IRS introduces broader ‘Digital Assets’ category ahead of 2022 tax year

October 19, 2022 Coin Telegraph

2022 tax form

An early draft of the 2022 IRS tax form sees cryptocurrencies, stablecoins and nonfungible tokens grouped under a new “Digital Asset” category.

American taxpayers will find a broader, more defined category encompassing cryptocurrencies and nonfungible tokens (NFTs) in their 2022 IRS tax forms. The draft bill released by the Internal Revenue Service features a well-defined Digital Assets section that outlines if and how taxpayers will account for the use of cryptocurrencies, stablecoins and NFTs.

Page 16 of the draft defines Digital Assets as any digital representations of the value recorded on a “cryptographically secured distributed ledger or any similar technology.” 2021’s tax form required taxpayers to indicate whether they had received, sold or exchanged in “virtual currency” — with this term changing in the yet-to-issued 1040 tax form for 2022.

Taxpayers are required to answer the Digital Assets section of their income tax return whether or not they have engaged in digital asset transactions during the tax year.

A number of situations will require American taxpayers to indicate yes to the question on Digital Assets of Form 1040 or 1040-SR. This includes receiving as a reward, award or payment for property or services or sold, exchanged, gifted or ‘disposed of a digital asset in 2022.

This would include instances where an individual received digital assets as payment for property or services provided or as a result of a reward or award. Receiving new digital assets through mining or staking also falls under this category, as does transacting digital assets in exchange for goods or services as well as exchanging or trading digital assets.

Holding cryptocurrencies, stablecoins or NFTs as well as staking tokens is also clearly addressed in the draft tax form:

“You have a financial interest in a digital asset if you are the owner of record of a digital asset, or have an ownership stake in an account that holds one or more digital assets, including the rights and obligations to acquire a financial interest, or you own a wallet that holds digital assets.”

The Digital Assets explainer also outlined conditions that do not require taxpayers to check Yes on their tax forms. If an individual holds a digital asset in a wallet or account, transfers digital assets from a wallet or account to another wallet or account owned by themselves or acquires digital assets using United States dollars or other fiat currencies through electronic platforms like PayPal.

Digital asset transactions can be clearly classed in either capital gains or income sections of the 2022 tax return.

If an individual disposed of any digital asset during the year which was held as a capital asset, they are expected to calculate their capital gain or loss and report on Schedule D of the tax return.

If individuals received digital assets as payment for services or sold digital assets to customers in a trade or business, this would need to be reported as income in its specific category.

Bored Ape creators and other NFT projects investigated by SEC probe

October 12, 2022 Coin Telegraph

Bored Ape Yacht Club

A source familiar with the matter said the SEC is looking into whether certain NFTs from Yuga Labs could be “more akin to stocks.”

Sources say that the U.S. Securities and Exchange Commission (SEC) probe into Yuga Labs is actually part of a wider investigation into the nonfungible token (NFT) market, which already came to light in March.

On Oct. 11, a report from Bloomberg citing a source “familiar with the matter” said the SEC is investigating Yuga Labs over whether certain NFTs are “more akin to stocks” and whether the sales of certain digital assets violate federal laws.

However, Cointelegraph understands that the investigation is part of the ongoing SEC probe into the wider NFT market, which is looking at whether certain NFTs and fractional NFTs could fall under federal securities laws.

In March, anonymous sources told Bloomberg the SEC was investigating NFT creators and marketplaces whether “certain nonfungible tokens […] are being utilized to raise money like traditional securities.”

Cointelegraph has contacted the SEC for comment but has not received an immediate response.

Meanwhile, Yuga Labs appears to be looking at the bright side of things. In a statement to Cointelegraph it said:

“It’s well-known that policymakers and regulators have sought to learn more about the novel world of Web3,” said a Yuga Labs spokesperson.

“We hope to partner with the rest of the industry and regulators to define and shape the burgeoning ecosystem. As a leader in the space, Yuga is committed to fully cooperating with any inquiries along the way.”

Bloomberg also reported the regulator is examining the distribution of ApeCoin, which was given to the holders of Bored Ape Yacht Club (BAYC) and other NFTs.

According to the ApeCoin website, Yuga Labs is a community member in the ApeCoin DAO and will adopt APE as the primary token across its new projects.

Critics can’t stop NFTs from becoming a mainstay of daily life

October 8, 2022 Coin Telegraph

Coin Telegraph

Nonfungible tokens are about more than Bored Apes. They fulfill a host of functions better than existing systems.

Some critics deem nonfungible tokens (NFTs) to be totally worthless. They don’t see the point. Why should they? The industry hasn’t covered itself in glory with countless rug pulls and celebrity endorsements with prompt pump-and-dumps.

But, this is missing the point. Already most of the digital and physical objects we use in real life are unique, they are not fungible: this means they cannot be copied, substituted or subdivided.

Detractors might still say, well, what’s the point? NFTs are immutable and verifiable assets on the blockchain — these sound like industry buzzwords with little meaning. However, they go a long way in exposing the untold use cases.

Contrarians exist in every phase of technological innovation; You can go back to the literal Luddites of 19th century England who destroyed machinery threatening their jobs, or more presciently, you can point to those who thought the internet was going to be a short-lived craze.

We are ever-closer to digitizing swathes of our lives, and not in a metaverse-owns-you-now type of way, but instead through the tokenization of assets with transfer made easier than ever.

It’s true in a world of crypto mass adoption, like with the internet, users will likely hold little knowledge of the technology underpinning the system. NFTs may well be used abundantly in this scenario: Users simply won’t care about past negative connotations when they can access a brilliant new way of owning, renting and selling.

Near-negligible transaction fees is the goal, as is an easily navigable user interface. Right now, there isn’t the groundbreaking solution needed to break down barriers and remove existing stigmas.

NFTs can irrevocably alter the way we exchange value. Here lies an opportunity to digitize assets in an open economy and in the process, hasten a step toward legitimacy for blockchain solutions in the mainstream market.

Leveraging the power of NFTs

First mover’s advantage in the burgeoning tech world is not to be underestimated.

But, leading players in the NFT space have garnered the wrong type of mainstream attention and there is a perception problem. Cynical corners of the media tend to cast a skeptical eye over blockchain-related projects and paint the space as riddled with rug pulls and abandoned road maps. This is a view that sorely lacks nuance and understanding; do they realize how many people lost money in the dot-com bubble?

What is often overlooked — and this will come with the maturation of the technology — is how NFTs can change marketplaces: in gaming, as well as in all conceivable intellectual property as we know it. Mainstream success for NFT solutions will result from the utility for commercial and retail users, and it is not, therefore, likely to be so intrinsically tied to volatile crypto markets.

NFTs just have too many use cases to not become incredibly useful. Bored Apes started with profile pictures, but its purveyor, Yuga Labs, is already building off the springboard of the huge community it gained from its notoriety with plans for a metaverse and gaming platform.

This dramatic pivot from Yuga Labs indicates NFTs carry a much greater purpose than just art and collectibles and hints at a viable path to mass adoption.

NFTs just fulfill functions much better than existing systems, which will manifest across industry and consumer markets once efficient and effective solutions are created.

What makes an adoptable NFT?

The pillars of a successful NFT project are currently predicated on three major aspects: a strong community, exclusivity and utility.

You need people to talk about the NFTs in a positive light and share information to one another. A tangible sense of exclusivity is present in the most popular projects and this should extend to the implementation of NFTs in any media form. If one million other people have the same skin as you in a game, you won’t really see it being worth keeping.

The utility provides real-world value to buying and holding an NFT. If a consumer buys a brand new car, they know exactly what to expect, more or less. Of course, in the case of an NFT, you want it to look good in most cases, but to pique mainstream interest, there must be an element of it serving a grander objective.

Indeed, an oft-neglected viewpoint is how the utility of NFTs can unlock mainstream success. Digital assets represented by NFTs hold untapped potential to revolutionize both products and services. Your money is safe when the asset is not liable to drastic changes in value because it serves a purpose, again, in the real world.

A notable shift and evolution in NFTs beyond how we perceive them in the present day is a prerequisite for this next step. The industry is slowly moving toward the ‘normalization’ of nonfungible tokens wherein value is established and use cases are realized.

One great example of this is in secondary ticket markets, which could allow people to trade verifiable NFT passes to a show, sports game or concert through a smart contract. The blockchain, in this case, knows the ticket is legitimate because that’s the nature of the technology: Information cannot be changed once registered in a transaction.

On-chain tickets are an obvious use case. From a consumer perspective, there is potential to safely buy tickets on the resale market for any event. Blockchain provides proof of purchase from the original ticket vendor, as well as a price history and further makes transfer very simple with the smart contract only releasing the ticket upon the confirmation of funds reaching the seller’s wallet.

Processes could be made much fairer for those using the secondary market and simultaneously nullify the efforts of scalpers: If price increases were limited to 50% additional to face value, with the artist receiving royalties for the resale, in one fell swoop, we deal with the issue of performers struggling to capitalize on their success and the problem of people being ripped off.

Retail bosses may imagine a world where all products are uniquely registered in the digital world; do they know yet these could be represented by NFTs?

Rights to a rented home is another interesting possibility. Upon purchasing the NFT, which gives you the right to use the property for a period of time, what if you can upload images to the blockchain showing the condition of the house you are leasing? A legal challenge over the landlord keeping a security deposit can be swiftly dismissed or indeed proven when such matters are immutably proven with the aid of blockchain.

We haven’t even scratched the surface of business utility for NFTs. There is pervasive fraud in supply chains with countless incidents of double financing, where malicious actors use copies of the same paperwork to illegally obtain money from multiple sources. With blockchain, this will disappear overnight as each and every shipment can be represented by only one single NFT that documents everything delivered — and, indeed, tracks it every step of the way.

More than just assets

The winning combo of blockchain verification and self-custody can empower consumers and make their online lives far more secure than is currently possible.

A passport could be stored on a mobile device and locked behind multi-factor authentication: the entire process of renewing this crucial travel document can be made much quicker when there is a totally digital solution. Represented as an NFT, it further becomes harder to create a forgery which reduces the burden of security on governing authorities.

Medical records are another use case that could revolutionize the often antiquated systems in existence across hospitals around the world. Collating information in a secure manner is not an easy process nor is sharing this data with other entities, which, in some cases, can be an urgent matter. NFTs solve this issue as, even failing the computer sharing processes in place, the individual may gain the ability to access and share their own records.

We are swiftly moving toward a world where individuals take control of their information and choose who they share it with. Furthermore, digital assets will belong solely to them without the need to rely on centralized bodies to store and allow transfers to be made.

Challenges remain

Blockchains still have the technical limitations of throughput, scalability and congestion. There isn’t a single chain in existence that could onboard half a billion users, but we are steadily approaching the day when this becomes a reality.

Instead of listening to the noise of those who dare not try to understand the technology, we should be focused on collectively delivering better outcomes with a view to bringing an entirely novel way of doing things across all industries.

Yet, much development lies ahead. The mainstream media and critics will not destigmatize NFTs on their own. The use of blockchain in this manner doesn’t fit into their worldview.

When mass adoption eventually arrives, and I believe this is only a matter of time, we will swiftly enter into a new digital age built upon the blockchain. People will scarcely know what makes their seamless transfer of digital assets and information possible. But, they will use it and NFTs will vastly improve the way they conduct their lives in both digital spaces and through real-world applications. This is certainly a future worth fighting for through all and any disparaging noise.

Rong Kai Wong is the chief operating officer at Parsiq. He served as head of operations in a Singaporean police division of more than 700 police officers before joining Binance as director of Binance X, the digital asset exchange’s $100 million BSC Accelerator Fund.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. 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.

Illuvium co-founder shares plans for new ‘interoperable blockchain game’ model

September 29, 2022 Coin Telegraph

Blockchain

Illuvium’s co-founder says they want to build a series of blockchain games connected to each other, forming an ecosystem of interconnected titles which share NFTs.

Kieran Warwick, co-founder of the blockchain role-playing game Illuvium has lifted the curtain on a gaming concept he says has never been done before — the interoperable blockchain game (IBG).

Speaking to Cointelegraph during Token2049 in Singapore, Warwick said Illuvium has three games currently being built which will be underpinned by the same economy, governed by a single token (ILV), and connected by the blockchain — making it an interoperable experience.

“We're building something that has never been done before not in the mainstream and not in Web3.”

IBG, a term coined by Illuvium, is a series of blockchain games connected to each other, forming an ecosystem of interconnected titles which share NFTs, a common in-game currency, or both.

Aside from trying to blaze new territory in the industry, Warwick says Illuvium is a “fun game” first and foremost, with player enjoyment as a cornerstone, rather than play to earn (P2E) and non-fungible token (NFT) aspects that some titles in the GameFi space have tended to focus on.

He hopes the shift in focus could be the key to attracting players from the mainstream market.

“In our genres that we're hitting, there might be roughly 500 million people that we can bring in that literally won't know that they're playing a crypto game.”

The first game is a city builder, one that Warwick says is a “combination of Sim City and Clash of Clans” where players can build and mine resources for use in the second game, “Overworld.”

Overworld focuses on exploring and capturing creatures called “Illuvials”, which Warwick compares to Pokemon, that can then be battled in the third game, which will be similar to online battle arena titles such as “Teamfight Tactics or DOTA.”

Warwick says they might not stop at three games though, adding at some point they want to “build another six games on top.”

“Imagine taking one of those assets and then going over to the racetrack and playing a Mario Kart Game, but you're not buying a new Nintendo game, it's just one asset that's usable across an entire universe of games.”

At this stage, Illuvium still doesn’t have a formal release date but Warwick hopes to have a working beta in the next two or three months, with plans to publish on mobile, PC, and Mac.

“I reckon probably sometime really early next year is when we'll have open Beta with yields and all the aspects that we need, but not fully polished.”

Illuvium is governed by the Illuvium DAO, a decentralized autonomous organization. Warwick said they originally were going to raise $350 million in funding during the bull market, but the ongoing crypto winter has seen them scale back to between $10 and $20 million.

Warwick also revealed he made the Australian Financial Review's Young Rich List again this year — but the market conditions mean the billion dollars he was worth last year are a distant memory.

Warwick jokingly noted that this was not a concern as his main motivation is only to be richer than his brother, Kain Warwick, the founder of Synthetix, who also made the Australian Financial Review's Young Rich List in 2022.

Bored Apes, Moonbirds to feature on NFT-customized Mastercard debit cards

September 27, 2022 Coin Telegraph

Blue-chip NFTs

The customizable card will only support NFT avatars from select blue chip collections, subject to Mastercard’s design standards and an owner verification process.

Mastercard has launched customizable nonfungible token (NFT) debit cards, allowing some cardholders who own avatars from select NFT collections to add the artwork onto the payment's card.

The debit cards are made available through a Sept. 26 partnership with European cryptocurrency exchange platform, “hi” allowing its “Gold” members to personalize their debit cards with an NFT they verifiably own

Gold membership with the platform is obtained by staking a minimum of 100,000 hi Dollar’s (HI), the platform's native token, a sum worth around $4,600 according to data from CoinGecko.

NEWS! Today @hi_com_official launches the world’s first debit card featuring NFT Customization, allowing cardholders to personalize the face of their card with an NFT Avatar. Read more here https://t.co/awNVowcsuG pic.twitter.com/A5xFsHlX0w
— Mastercard Europe (@MastercardEU) September 26, 2022

The cards will allow spending in fiat money, stablecoins or any cryptocurrency the user holds and is accepted wherever Mastercard is available. Other features such as hotel credits, cash back incentives and rebates on Netflix and Spotify subscriptions are also touted as benefits of certain membership levels.

Mastercard’s Crypto and Fintech Enablement VP, Christian Rau said with consumer interest in NFTs and crypto growing the payments provider was “committed to making them an accessible payments choice for the communities who wish to use them.”

A limited range of NFT collections will be supported including CryptoPunk, Moonbirds, goblintown, Bored Ape and Azuki, owners of these NFTs will have to become Gold members with hi and verify their NFT ownership with the platform to receive their custom cards.

Additionally, the cards are available only within 25 European Economic Area (EEA) countries and the United Kingdom.

With the wider downturn in crypto markets over the last few months most of the “blue chip” NFT collections took a price hit, but data by NFTGo shows the performance of blue-chip NFTs growing steadily since Sept. 12 possibly bringing renewed interest to the largest collections.

Mastercard has helped crypto payments go mainstream with its support for the assets, even allowing Mastercard holders the ability to purchase NFTs through partnering with multiple NFT marketplaces in June.

Throw your Bored Apes in the trash

September 25, 2022 Coin Telegraph

Bored Apes

From carrying medical data to streamlining royalty payments, NFTs serve a variety of important technological purposes. Bored Apes are a demeaning distraction.

It’s time to move on from the Bored Ape Yacht Club. They’re bad for nonfungible tokens (NFTs). They give critics ammo and distract from the technology, which is where the real value lies.

For those on the outside looking in, NFTs are nothing more than overpriced monkey JPEGs. Or whichever choice of animated animal profile picture is in the firing line.

NFTs, of course, are much more than that.

But, because of Bored Apes, and the countless imitations they’ve spawned, NFTs are getting a bad rep. “Bubble,” “money laundering” and “scams” are all terminology associated by critics with the new “Beanie Babies craze.”

It’s a disparaging distraction.

Yes, Bored Apes are still priced at more than $100,000 (a fifth of what they were worth at the market’s peak). But, they’re tied to the tumult of cryptocurrency volatility and market sentiment, which has fallen along with the tumbling crypto market.

You also have Ape-backed borrowers on the verge of liquidation and 143 Apes already stolen, including Seth Green’s Bored Ape, which he was forced to pay to get back. And, of course, there are also the fans who slammed Eminem and Snoop Dogg when they performed as their apes at the latest VMA awards.

Bored Apes are the face of the NFT hype cycle. They might be the closest thing to aforementioned Beanie Babies in the NFT space because of their status. But, there’s a categorical mistake with painting an entire industry with the same brush: The hype is not the technology.

If you look past what’s on the market, you’ll find unique ideas with real-world value.

Here’s one: carrying medical data. Researchers at Baylor College of Medicine have suggested that NFT ownership powered by smart contracts could provide citizens control of who accesses their personal health records. Citizens already give up their information to medical applications, but smart contracts could allow them to sell their data as NFTs if they choose.

Hospitals and private institutions routinely sell patients’ data via so-called data brokers to companies like Pfizer — It’s a multibillion-dollar industry. This might seem harmless, but you never agreed to it. Maybe you wouldn’t have if you knew how much your data was worth.

Selling or securing your data as an NFT could become a real option, as long as the right hack-prevention measures are in place. Adding encryption to NFTs can keep content private while also enabling it to remain in public storage.

Another service NFTs can perform: streamlining royalty payments. Artist resale royalty rights haven’t been codified into U.S. law — only proposed. The EIP-2981 royalty standard made this a coding choice on Ethereum, leading the way for Polygon and other chains.

Technology, Fintech, Tech Analysis, Tech, Analysis, Decentralization, Education, Metaverse

With enhanced security and the versatility of NFTs, private documents can be airdropped into users’ wallets. These could be legal documents served by law firms or deeds to properties. Hypothetically, we could see a work contract on the blockchain, which interfaces with decentralized finance payment protocols to provide salaries based on duties completed.

Despite the endless cries of “wen utility,” which have echoed through NFT communities, the utility was always there: A token on the blockchain is verified that promises interoperability via a self-executing hard-coded agreement. It’s the gateway to digital and physical real-estate and on-chain gaming experiences or whatever content your digital identity unlocks.

It’s still growing. On trading platform NFTGo, 10 times more Ethereum wallets hold an NFT compared to August 2020. Doodles just raised $54 million to strengthen their IP. Creators are building. And, many skilled underground artists are making more now than ever before.

NFT art has flipped the traditional art industry on its head. Not just because of the headline-grabbing numbers, but also the promise of provenance. Even if profile pictures stole the show, the technology came first and will thrive without its Bored Ape counterparts.

It might also be better to leave the term “NFTs” in the past, as a genre only defined by a limited boom and bust cycle, and to move forward with “digital collectible,” a term that some have started using.

Some kind of split is inevitable — and healthy — to free builders from the burden of overinflated expectations, market collapses and celebrity cash grabs.

If you still don’t see the value, you might still have Bored Ape goggles. Take them off. There’s a whole suite of NFT technology use cases on the rise.

O.C. Ripley is the lead content creator for Curio DAO, an NFT community on the Ethereum blockchain. He is also the editorial manager at Tech & Authors and has been active in blockchain since 2017.

The author, who disclosed his identity to Cointelegraph, used a pseudonym for this article. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. 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.

Crypto developers should work with the SEC to find common ground

August 30, 2022 Coin Telegraph

Coin Telegraph

Developers, investors and regulators can establish best practices and raise the quality of cryptocurrency development by working together.

Regulators are tasked with balancing between protecting consumers and creating environments where entrepreneurs and the private sector can thrive. When markets face distortions, perhaps due to an externality or information asymmetry, regulation can play an important role.

But regulation can also stifle entrepreneurship and business formation, leaving society and its people worse off. The United States Securities and Exchange Commission has been particularly hostile against cryptocurrency companies and entrepreneurs. For example, SEC Chairman Gary Gensler has remarked that he views Bitcoin (BTC) as a commodity but that many other “crypto financial assets have the key attributes of a security.”

He reiterated the line in an explosive Aug. 19 op-ed penned for The Wall Street Journal, arguing that “you could replace ‘crypto’ with any other asset” when talking about the regulation of securities.

But rather than “regulating by op-ed,” as some crypto enthusiasts have framed it, a better strategy would be for developers, investors and regulatory agencies — like the SEC — to work together at least around common standards that can raise the quality of projects overall and establish best practices that the entire community of Web3 participants will benefit from.

“Regulators are effective when they’re also in the trenches with the innovators and industry builders,” Mirai Labs co-founder Corey Wilton told Cointelegraph.

That means there needs to be an open and free dialogue between regulators and developers. “Developers need to become familiar with Know Your Customer (KYC) best practices, vendors that are available, and how those KYC services are integrated, and how they need to manage user roles [and] capabilities,” said Simon Grunfeld, vice president of Web3 at Cogni.

Defining securities

Almost every article on crypto regulation points out the classic Howey Test based on a 1946 Supreme Court case that established precedent around the definition of a security. But Gensler has honed in on arguably the most important one of the criteria, namely that “the investing public is hoping for a return.”

To be sure, many nonfungible token (NFT) projects launch, and their founders promise investors large returns that turn out to b patently false or at least exaggerated. However, the problem with these projects is not that NFTs need to be classified as a security, but rather that these founders are engaging in dishonest marketing and making claims that they simply cannot deliver on.

According to the Howey Test, an “investment contract” exists if there is: (1) an investment of money, (2) in a common enterprise, (3) with the expectation of profit, and (4) to be derived from the efforts of others. But what if we applied the Howey Test to a house? A household could be considered a common enterprise, especially if there is a family business, and every homeowner invests with the expectation of house price appreciation.

One counter is that a household is too small to constitute a common enterprise. But where is the bright line? What if the family is big? Or what if the immediate family lacks the resources and relatives contribute to help finance the house? Or what if a handful of people decide to rent a bigger house in anticipation of spending some time in it but also intend to rent it out on Airbnb as they travel and spend time in other locations? The problem with the Howey Test is that it was designed for a much more specific and narrow situation — one that involved leasing to farmers.

Sadly, the absence of a clear bright line between securities and commodities in the digital asset space has created substantial regulatory risk for Web3 entrepreneurs and companies, causing many to locate their activities offshore. Given the inherent anonymity involved in the Web3 community, particularly related to company formation, quantitative estimates are unavailable, but anyone who spends any amount of time talking to people in Web3 quickly sees that they are outside the United States.

However, even then, both users (especially in GameFi) and owners must be cautious. “I see no path for U.S. regulators to come after a (U.S.-domiciled) individual for gaming on an illegal site unless that individual is using that site for money laundering or other illicit activities involving other U.S.-domiciled individuals,” Grunfeld said.

“Otherwise, the individual assumes the risk of depositing funds,” he added. “In many cases, these platforms may trick people that they are subject to U.S. regulation. Then, the regulatory risk is all on the platform — it’s the platform’s responsibility to comply with local and international laws, and if they are opening accounts for U.S.-based people, then they run the risk of being touched by the long arm of the U.S. Treasury.”

A Web3 compromise

Standards have an important role to play in markets. They establish a predictable threshold for minimum quality. The best types of standards are those that emerge organically as a result of demand and coordination in a community whereby members recognize everyone is better off by adhering to a set of best practices. A common set of open-source and organic standards is perhaps best demonstrated by the W3C standards, which cover the spectrum of application development.

In particular, the W3C standards for verifiable credentials and decentralized IDs have proven to be principal sources for coordination and adoption in global education. Organizations, ranging from governments to large publicly traded companies, need interoperable technologies that do not lock them into specific vendors or systems that could create unnecessary risk— (e.g., if one system goes down or a business fails. These types of standards become a requirement for true global adoption; without them, pioneering technologies will remain bespoke and never reach scale.

We are seeing how open-source standards within the use case of education provide an opportunity for anyone, regardless of where they are in the world, to scrutinize a technology and ensure that it has passed through rigorous trials for privacy, security and interoperability, providing clarity and comfort for large-scale institutional partners who can bring new technologies to the masses.

“Bringing Web3 education to the masses would be impossible without a firm standards-based backbone… all of the innovation happening in our industry would eventually become a fragmented mess of systems that do not communicate or exchange, no different than the centralized systems of the past,” said Chris Purifoy, chairman of The Learning Economy Foundation.

The question for us in the cryptocurrency space is whether we can develop a similar set of standards as the W3C standards for verifiable credentials in the market for education. Such standards create not only interoperability but also norms and best practices that ensure minimum quality. That would take the burden off regulators to look so intently at NFT and other crypto projects since the quality of projects would be higher overall and the incidence of “rug pulls” would be much lower.

There is no simple solution here, but both sides need to understand each other’s positions better. That will only happen when they meet each other in the middle.

Christos A. Makridis is the chief operating officer and chief technology officer for Living Opera, a Web3 multimedia startup, and holds academic appointments at Columbia Business School and Stanford University. He holds doctorates in economics and management science from Stanford University.

The opinions expressed are the author’s alone and do not necessarily reflect the views of Cointelegraph. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice.

Bored Ape prices are down, but the NFT market is headed for new heights

August 30, 2022 Coin Telegraph

Coin Telegraph

One report suggested the NFT market could reach a $230 billion valuation by 2030 — more than 20 times greater than its value in 2021.

There is no denying that nonfungible tokens (NFTs) have taken a hit in recent months. Market conditions have plunged, scams and hacks are frequent, and there is an increasing number of low-quality projects, pushing many to question the value of NFTs and their place in Web3 altogether.

Over the last crypto cycle, NFT market conditions have been largely correlated to and reliant upon the general crypto market. As technology and digital assets soared in valuation, it became easier for individuals and investors to justify speculating on the nascent NFT asset class — often paying exorbitant premiums with the conviction that some tangible utility and value might be derived at a point in the future. Combined with the fact that NFTs, by nature, are relatively scarce and illiquid, it set up the perfect storm for dramatic price appreciation that fell even more dramatically back to earth.

Market conditions are also tied to developments in the ecosystem, which include rampant fraud and oversaturation in content, causing increased concern for parties already involved within the space, and hesitation for consumers and businesses that were looking to enter the space.

What is important for us to realize is that this is a natural part of the NFT space’s evolution. Over-speculation followed by reality-striking struggle is not only to be expected, but necessary for us to take action and remedy the current issues to ensure these digital assets can continue to grow and flourish.

Scams and hacks are, of course, harmful to projects and users participating in the NFT space. No creator should have their work duplicated and sold under someone else’s name, just as no buyer should unwittingly fall prey to a scam or theft. Projects should not need to worry that a hacker can take advantage of infrastructure vulnerabilities and steal massive sums of money. Moreover, early supporters do not need to fear that project leaders will either run out of working capital or simply abandon the product in early stages of the roadmap.

But what these security breaches do reveal is where the points of failure are in the system, allowing us to work harder towards fixing them and preventing them from happening in the future. They also prove an important point to blockchain projects: that they need to prioritize infrastructure and security partners in order to be successful in the long term and prevent future financial losses. Additionally, companies and projects need to look internally on how best to protect users. They need to leverage open-source technology and develop features of their own that help to bolster security — OpenSea and MetaMask are taking steps to do just that.

Where scams and hacks cause distrust and unease, the increasing number of low-quality projects has led to a general oversaturation in the NFT market. People are tired of hearing about NFTs that have either no artistic value or no tangible utility. In an over-crowded market, it becomes difficult to gauge which projects or collections are worth any money at all.

My view on the NFT market action today... pic.twitter.com/iDjrJeQdMt
— Peter Smith (@OneMorePeter) August 22, 2022

The silver lining here is that the market’s downturn is weeding out some of the lower-quality NFT projects. Projects will be forced to execute on their promises, pivot their strategies to remain competitive, and better cater to their audiences.

Users, volume and transactions have been declining on OpenSea. Source: DappRadar

For starters, marketplaces will need to start curating artwork to ensure the highest quality pieces are not drowned out by the massive number of NFTs and duplicates being listed. They’ll also need to better align with evolving copyright and IP standards. Projects that are not purely focused on digital art will need to deliver real utility to consumers or other businesses in order to be successful in the long term. Utility can come in the form of ownership privileges, exclusive memberships, redeemable rewards, or entrance to communities of like-minded individuals.

And what’s perhaps most important is that we have only begun to touch the tip of the iceberg with respect to the full potential of and number of use cases for NFTs. This highly disruptive token standard can and will support efficient and secure digital ownership rights of valuable assets. Ticketing for events and travel, immutable forms of identification, and digital domain standards are among other exciting possibilities which also include financial products, medical records, real estate and intellectual property.

The challenges we’re facing will be overcome and will result in a healthier ecosystem of sturdy projects that reshape our lives in new and unimaginable ways. Moreover, McKinsey & Company predicted the Metaverse would likely reach a valuation of $5 trillion by 2030. Guess what the building blocks to the Web3 metaverse are? NFTs. Little surprise, then, that another study predicted the NFT market would reach $230 billion in value by 2030.

Because NFTs represent digital ownership that is both immutable and easily transferable, they will serve as digital identification or tickets for events in the Metaverse, provide proof of attendance or payment, and act as proof of ownership for games, wearables, or digital real estate. NFTs will underlie all activities in the new digital economy within the Metaverse.

NFTs are laying the foundation for the next generation of innovative products and services. As we continue to get through these growing pains of this nascent industry, one thing abundantly clear is that NFTs are here to stay.

Anthony Georgiades is a co-founder and president of Pastel Network, a Layer 1 blockchain for NFTs and Web3 technology. He’s also a general partner at Innovating Capital, a technology fund focused on disruptive companies and digital assets. He previously spent time on the investment team at First Round Capital and on the operations teams of various startups. He studied finance, management, and computer science at the University of Pennsylvania’s Wharton and engineering schools.

What is an NFT and why are they so popular?

August 19, 2022 Coin Telegraph

Coin Telegraph

Nonfungible tokens continue to captivate mainstream audiences around the world as Web3 technology grows at a rapid pace.

Nonfungible tokens (NFTs) have been part and parcel of the cryptocurrency space for the last couple of years. Still, their value and utility across several industries have driven their proliferation into mainstream consciousness.

Cointelegraph’s director of video production Jackson DuMont delves into the intricacies of NFTs, highlighting the importance of the underlying blockchain technology in proving ownership of digitally scarce assets:

“NFTs provide unique, verifiable and immutable proof of ownership of digital goods. True digital ownership of assets through NFTs is a revolutionary idea that will transform how we interact with the internet.”

Another important aspect of NFT technology highlighted by DuMont is handing the ownership of digital assets to users as Web3 functionality begins to proliferate the Internet.

NFTs come in many different forms, from the best highlights of the NBA to multi-million dollar pieces of art by some of the world’s most talented creators. The technology is also being used as a means to solve dilemmas for ticketing and other real-world use cases.

Check out the full video on our YouTube channel and don’t forget to subscribe!

NFTs and intellectual property, explained

August 11, 2022 Coin Telegraph

Bored Ape Yacht Club

When you buy a nonfungible token, do you automatically get intellectual property rights? Well… it's complicated.

How can IP assets transform DeFi, DAOs and the metaverse?

InvArch says that its infrastructure can be used to speedily create new decentralized autonomous organizations.

This could make it easier for nonprofits to fund intellectual property development — and organizations could generate cashflow without signing over their IP rights. It's hoped roadblocks to innovation could be torn down — with a new "development highway" left in its place.

InvArch's infrastructure could also offer greater protections to those who are building ambitiously on virtual plots of land in the metaverse — and unlock whole new business opportunities over in the world of DeFi.

The project won the 43rd Kusama parachain auction — and at the end of June, it unveiled technology that will make everything from music to code "all but impossible to steal." What's more, this will strike at the heart of centralization in the world of IP, not least because seeking protection through InvArch is vastly cheaper than the status quo.

Learn more about InvArch

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.

Could smart contracts be used for IP agreements?

Yes — business deals could be brought into the 21st century with the help of blockchain.

InvArch's goal is to ensure that those who hold the most desirable NFTs — including CryptoPunks, Bored Apes and Meebits, can establish on-chain agreements that extend to use of their nonfungible tokens in a third-party product.

Setting out its vision in a recent blog post, the project added: "In the end, you have a marketplace where communities can buy swag and products relevant to their interests — and a market where artists and NFT copyright owners can establish lucrative income streams from their NFTs and increase the raw value of their digital assets."

How can NFT and Web3 protocols help transfer IP rights?

The 21st century has turned into an IP war zone and an innovation graveyard — but things are beginning to change.

New and enhanced NFT classes have the potential to certify the authenticity of nonfungible assets, protect their uniqueness, and streamline management rights.

This approach is being championed by InvArch — an IP rights blockchain that is scalable, interoperable and has ambitions to be integrated throughout the Web3 world. An Invention, Involvement, Inventory and Investment protocol (known as INV4) delivers piracy-proof files as well as on-chain copyright and licensing.

Setting out one potential use case for how its approach could transform the creative sector, the project paints a picture where decentralized music studios and record labels can flourish — with individual artists contributing distinctive elements. They could then be brought together to form a song with a plethora of beats and rifts — with each contributor retaining their IP, jointly owning the rights to the track, and sharing a piece of the royalties.

Which NFT collections have given IP rights to owners?

Some of the biggest NFT collections out there right now — Bored Ape Yacht Club among them — have given full intellectual property rights to users.

This is a significant (and you could argue a very generous) development. It effectively means that those who own Bored Ape NFTs have the potential to profit from them. We've seen Eminem and Snoop Dogg team up for a new music video where they transform into their characters. Meanwhile, sites have emerged where collectors can effectively hire out their ape's NFT to brands.

As we alluded to earlier, the actor Seth Green made a splash when he unveiled plans to create a TV show themed around his Bored Ape NFT, which he affectionately calls Fred, called White Horse Tavern. Green's beloved collectible ended up being stolen in a phishing attack, and he ended up paying over the odds to get it back.

BAYC's license states those who purchase NFTs "own the underlying Bored Ape, the Art, completely" — but doesn't actually mention what happens in cases of theft. Many experts believed that Green would have been on firm legal ground if he released the TV show without the NFT, but there are no guarantees.

When you buy an NFT, do I automatically get IP rights?

The short answer to this is no. It's important to read the small print to find out exactly what you're getting.

Let's run through some quick examples. Jack Dorsey sold off his first tweet in NFT form for a whopping $2.9 million back in March 2021. While there's little doubt this is a historic piece of content, crypto entrepreneur Sina Estavi doesn't own the IP to this tweet. All copyright still rests with Dorsey.

The New York Times pulled off a tongue-in-cheek stunt when it published an article about crypto collectibles — and then gave readers the chance to own a tokenized version of the story. It ended up selling for a whopping 350 ETH — worth $560,000 at the time, and about $600,000 as of the start of August 2022. Although this NFT did come with some perks (the buyer was given the chance to be named and photographed in a subsequent piece,) it didn't include the copyright to the article… or any reproduction or syndication rights.

Potential pitfalls don't end here, either. MetaBirkins have become especially popular during the NFT boom — a digital remake of Hermes' famous bags. But digital artist Mason Rothschild ended up in hot water with the designer brand, which took legal action after claiming it could cause confusion in the eyes of consumers.

What are intellectual property rights?

In its simplest form, intellectual property relates to something you create with your mind — such as artwork, literature and inventions.

These protections were relatively easy to enforce in the analog era, but our digital world — where copying and pasting runs abound as millions of people create their own content — makes things especially challenging.

Nonfungible tokens are a thrilling development that have the power to modernize everything from baseball cards to music albums, from movie merchandise to stunning art. But, as with any new technology, there are issues that need to be overcome.

The industry's still getting to grips with the rights that are afforded to the owners of an NFT, and there are other threats that need to be addressed. If a nonfungible token is stolen by a malicious actor, does the victim still enjoy IP rights? And how can we counter the risk of copycat NFTs being minted on a rival blockchain?

Nonfungible Tokens