades, a part of Hamas’s military.
Crypto-based philanthropy is by no means limited to funding terrorism. In the first two months of 2022, supporters of the Freedom Convoy in Canada and Ukraine’s resistance force against Russia have raised millions in crypto donations.
Last month, crypto exchange Binance suspended services and marketing to Israelis upon request from the Capital Market, Insurance, and Savings Authority. The suspension is likely to be in effect as long as the Authority reviews the status of Binance’s license to do business in the country.
On Feb. 17, United States Deputy Attorney General Lisa Monaco announced at the Munich Cyber Security Conference the formation of the new task force “dedicated to cryptocurrency” within the Federal Bureau of Investigation (FBI). Coming four months after the launch of the Justice Department’s National Cryptocurrency Enforcement Team (NCET), this marks another major step in the U.S. government’s crusade against criminal abuse of cryptocurrencies.
What the task force will look like
The name of the new task force that Monaco revealed is the Virtual Asset Exploitation Unit (VAXU). It will bring together the personnel from the various units of the FBI with crypto expertise to conduct investigations that use blockchain analysis and can result in virtual assets’ seizure. There are still not a lot of details available on the details of the VAXU’s operation but in her speech, Monaco clearly emphasized the fight against cyber ransomware as the main priority:
“Ransomware and digital extortion, like many other crimes fueled by cryptocurrency, only work if the bad guys get paid, which means we have to bust their business model […] The currency might be virtual, but the message to companies is concrete: if you report to us, we can follow the money and not only help you but hopefully prevent the next victim.”
The VAXU also plans to work jointly with foreign task forces to track down multinational criminal networks operating in crypto.
Relation to the NCET
Despite its primary affiliation with the FBI, VAXU will in fact be part of the National Cryptocurrency Enforcement Team (NCET), launched in Oct. 2021, to target money launderers and cyber criminals. As per the official release, the NCET’s mission is to “tackle complex investigations and prosecutions of criminal misuses of cryptocurrency, particularly crimes committed by virtual currency exchanges, mixing and tumbling services, and money laundering infrastructure actors.”
The NCET’s mission includes investigation and prosecution of cryptocurrency cases, identifying areas for increased investigative and prosecutorial focus, building relationships with crypto-adjacent units and officers across the law enforcement system and collaborating with the industry players.
Essentially, the NCET has a mandate to participate in almost any relevant case, no matter who is investigating it. The addition of the FBI-backed VAXU will further extend the unit’s capacities and entrench its status as one of the most important forces in the crypto law enforcement game.
NCET’s new look
On Feb. 17, Eun Young Choi, ex-senior counsel to the Deputy Attorney General, was appointed to lead the NCET. Choi spent over nine years as the cybercrime coordinator at the U.S. attorney’s office for the Southern District of New York where she dealt with cryptocurrency while investigating money laundering schemes and online fraud.
To name one, Choi served as lead prosecutor in the case of illegal crypto exchange Coin.mx, an unlicensed virtual currency exchange whose operator, Anthony Murgio, was sentenced to 66 months in prison. She also successfully argued the appeal in the case against Ross Ulbricht, the founder of the Silk Road, who’s been serving his back-to-back life sentences since 2015.
Speaking to Cointelegraph, Sujit Raman, partner in the privacy and cybersecurity practice at Sidley Austin law firm, underlined the consistency of the current U.S. law enforcement approach. As early as 2018, the Department of Justice publicly declared that “cybercriminals increasingly use virtual currencies to advance their activities and to conceal their assets,” and announced its intention to “continue evaluating the emerging threats posed by rapidly developing cryptocurrencies that malicious actors often use.”
Detailed internal evaluation and analysis within DOJ led to the publication of a comprehensive crypto enforcement strategy by the Trump Administration in October 2020. Raman noted:
“The launching of the NCET and of the FBI’s Virtual Asset Exploitation Unit are, therefore, significant and important expansions upon lines of thinking that senior officials have been pursuing for some time, across administrations.”
Executive synergies
Michael Bahar, chair of global law firm Eversheds Sutherland’s Cybersecurity practice said to Cointelegraph that there will be a synergetic effect to the prospective cooperation between the DOJ and other regulatory bodies. Bahar commented:
“The growing experience and expertise within the Department of Justice will also spread to regulators like the Securities and Exchange Commission and financial regulators. Indeed, we should now expect the Department of Justice to further enhance its engagement with state and local law enforcement and regulatory bodies in the United States and globally.”
As Raman explains, these relationships between the DOJ and bodies such as the SEC, Commodity Futures Trading Commission (CFTC), Financial Crimes Enforcement Network (FinCEN) and Internal Revenue Service (IRS) already exist and, while there are limits on how much criminal enforcers can collaborate with civil regulators, “those partnerships will only continue to deepen.” But, in Raman’s opinion, the DOJ and its task forces will not drive the actual rulemaking around digital assets:
“DOJ is a law enforcement agency. It is not likely to play a very significant role in crafting a legislative framework to govern the crypto industry writ large.”
Both experts agree that these developments don’t pose any threat to the legitimate crypto industry. On the contrary, capable law enforcement can help move it forward toward becoming a more transparent and safe zone for investments.
The signal the DOJ activity sends is quite clear: It’s time to comply. “If you engage with cryptocurrency, you will need to demonstrate that you can do so in a compliant manner, calibrating your compliance programs to the unique risks that cryptocurrencies and the underlying blockchain technology present,” Bahar explained.
The continuing centralization and coordination of federal law enforcement’s investigative and prosecutorial efforts in the virtual currency space makes it clear: While the fast-growing crypto industry is here to stay, law enforcement is adjusting its strategies in response.
In 1996, when the Nintendo 64 was first launched in the United States, it sold 1.6 million units (worth $200 each) in its first quarter. Its closest competitor for the holiday season was a $30 Tickle Me Elmo doll, which sold around a million units in the same window. More than 20 years later, when Nintendo’s $300 Switch sold 1.5 million units in its first week, there was a lot more competition, and not just for the holiday season.
The business of gaming has changed dramatically since its early days. From basic monetization through the sale of physical and digital copies of games to in-game monetization through microtransactions, the widespread adoption of the internet has caused a pronounced shift in the gaming landscape. While the previous millennium’s video game studios depended on revenue from selling games and gaming hardware, today’s goliaths don’t expect you to buy their games at all.
The business of gaming
Nintendo is a relatively rare example of a large gaming studio that hasn’t delved too deep into the microtransaction waters. Fortnite rakes in around $5 billion per year for Epic Games, and with numbers like that, you can bet most gaming companies are at least investigating the free-to-play model. However, this shift in consumer mindset from deep loathing to moderate acceptance for microtransactions has been a long, arduous process.
Fortnite was far from the first game to introduce microtransactions, but it was one of the first mainstream examples of a live-service game that relied purely on in-game purchases. This came at a time when the concept of microtransactions invoked images of toxic loot-box economies and luck-based purchases that had games morphing into “pay-to-win” ecosystems and as consumers were growing increasingly frustrated with game publishers.
Fortnite flipped the script, pushing microtransactions as a way to distinguish yourself in-game while supporting the developers on the side. They did not affect gameplay, preventing deeper pockets from dominating the games, and served as an excellent way for those with money and appreciation to show it — a sort of vanity-fuelled charity. Sound familiar?
Treasure Chest from Fortnite. Source: Fortnite Wiki
Will it blend?
Nonfungible tokens (NFTs) were bound to find their way into gaming ecosystems. From early implementations like CryptoKitties to today’s Axie Infinity, digitally owned tokens are seemingly destined to be coupled with games.
Some of the biggest names in the video game industry are embracing NFTs, and it’s no real surprise. Gaming has never been more accessible than it is today, evolving from a niche consumer base to establishing global pop-culture trends. For decades, gaming collectibles have sold for obscene prices — why should their digital cousins be any different?
From Ubisoft to Square Enix, what’s really intriguing the industry is figuring out the best approach. Some have simply started selling digital items as NFTs, enabling buyers to resell them to other, more eager enthusiasts. Others are attempting to adopt the play-to-earn (P2E) model used by Axie Infinity.
Earlier this year, American video game retailer GameStop announced plans to partner with an Australian crypto firm to develop a $100 million fund for NFT creators, content and technology. In his New Year’s letter, Square Enix president Yosuke Matsuda indicated that the company would like to incorporate blockchain/NFTs into its future releases, but he did not mention any specifics.
Recently, Ubisoft attempted to release a limited-edition collection of NFTs alongside its Ghost Recon Breakpoint game. In a perfect world, this would have been a celebratory moment — one of the world’s largest, most valued gaming mammoths had proclaimed the adoption of blockchain technology. As you might already know, this announcement didn’t quite go according to plan.
Introducing Ubisoft Quartz We’re bringing the first energy efficient NFTs playable in a AAA game to Ghost Recon: Breakpoint!
According to a report from DappRadar, gaming-related NFTs generated revenue worth nearly $5 billion last year and represented around one-fifth of all NFT sales in 2021. Ubisoft unveiled an NFT project on Dec. 7 — a move that was met with a 96% dislike ratio on its announcement video on YouTube — and two weeks later, it had reportedly only sold 15 NFTs, collectively worth less than $1,800.
“The traditional gaming industry is not going to adopt NFTs in their current state,” Wade Rosen, the CEO of legendary video game corporation Atari, told Cointelegraph. According to Rosen, though blockchain gaming will continue to evolve, there currently isn’t enough tangible utility for players to consider adoption yet.
“NFTs — how they are produced, what value they provide to individual players, and communities of players that form around individual titles — will need to evolve pretty significantly before you can expect to see any widespread adoption within the [traditional gaming] industry. We do see a lot of potential for NFTs and blockchain technology within video games, but not until the definition of an NFT evolves significantly beyond where it stands now.”
It’s not that gamers don’t like the idea of buying NFTs — it’s that they have been marketed as blatant cash grabs. To drive NFT sales, Ubisoft made it absurdly difficult to earn any in-game items for free. Still, some of the most prominent players from Zynga to EA Sports are keeping a close eye on blockchain and how it could impact the business of gaming — an industry worth around $80 billion.
“The reaction to the topic within the industry is binary and visceral, and unfortunately, that just isn’t a good environment for exploration,” Rosen added. “We expect most of the related innovation over the next 12 to 18 months to happen within the more narrow blockchain gaming space.”
American gamers, with an average age of 35, have seen the medium shift from text-based to 2D to 3D to virtual reality multiplayer, all in around two decades.
During this time, the gaming industry has primarily profited from selling entertainment products that offer nothing more than a game. But as soon as you let money flow in and out of a game, you effectively turn its economy into a stock market.
This has led many gamers to feel that — with NFTs and blockchain — studios and game publishers are more focused on creating markets than on engaging, unique and, most importantly, fun gaming experiences.
Make games fun again
There is a middle ground for gaming NFTs, one where publishers don’t run blatant cash grabs and the tokens themselves have no impact on the financial incentives of the game. There are countless factors to consider when investigating why adoption rates have been slow, but many are convinced that cracking the case is only a matter of time.
Elliot Hill, director of communications at Verasity — a blockchain-based advertising technology firm — told Cointelegraph that while NFTs are clearly innovative and useful, they lack adequate infrastructure.
“With these hurdles in the rear-view mirror, it’s my view that widespread adoption of NFT technology is now much more likely by major game companies,” he said.
On the surface, video game studios are like software companies: They both hire developers, designers, managers and executives, along with sales and marketing teams, to build and sell a product. However, they serve an entirely different clientele.
The video game industry works some of the longest hours among software-based companies, filling a strange space between the extravagance of Hollywood and the structure of Big Tech. However, with NFTs practically tacking on optional financial services sidequests to video games, the line between work and play begins to blur.
Gaming NFTs exist at an intersection between some of the most fast-paced, high-skill, high-value environments in the world: technology, finance and entertainment. Each of these sectors accommodates all kinds of market conditions and consumer behaviors, and it will take time for them to understand the intricacies of the others.
Sarah Austin, co-founder of NFT and metaverse gaming launchpad QGlobe, told Cointelegraph that NFT games are in their early stages and haven’t evolved much beyond simple GameFi and P2E models.
“Going from AAA games to NFT games can feel disappointing. However, if the player’s motivation is to earn rewards, then they are less concerned with the quality of gameplay.”
According to research from Nielsen, consumers spent over $90 billion on microtransactions in 2021. The gaming consumer market is happy to spend money in-game, but not at the cost of the game itself. The more utility and impact an NFT has in-game, the less important the actual game becomes.
“The GameFi/P2E arena is where the industry is starting — not the end state,” said Atari’s Rosen. “Personally, I am intrigued by the potential for NFTs to allow for more collaboration and interaction between games and among virtual worlds. Eventually, NFTs may become building blocks that allow players and developers to create new, shared experiences.”
However, there are also cultural elements at play. While pay-to-win microtransaction economies are shunned in the West, gamers in the East seem to have adopted them wholeheartedly. Chinese game developer miHoYo’s worldwide smash hit Genshin Impact essentially runs on a luck-based loot-box economy but managed to gross over $2 billion in its first year.
Genshin Impact title image. Source: GameRant.
As Square Enix president Yosuke Matsuda previously stated, not everyone plays games just to have fun. Some want to contribute to the games they’re playing, and so far, traditional gaming has no incentive models that cater to these consumers.
There’s certainly a large enough market to warrant the effort, but it seems gaming NFTs, in their current form, are more geared toward attracting casino gamblers than average gamers. NFTs are most certainly coming to mainstream gaming — it’s just a matter of who can figure out the right balance between the finance of gaming and the gamification of finance.
Mirror Protocol, a decentralized finance (DeFi) protocol built on the Terra blockchain, was hit by one of the biggest collapses in financial history this week after Vladimir Putin ordered military strikes against Ukraine.
Terra tokens rally
Mirror Protocol’s native token, MIR, dropped to $0.993 on Feb. 24, its worst level to date amid a selloff across the broader crypto market. But a sharp rebound ensued, taking the price to as high as $1.41 two days later, up more than 40% when measured from MIR’s record low.
Just like the drop, MIR’s upside retracement came in the wake of similar recoveries elsewhere in the crypto market. But interestingly, MIR/USD returns appeared larger than some of the highly valued digital assets, including Bitcoin (BTC) and Ether (ETH).
Notably, Bitcoin rallied up to 17% after bottoming out locally on Feb. 24, below $34,500. In contrast, Ether’s gains in the same period came out to be a little over 25% after bouncing from $2,300.
On the other hand, Terra (LUNA), whose protocol hosts the Mirror Protocol’s synthetic assets platform, rebounded by more than 50% in the same period.
Interestingly, another Terra blockchain-backed token, Anchor Protocol (ANC), jumped more than 45% from its Feb. 24 low of $2.64, reaching its best level to date just shy of $4.
MIR paints a “golden cross” but…
The recent upside boom in the Mirror Protocol market also resulted in the formation of a so-called golden cross pattern.
In detail, MIR’s 20-4H exponential moving average (20-4H EMA; the green wave) surged above its 50-4H EMA (the red wave), a move that typically follows up with a short-term uptrend, as per the Mirror Protocol’s recent market history.
Nonetheless, the readings on the MIR’s four-hour relative strength index (RSI) — which went above 70 during the weekend — alerted about its “overbought” status. That has coincided with a correction in the Mirror Protocol market, with MIR now down over 10.5% from its retracement high near $1.41.
MIR/USD four-hour price chart featuring golden cross and Fibonacci retracement levels. Source: TradingView
The decline has had MIR break below $1.36, one of its previous support levels that also confluences with the 61.8 Fib line of a Fibonacci Retracement Graph made from $1.58-swing high to $1.00-swing low.
The price now eyes additional drops toward the next support levels near the 0.5 Fib line around $1.29, followed by the 0.236 Fib line at $1.13.
Conversely, if MIR holds above its 20-4H and 50-4H EMAs, its likelihood of retesting $1.58 might increase. Its bullish outlook also depends on how the ongoing geopolitical conflict in Eastern Europe plays out, and its impact on Bitcoin.
MIR/USD four-hour price chart featuring correlation between Bitcoin and Mirror Protocol. Source: TradingView
Notably, the correlation coefficient between Bitcoin and Mirror Protocol sits near 0.75 above zero, meaning MIR price is more or less mirroring the moves of the top digital asset for the time being.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The new book written by Steven Sidley and Simon Dingle explains why Defi Is the future and banks are the past, covering the entire landscape of people, projects and future portents
February 22nd, 2022 – A new book written by Steven Sidley and Simon Dingle has made a strong case as to why the death of the legacy banking system is inevitable as Decentralized Finance (DeFi) applications offer less expensive and more robust competitive solutions to retail, corporate and international finance. The authors draw on their insights as fintech professionals and technology and crypto entrepreneurs to outline their points. Both also have strong credentials as established authors.
The title of the book is Beyond Bitcoin: Decentralised Finance and the End of Banks, which is clear in terms of what the book is about and all of the chapters to follow are geared towards explaining why legacy finance is being rendered obsolete.
While written in a way that non-technical people will understand, it covers all of the main points of the DeFi industry including the birth of the industry, smart contracts, the removal of middlemen, lending and borrowing, automatics market makers, decentralized exchanges, ICOs, legacy financial models, yield farming, NFTs, stablecoins, mining, regulations, and more. It also outlines some of the major events in the past 15 years and introduces the reader to key individuals who have helped to bring about the world of DeFi.
The book aims to bring about what is truly missing in the DeFi space – a clear and articulate description of the entire landscape, including how each of the major Defi innovations works under the hood comprehension. Too many of the criticisms of distributed ledgers and blockchains are fueled by a superficial understanding of how the underlying technologies and services work, and how it compares with competitive traditional financial products. This book, written with wit and insight, cuts through the jargon and makes the subject both accessible and compelling.
The host ofJist (a UK-based blockchain-orientated YouTube channel), stated, “It wasn’t until I got the chance to read Beyond Bitcoin: Decentralised Finance and the End of Banks by Steven Boykey Sidley and Simon Dingle that I really understood the full scope of how this space threatens the world of finance, what exactly DeFi is, and how NFTs are going to be so much bigger than just some neat pictures.”
Further praise includes:
“A rich, clear, and articulate explanation of a transformative technology,” David Spence, former Director and Chairman of PayPal Australia.
“Looking backward to move forward, this book is a masterclass on the evolution and expansion of the crypto world and its possible futures. Essential for those wanting to move beyond the headlines,” Herman Singh, Associate Professor, University of Cape Town Graduate School.
“The gripping story of the great financial disruption and its portents, told with wit and insight,” Ray Hartley, Research Director, The Brenthurst Foundation.
“Everyone who cares about money is trying to get their heads around DeFi, and what it may mean for financial institutions. This book explains it all, with sparkle, depth, and clarity,” Michael Jordaan, ex-CEO of First National Bank and co-founder of Bank Zero.
Beyond Bitcoin: Decentralised Finance and the End of Banks is 240 pages long and is written for the intellectually curious layperson as well as those already established in the industry and released in stores across the US on Feb 22nd. The book is also currently available on Amazon as a paperback, audiobook, or Kindle ebook.
About Steven Boykey Sidley
Steven Boykey Sidley has worked extensively in technology and finance and is an award-winning novelist, playwright, and columnist. An American citizen, he currently
lives in Johannesburg with his wife and their two children. Steven possesses an MSc in Computer Science from UCLA and is currently a partner with Bridge Capital.
About Simon Dingle
Simon has been working with cryptocurrency since 2011 and has founded multiple fintech firms. His career spans broadcasting, journalism, design, product management, and investing all with a focus on information science, finance, and open source technologies. He is currently the chief of Venox Digital Assets which operates exclusively within the Defi space. Simon has been on the founding teams of several fintech firms, founded cryptocurrency exchange Luno, and opened banking provider Curve.
The blockchain and cryptocurrency rave is not ending anytime soon. And as more people are being introduced to revolutionary technologies in the digital space, new improvements upon these technologies are also being introduced. In the last couple of years, the DeFi and NFT industries have experienced immense levels of growth and, currently, metaverses and Web3 are the technologies making the digital space light up.
It is not yet clear where these disruptive technologies will lead us, but we are sure that there will be much value up for grabs. At the convergence of Web3 and NFTs lie many platforms looking to leverage technology and infrastructure to make the NFT ecosystem more decentralized, structured and community-driven.
Using both social building and governance, the decentralized autonomous organization disruption is a notch higher. The DAO is one major invention that is challenging current systems of governance. Utilizing NFTs, DAOs are changing our perspective of how organizations and systems should be run, and they put further credence to the idea that the optimal form of governance does not have to do with hierarchical structures.
With the principal-agent problem limiting the growth of organizations and preventing agents from feeling like part of a team, you can see why the need for decentralized organizations fostering community-inclusion is paramount.
Is there something you would change about your current organization if given the chance? Leadership? Structure? Payment system? What if your current organization could help you feel like a more valid part of the team by reducing the disparity between the principals and staff? Or, better put: What if you get to be a part of your organization’s governance? Sound interesting? This is what we’ll be discussing here.
Understanding DAOs
From its name alone, you can probably get an idea of what a decentralized autonomous organization is. A DAO is an organization that is focused on a specific mission, and its members work in coordination according to a shared set of rules encoded on a blockchain. The major purpose of the decentralized autonomous organization is to help eradicate a significant problem in many conventional organizations — the principal-agent problem.
As the popular English phrase goes, two’s company; three’s a crowd. Organizations need a more hands on deck. But with each new person joining the team, there is bound to be some divergence of interest, priorities and goals. This often results in parties making some selfish choices. DAOs avoid this problem by existing as a trustless system, removing the need for centralized leadership.
There are a few criteria that a company must meet before it can be considered a decentralized autonomous organization. The governing rules and policies need to be set up as a smart contract on a blockchain — this helps to remove the need for a central authority, and it also prevents any party from making decisions that are different from the organization’s initial goal. The treasury of the organization must be accessible only with the consent of the whole group, or at least a predefined percentage.
A brief history of DAOs
The earliest application of DAOs did not go well simply because stakeholders did not put a standard precautionary measure in place. Created in early 2016, the first DAO was called, simply, The DAO. It was an open-source framework focused on venture capitalism. It became an instant success, raking in over $250 million worth of Ether (ETH) — note that ETH was priced at around $20 at this time.
This huge success did not last long, as a bug exploitation attack left The DAO reeling from a loss of roughly 3.6 million ETH in mid-2016. It didn’t recover. Since then, several attempts have been made to run a successful DAO, and many more are being created at this very moment. (The Faith Tribe, discussed later in this article, is one of the closest to full decentralization.) The success of a DAO lies in the strength of its smart contract. And, as an investor, you should spend time looking through the smart contract’s open-source code to check for any red flags or abnormalities.
A token that can be spent within the system for rewards.
The smart contract holds the rules and nitty-gritty of the DAO, ranging from a roster of its members, the amount invested, who the majority stakeholders are, the workflow, and the reward mechanism. The other two aspects depend on this important facet, as a faulty smart contract puts the project at risk. Any upgrade would also need votes from all its members, so it is important to get it right from the start.
Encoded in the smart contract is a token. The token is useful in allocating rights and incentives to the organization members. The DAO involves everyone in its mission, but members have different levels of benefits based on different input values.
Notable advantages of using a DAO:
The autonomous structure of DAOs makes them open to transparency. The concept of decentralization has fostered the idea of trust and, with DAOs, you don’t need to be worried about the people behind the organization and whether or not there’s an ulterior motive. The template everyone is judged by is the smart contract, and every transaction is immutably recorded on the blockchain.
There is no long, arduous process required to accept innovations with no central authority. With DAOs, innovations do not need to pass through different hierarchies before they get to those with the authority to make decisions. Anyone can make a suggestion, and the fact that these suggestions come at a fee encourages more well-researched and thought-out ideas, not just random, vague ones.
DAOs solve the principal-agent problem. There is no power play as members see themselves as equally responsible for the organization’s progress. Everyone is responsible for the organization’s direction, and if there is to be a change in the trajectory, it has to come with the consent of everyone on board.
Disadvantages of using a DAO:
The major disadvantage of the DAO is that it needs everyone to be involved. (Wait! I know you’re thinking: “Isn’t that supposed to be an advantage?”) Yes, there are times when the codes written for the smart contracts are buggy and have loopholes, and getting the whole organization to agree on how to rectify those issues becomes a time-consuming process. Knowing that hackers can operate more effectively given ample time, this can cause huge problems.
The legal terrain for DAOs is still subject to the regulatory frameworks of different nations. Since the DAO itself is not bound by borders, it comes with a high possibility of facing multiple lawsuits from different cities/countries. This is a hurdle that has not yet been surmounted.
Examples of and use cases of DAOs
Faith Tribe
Faith Tribe is an open-source design platform specially made to give fashion creatives a say both in the metaverse and physical world. It is the first fully decentralized platform for fashion creatives, and it is community-owned.
The general idea of NFTs relates to arts, so Faith Tribe is looking to change the fashion design narrative by contributing to the growth of Web3 while also building an economically viable ecosystem.
The global market for fashion apparel is roughly $3 trillion, and 15% of this is unbranded. With Millenials and Gen Z showing unflinching interest in fashion, Faith Tribe is looking to leverage their engagement with the metaverse in bringing more brands into the limelight without the help of an intermediary.
Gains Associates
Another great example of a DAO use case is Gains Associates. Gains Associates is a decentralized investment fund that utilizes a DAO in order to make investment in cryptocurrencies and projects in the blockchain space accessible to anyone — and in a transparent way. The organization does this by sharing news, insights and opinions with a like-minded community whose main goal is to develop a solid aptitude and knowledge with regard to investing in the industry.
Paragen
A fantastic example of a DAO being used as a project launchpads is Paragen. This is an organization that focuses on helping projects through the preparatory stages before they launch. From marketing to strategy, to in-depth technical development, Paragen offers comprehensive advisory support throughout a project’s cycle.
Paragen also incubates projects by searching for talent. Upon the discovery of this talent, Paragen then works with the talent in an advisory capacity as an incubator. Finally, Paragen helps with the launching of projects. Through the DAO’s rigorous screening process and sophisticated research papers, the community members have a portal to where they can access safe and secure projects in a single hub.
Tangible
Tangible is an interesting example of the types of problems that can be solved using the DAO model. Tangible custodies real world assets like fine wine, gold and real estate and mints NFTs that represent the physical asset. These NFTs will be tradable on their marketplace, which is set to launch in the near future. This enables deep instant liquidity for assets that have traditionally been cumbersome to trade.
Gaming and DAOs
In 2021, blockchain gaming took the world by surprise with a high rate of adoption and acceptance. It’s great just being able to play a game and earn value from it on the blockchain, but playing a game that utilizes the benefits of a DAO for its community is even better.
One such platform to offer these games is Nest Arcade. Nest Arcade is a play-to-earn arcade application on the blockchain. The project’s goal is to massively accelerate the adoption of blockchain technology through the help of a simple application that offers a variety of games its community members can select from and play. Think of this as a Netflix application, but for mini-to-medium scale games.
Using Nest Arcade, players will be able to own their in-game characters through the use of NFTs and playing with them in a variety of play-to-earn games. Players will earn rewards from playing on the Nest Arcade platform via Nest’s own SPL token ($NEST), which is the project’s currency, as well as via Solana (the blockchain it is built on).
Even though the growth of DAOs has been overshadowed by NFTs and various play-to-earn models, they have been growing significantly in relative silence, and many of them have seen sizable venture capitalist involvement. Gaming DAOs are a major part of the DAO ecosystem that have received heavy investment from VC funds.
Despite their substantial funding, it is difficult to see how they will fare against less decentralized virtual world games, such as Roblox.
Why DAOs are the future
The stereotypical traditional organization has seen more flaws than imagined, and the COVID-19 pandemic has left us with many workers who are not willing to return to their former jobs because they feel used and without a say. It’s unclear if the traditional systems will change or how soon they will, but DAOs have shown a clear path to better working conditions and staff management.
The two unique models for DAOs are the token-based membership and the share-based membership, and both of them have team-centric motives — not a sign of superiority complex.
Because of these reasons and many more, the concept of bringing decentralization into private and public governance has been birthed.
The decentralized autonomous organizations have been used in projects like Dash, Digix, and even BitShares. We have even seen torrents operate similar models and look to integrate blockchain inclusiveness into their future upgrades.
As Vitalik Buterin, co-founder of Ethereum, cited, most companies are likely to buy into the DAO system as it helps to reduce operational costs and improve the bottom line of these companies’ finances.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Evan Luthra is a tech entrepreneur and blockchain expert holding an honorary Ph.D. in decentralized and distributed systems. Evan has been featured in Influencive’s “The Top 30 Entrepreneurs Under 30 Creating Life On Their Own Terms.” His companies, StartupStudio and Iyoko, invest in and help build the companies of tomorrow. Evan is a featured speaker at various universities and conferences around the globe.
