Fintech company Current is one step closer to bringing decentralized finance (DeFi) features to its 3 million users.
The firm said Thursday it is working with Bison Trails, the blockchain infrastructure company acquired by Coinbase in January, to sync up with Polkadot parachain networks Karura and Acala. The fintech first announced its crypto plans in May.
Current says it’s looking to combine DeFi services with the best of its traditional offerings in a bid to meet the growing needs of crypto-curious retail investors. Along with travel app Maps.me toying with DeFi features on Solana, Current represents an emerging crop of aspiring fintech-DeFi mashups.
“We’ve flirted with bringing crypto back into our project for a while now, but there were always obstacles in the way,” Current Chief Technology Officer Trevor Marshall told CoinDesk in an interview. “When DeFi really took off in 2019, we were able to get over a lot of the technical hurdles.”
The company first attempted to offer DeFi services with Ripple and later Ethereum, dating as far back as 2015, though neither came to fruition due to technical limitations, Marshall said.
“The launch of our cluster on Karura is the first step in the evolution of what we’ve been building over the past six years at Current,” he added in a statement.
Said Acala co-founder Bette Chen:
“These two organizations share our vision of a hybrid finance (HyFi) future, and we are excited to continue building products and networks that improve financial outcomes for the Current, Acala, and Karura communities.”
Did Satoshi Nakamoto work on E-Gold? If so, Peter Thiel thinks he has a way to narrow down the identity of Bitcoin’s creator.
PayPal co-founder and billionaire venture capitalist Peter Thiel believes he may hold a clue on how to find Satoshi Nakamoto, Bitcoin’s (BTC) pseudonymous creator who disappeared two years after mining the cryptocurrency’s genesis block in January 2009.
His theory stems from an early meeting of E-Gold founders in February 2000, where roughly 200 people coalesced around a beach in Anguilla to devise a strategy for promoting a new currency system that could challenge central banks. E-Gold was a digital gold currency that folded in 2007 after its founders were indicted by the United States Justice Department.
“I met them on the beach in Anguilla in February of 2000,” Thiel told a cryptocurrency conference in Miami on Wednesday, referring to the E-Gold founders. “My sort of theory on Satoshi’s identity was that Satoshi was on that beach in Anguilla.” He further explained:
“We were beginning the revolution against the central banks on the beach in Anguilla. We were going to make PayPal interoperable with E-Gold and blow up all the central banks.”
E-Gold’s failure may have given Satoshi the foresight to remain anonymous when building its successor. “Bitcoin was the answer to E-Gold, and Satoshi learned that you had to be anonymous and you had to not have a company,” Thiel said.
Not everyone is convinced that Nakamoto was behind earlier e-cash protocols. Dustin D. Trammell, one of the first cypherpunks to mine Bitcoin, told Cointelegraph Brasil in March that Nakamoto lacked bias in implementing new technology, which implies they were approaching the project with a fresh perspective.
Nakamoto’s 2008 white paper has spawned a multi-trillion-dollar crypto industry, with tens of thousands of digital assets vying for a piece of the pie. Bitcoin is in the midst of a historic week, having shattered new all-time highs above $67,000 on Wednesday.
Earlier this week, we considered the challenges of creating viable long-term regulations for decentralized finance (DeFi) protocols. These systems can ostensibly remove intermediaries from the trading of any asset represented on a blockchain, but those intermediaries have been the ones enforcing rules on behalf of regulators for the better part of a century. That means workable DeFi regulation will likely be much different in substance, and enforced differently, than current securities and finance rules.
That rethink may be years away from occurring, but U.S. regulators aren’t sitting idly in the meantime. With Securities and Exchange Commission chief Gary Gensler signaling that he’s paying attention, there’s significant expectation that enforcement actions could target DeFi well before any new regulations become official. Those enforcement actions will likely prioritize instances of clear lawbreaking, such as fraud or money laundering, taking place on DeFi systems.
This op-ed is part of “Policy Week,” a forum for discussing how regulators are reckoning with crypto (and vice versa). David Z. Morris is CoinDesk’s chief insights columnist.
They will be significant tests for the legal implications of decentralization. And they could get very, very ugly – particularly for individuals running “DeFi” systems that aren’t very decentralized at all.
Here, based on conversations with lawyers, former regulators and DeFi executives, are three key points about how things are likely to play out over coming months and years.
1. Enforcement will come before new rules.
The first ugly truth about DeFi regulation is that it will inevitably come too late. Systems like UniSwap and Celsius were built in ways that challenge the fundamental premises of conventional financial regulation, but regulators will not be quick to shift their models to conform with the reality on the ground. Meanwhile, DeFi systems continue to grow, guaranteeing they’ll face increasing scrutiny.
Jai Massari, a partner focused on trading and markets at the law firm Davis, Polk and Wardwell, predicts a three-step process of reconciling those conflicting truths. Call it the Stages of Regulatory Grieving.
“I think it starts off with enforcement,” she says, “because enforcement is easier than regulation.” Those enforcements could be similar to recent actions that have led to large fines for crypto exchanges like Kraken or services like Tether. But they could also go further to include criminal charges against individuals, on which more below.
Then we’ll begin to “see an effort [by regulators] to push these DeFi activities into existing regulatory categories,” Massari says. “But I don’t think that’s going to go well. I think it could be quite messy.”
In other words, she doesn’t expect serious consideration of a new regulatory framework that actually fits how DeFi works until after regulators spend time trying to hammer square pegs into round holes. In the U.S. context that could include jurisdictional fights between the SEC and other financial regulators.
Plenty of crypto operators will rightly view putting enforcement ahead of regulation as shutting the barn door after the horse is loose. To some extent, it’s a consequence of the shifting priorities of a new administration. Trump administration regulators, for better or for worse, made only incremental progress on laying out rules for crypto, much less DeFi, as crypto and DeFi grew from marginal to meaningful between 2016 and 2020.
There are signs regulators see things as running out of control. “It appears [Gary Gensler is] aligned with people like [Massachusetts Sen.] Elizabeth Warren that it’s the wild west, that it’s under-regulated,” says Katherine Kirkpatrick, co-chair of the Financial Services working group at the law firm King & Spalding.
Gary Gensler and Co., in other words, see themselves as trying to lasso a galloping stallion. That may lead to particularly strong enforcement tactics.
“They’re operating from the perspective of trying to solve something that’s the most egregious thing going on using traditional law enforcement tools,” Duane Pozza, a former Federal Trade Commission staffer who is now a partner at Wiley Law. “Because it means there will be fewer limits.”
2. Investigators will “Pierce the Veil” of decentralization.
In principle, DeFi protocols run without owners, leaders or managers. Much like Bitcoin, the protocols are in principle just software run by a collection of node operators or validators who neutrally facilitate transactions while collecting liquidity yield and fees.
Governance decisions, including changes to the protocol itself, could also in principle be managed by users. But there are still few examples of this in practice today; instead, the reality of “DeFi” in the present is often that it’s a fig leaf for a very clear group of core leaders who are actually in charge. The clearest evidence of this is instances where accounts, tokens or entire “decentralized” systems have been frozen or shut down.
“One of the design decisions in an autonomous system is whether there’s a kill switch,” says Stephen Palley, a lawyer focused largely on crypto regulation at Anderson Kill. “The problem with a kill switch is, what’s the liability or exposure of the person who controls it? To be truly autonomous, you can’t have a kill switch. The absence of that is a way to say you’re not responsible.”
It’s a grim irony of DeFi’s coming collision with legal reality: DeFi administrators who have been taking direct action to control problematic activity may have given law enforcement clear evidence that they’re actually the ones in charge, making themselves targets.
Particularly in cases where there is no legal entity affiliated with a DeFi platform, experts say this could lead to regulators and investigators “piercing the veil” in their DeFi enforcement actions. “Piercing the veil” is a legal term of art normally applied to prosecutions of corporate wrongdoing that target individual officers of the company, not just the legal corporation itself.
At least two recent crypto prosecutions have shown the willingness of the SEC and others to pierce the veil of crypto organizations, even those that have conventional corporate structures. One was the SEC’s charging of individuals at Ripple, including CEO Brad Garlinghouse, with an unregistered securities offering. The other was the filing of money laundering-related criminal charges against officers of BitMEX, including CEO Arthur Hayes.
Similar direct action against individuals with control over DeFi systems may not be far off. SEC chief Gensler has already made clear that he views most claims of decentralization in DeFi with skepticism. In addition to use of kill switches, law enforcement may look for evidence of control and responsibility in public representations of a protocols team, or and control of multisig wallet keys.
3. Clarity will not come soon.
It will be extremely tricky to craft regulation that controls risks like fraud and money laundering through DeFi while preserving technological advantages like open access, self-custody and democratic governance. That could be worth the trade-off in the long term if new rules are truly crafted carefully.
“We’re at a moment where a bit of enlightened thinking about regulation, a little creativity, a little open-mindedness would result in a much better outcome,” says Jai Massari. “I think the best approach is to take a step back and think about the policy objectives we’re looking for.”
That process could easily take years. In the meantime, enforcement actions will likely ramp up, perhaps leaving DeFi creators and administrators in the difficult position of defending themselves for breaking rules that simply can’t be fairly applied to the new technology.
Even then, there’s no guarantee that competent and well-considered regulation will be the end result. As we saw over the summer with the poorly crafted reporting requirements in the U.S. infrastructure bill, there is still a large technical deficit in technical knowledge among legislators and regulators, and it can have serious consequences.
“The technological shortfall is pretty significant,” says Duane Pozza. “The lawmakers have a million other things going on. We’re far away from getting to the point of understanding DeFi. I do think the infrastructure bill was a wakeup call – at least some influential people on [Capitol] Hill had to learn, had to think through this new technology.”
That leaves an uncomfortable status quo, at least for those in the world’s largest financial market. For a period that could stretch for years, there will be no changes to U.S. financial regulations to accommodate the way DeFi really works. But at the same time, law enforcement and regulators will likely be making life very uncomfortable for anyone who could be seen as having authority or control over DeFi systems.
Unless something changes very soon, that will almost certainly push innovation in DeFi out of the United States, much as huge, centralized crypto exchanges including Binance and BitMEX found it more comfortable to center their operations elsewhere. It’s a message that at least some would-be creators are getting directly from their legal advisers.
“I might not agree with the application of certain laws to what my clients do, but I’m not the [Commodity Futures Trading Commission], I’m not the SEC,” says Palley. “I’m just a simple country lawyer and I have to call balls and strikes.
“So I spend a lot of time just telling people to stay out of the United States. I hate it, but it’s good advice.”
More from Policy Week:
WASHINGTON – Within a 36-hour period, the first bitcoin futures exchange-traded fund (ETF) began trading, the underlying cryptocurrency hit a new all-time high and federal lawmakers dusted off their 2019-era concerns about the Facebook-linked stablecoin project Diem.
I spent most of DC Fintech Week in the U.S. capital to reconnect with people I haven’t seen in two years and put faces to folks I’ve emailed during the coronavirus pandemic but never actually met. In these conversations, I found that the policy/legislative landscape around crypto has greatly matured since my last visit. Federal lawmakers who couldn’t care less in 2019 are planning to propose legislation regulating different aspects of the industry in the coming months.
This feature is part of CoinDesk’s “Policy Week,” a forum for discussing how regulators are reckoning with crypto (and vice versa).
There’s also a better understanding of crypto. A lot of the regulatory reaction in late 2019 was focused on the then-Libra project, which was announced by social media giant Facebook that summer. Libra, at the time, was a pretty visionary project that policymakers saw as having the potential to destabilize the financial system. The project, now named Diem, has been fairly quiet over the past 10 months (this week’s news notwithstanding), and we’re seeing lawmakers focusing on broader swaths of the industry.
What happens in 2022 will depend on how the industry handles these issues and how regulators react to the industry.
It’s still early
You’d be forgiven for thinking that all of Washington, D.C., is focused on crypto issues right now. There’s been no shortage of regulators and policymakers revealing new work around crypto, whether that’s the President’s Working Group for Financial Markets’ pending stablecoin report, the Fed’s pending central bank digital currency report, Securities and Exchange Commission (SEC) Chairman Gary Gensler’s increased comments on registration and regulation of crypto exchanges or the Commodity Futures Trading Commission’s (CFTC) recent spate of enforcement actions against industry businesses.
For all that, it’s still pretty early for the industry. A lot of lawmakers have heard of crypto, but it’s not a pressing concern for them. And this is even after the industry helped delay a massive, bipartisan infrastructure bill due to a single provision that impacted it.
The crypto industry is ramping up its engagement with Washington. In a feature for CoinDesk’s Crypto 2022 Policy Week coverage, Rob Garver wrote that companies and trade groups are increasing the number of lobbyists tasked with pushing for crypto-friendly regulations.
This engagement, however, is sort of mixed. At least one congressional staffer described interacting with newer lobbyists as being “painful,” an observation I’ve heard echoed by other industry participants.
We’re also seeing an increase in angry tweets and other social media messages directed at specific lawmakers or regulators. I’m told that these are extremely unhelpful in terms of communicating policy concerns. Great for engagement, though.
Crypto has arrived
Even if it isn’t top of mind, lawmakers and regulators are thinking more about crypto than in years past. We’re seeing this in the fact that aspiring ETF issuers are securing regulatory approvals to list retail-accessible trading products and that we are awaiting no less than three different government reports on aspects of the crypto industry that will inform policy.
One of the biggest issues may just be the differences in how different regulators or lawmakers perceive crypto. Individuals focused on consumer protection may be concerned that exchanges shut down every time the crypto markets grow volatile, while securities/commodities-focused regulators may be more worried with the quietly growing turf war between different agencies over who can regulate what.
And there is a huge amount of attention focused on the use of crypto in criminal activity such as ransomware payments.
The industry, as a collective, has to address all of these issues. Regulations are going to come regardless of whether industry acts or not. How severe these regulatory actions are may depend on how proactive the industry is.
Concerns about stablecoins are real
The concern around libra has morphed into concern over stablecoins at large. The revelation that neither tether (USDT), the largest stablecoin by market cap, nor USDC, the second most-issued U.S. dollar-backed stablecoin, are fully backed by U.S. dollars held in regulated bank accounts, did little to help.
But while regulators seem to agree that something should be done to rein in stablecoin issuers, we don’t yet have a clear picture of how that might be done. The president’s working group will publish a report that may recommend creating a special purpose bank-like charter to oversee stablecoin issuers.
This charter would likely benefit stablecoin issuers and the exchanges that list dollar-pegged tokens by granting some level of legitimacy to the projects.
However, the working group will ask Congress to enact a law creating this charter, and I’m told that is not likely to happen.
The alternative is asking the Financial Stability Oversight Council to create a rule around this issue, which lawmakers and industry participants alike have opposed.
Another train of thought centers around treating stablecoins backed by commercial paper and short-term securities as money market funds, meaning something the SEC would regulate. This would likely not be great for crypto exchanges that list stablecoins like USDT and USDC (Coinbase, for example) as these firms would have to register with the SEC as a securities trading platform and abide by a specific set of rules.
This also seems to be an issue of the industry’s making, but there’s too much in flux to see how these regulations will actually develop.
I joked about how much has happened in 2021 with every person I spoke to. And yet, 2022 is shaping up to be an even more eventful year for crypto policy on several fronts. Watch this space for more heated debate in the coming months.
More from Policy Week:
It’s Policy Week here at CoinDesk!
We’re diving deep into Washington, D.C., lobbying, DeFi regulation, how non-fungible tokens (NFT) could be seen as securities, and much more through a series of feature stories, op-eds, interviews, research and video.
For the “Opinionated” podcast, co-hosts Ben Schiller, Anna Baydakova and Danny Nelson discuss some regulatory hot topics.
First up: Is crypto a threat to financial stability?A senior Bank of England official recently suggested as much, comparing crypto to the subprime mortgage securities that blew up the world economy in 2008.
Similarly, the International Monetary Fund said the other day that digital assets could cause as much disruption as COVID-19 and climate change.
If the high priests and priestesses of finance once ignored crypto, no longer! This once-insignificant industry is now firmly on the agenda.
Next: The SEC is looking at NFTs.
Non-fungible tokens have been one of the big stories of 2021. Artworks and collectibles have sold for many millions and the NFTs have served to bring many new faces into the crypto sector.
But will 2022 raise compliance issues for NFT platforms and makers as regulators step in?
That’s the belief of many lawyers and NFT execs. Fractionalization, where works are split into pieces and sold off to investors, seems particularly likely to interest our overseers.
Finally: Will Russia embrace crypto as a way around the dollar’s domination of international oil markets? Recent comments from Russian President Vladimir Putin have raised hopes on this one. But, speaking from Moscow, Anna says it’s not likely, at least in the short term.
Listen to the episode for more on the big policy questions of the moment. And subscribe to the podcast via your favorite podcast service.
This episode was produced, announced and edited by Michele Musso. Our theme song is by Elision.
Bitcoin’s price slipped to the $62,000 area on Thursday as indicators suggest bullish sentiment is near extreme levels, which typically precedes a price pullback.
The cryptocurrency’s price was down about 5% over the past 24 hours after failing to sustain an all-time high of almost $67,000 on Wednesday.
The crypto Fear & Greed Index remained elevated in “extreme greed” territory, suggesting that investors who accumulated positions around the $30,000 BTC price could start to take profits.
Analysts also noted signs of excessive optimism in the bitcoin futures market, although some expect price pullbacks to be short-lived.
“Despite the recent setback, we remain very bullish about the current crypto cycle for at least another five to six months,” James Cox, CEO of Taipan Trading and Investments, wrote in a Thursday investment memo. The firm reduced trading during the September crypto sell-off and later deployed a large cash position to BTC in October.
Looking ahead, traders and analysts will be monitoring Valkyrie Investments’ bitcoin futures exchange-traded fund (ETF), which will begin trading in the U.S. on Friday under the ticker BTF.
- Bitcoin (BTC): $62,700, -5.54%
- Ether (ETH): $4,079, -0.69%
- S&P 500: $4,549, +0.30%
- Gold: $1,784, +0.17%
- 10-year Treasury yield closed at 1.67%
BITO trading activity surges
The ProShares Bitcoin Strategy ETF (NYSE: BITO) had significantly higher trading volume over the past two days relative to other large exchange-traded funds (ETF). This reflected strong investor demand for BITO, an ETF focused on bitcoin futures, and achieved nearly $1 billion in assets in just its second day of trading.
“The introduction of this product is a net positive for the [crypto] industry. Since ETFs are traded in all traditional brokerage accounts, BITO creates a frictionless avenue for thousands of professional financial advisors to achieve liquid exposure to bitcoin without needing to endure a learning process,” global advisory firm FundStrat wrote in a Thursday newsletter.
Nice look at just how ridic $BITO's first two days of volume were. Here it is vs the next most successful ETF launches of all time. It did double any of them, and is in good co w/ second day growth (see $QQQ, $GLD) via @tpsarofagis pic.twitter.com/WLzQt7yD3t— Eric Balchunas (@EricBalchunas) October 21, 2021
Indicators show extreme market optimism
The crypto Fear & Greed Index reached a six-month high over the past week, which signaled “extreme greed” among market participants.
“It’s not unusual to see the index fluctuate at such high levels,” Arcane Research wrote in a Tuesday newsletter. “Throughout the bull market from November until April, the index mostly remained in this area [current levels], with periods of decline into the fear area during sudden sharp sell-offs,” Arcane wrote.
Excessive optimism is also evident in the bitcoin futures market. For example, the average BTC funding rate, or payments to long or short traders, is at the highest level since August. Elevated funding rates often lead to temporary price pullbacks, according to CoinDesk’s Omkar Godbole.
“Although a positive funding rate represents an upbeat market mood, a very high reading indicates that the leverage is heavily skewed on the bullish side and often paves the way for price pullbacks,” Godbole wrote.
Traders anticipate an ether ETF
Options traders are betting big on ether’s turn for an ETF, reported CoinDesk’s Muyao Shen.
Data reveals strong purchase activity on ether’s $15,000 call options (the right to buy the underlying asset in the future at a predetermined price) expiring March 25, 2022 – a far cry away from the current spot price around $4,000.
- Associated Press taps Chainlink for elections, sports data: The Associated Press (AP), the 175-year-old news agency, will provide economic, sports and elections data to Chainlink, a system that provides information feeds to blockchains and triggers digital contracts to carry out transactions. The partnership, announced Thursday, is another example of an iconic, mainstream brand embracing blockchain technology, while also showing Chainlink’s plans to expand the reach of decentralized finance (DeFi) into new areas.
- Worldcoin, now valued at $1B, has grand plans to get you to gaze Into the orb: Worldcoin announced Thursday it raised $25 million from investors including Andreessen Horowitz (a16z), Coinbase Ventures, Digital Currency Group (the parent company of CoinDesk) and angel investors, including crypto billionaire Sam Bankman-Fried and Reid Hoffman, the co-founder of LinkedIn. The company is currently valued at $1 billion. The Orbs are handled by independent entrepreneurs Worldcoin calls “Orb Operators,” who take the devices into the world – say remote villages and metro stations and university campuses – and convince people to sign up for free worldcoin with an eye scan. Orb uses the eyescan to create a unique identifier, called IrisHash, which ensures the signee is human and has not collected worldcoin before.
- NFT artist Brian Frye wants you to steal his intellectual property: Brian Frye, a conceptual artist, film maker and law professor, encourages people to plagiarize everything he’s ever created or said, reports CoinDesk’s Daniel Kuhn. This pro-plagiarism stance is part of Frye’s continuing campaign against copyright, the legal instantiation of the idea that ideas can and should be owned. This contrarian opinion has brought him to the world of non-fungible tokens (NFT), the blockchain-based technology often credited with bringing “scarcity” to digital goods.
- Bitcoin Tumbles to $63K in Quick Retreat From All-Time High
- Bitcoin 87% Price Flash Crash on Binance.US Attributed to Trader Algorithm Bug
- FTX Raises $420,690,000
- Houston Firefighters Pension Fund Makes Bitcoin, Ether Purchase
- FATF to Publish Crypto AML Guidance Next Week
- Andreessen Horowitz Invests in New Meta4 NFT Fund
- Swedish Financial Watchdog Investigating Two Local Crypto Firms
Most digital assets in the CoinDesk 20 ended the day lower.
Notable winners as of 21:00 UTC (4:00 p.m. ET):
- The Graph (GRT): +7.74%
- Chainlink (LINK): +3.35%
- Ethereum Classic (ETC): 1.37%
- Dogecoin (DOGE): -5.60%
- Polkadot (DOT): -5.60%
- Filecoin (FIL): -4.84%
CORRECTION (Oct. 21, 21:07 UTC): Corrects bitcoin’s all-time high price.
Walmart, the world’s largest company by revenue, is letting customers buy bitcoin at dozens of its U.S. stores.
Shoppers can purchase the cryptocurrency at Coinstar machines inside the retailer’s cavernous big box stores. A CoinDesk editor verified that the service works, buying a small amount of BTC at a Pennsylvania Walmart on Oct. 12.
“Coinstar, in partnership with Coinme, has launched a pilot that allows its customers to use cash to purchase bitcoin,” Walmart communications director Molly Blakeman told CoinDesk via email. “There are 200 Coinstar kiosks located inside Walmart stores across the United States that are part of this pilot.”
Coinstar is best known for allowing consumers to exchange coins for paper bills or gift cards. The ability to buy bitcoin is enabled by Coinme, a crypto wallet and payment firm that specializes in bitcoin ATMs (BTMs).
After inserting bills into the machine, a paper voucher is issued. The next stage involves setting up a Coinme account and passing a know-your-customer (KYC) check before the voucher can be redeemed. The machine charges a 4% fee for the bitcoin option, plus another 7% cash exchange fee, according to the Coinstar website and verified by CoinDesk.
CoinDesk tested the service out of an abundance of caution following a hoax last month, when a fake press release claimed that litecoin (LTC) would be accepted as payment at Walmart stores. This time, the bitcoin-Bentonville connection is real. A source with knowledge of the pilot said the Litecoin debacle had put Walmart, which is based in Bentonville, Ark., off from issuing a press release.
Bitcoin ATMs on the rise
The cryptocurrency ATM industry is expanding at a rapid pace, partly fueled by the COVID pandemic. Coinstar announced plans in 2020 to double its fleet of 3,500 Coinme BTMs amid a spike in usage.
More recently, Coinstar, which started adding bitcoin-buying services with Coinme in early 2019, added 300 bitcoin-enabled machines at Winn-Dixie, Fresco y Más, Harveys and other grocery stores across Florida.
But Walmart, long seen as the crown jewel to bringing crypto financial services into the mainstream, is another step up – even if the 200-kiosk pilot is chump change for a company with 4,700 stores and a market cap of $409 billion.
The potential for crypto-enabled financial services for lower-income users is alluringly close given shared connections among Walmart, Coinme and MoneyGram, but the retailer didn’t elaborate further on its crypto plans.
While large-scale BTM rollouts could bode well for adoption, there are concerns about money laundering, said Seth Sattler, compliance director of BTM provider DigitalMint.
That’s because some crypto ATM operators turn a blind eye to the relatively high level of illicit activity the machines attract, he said. That includes money mules, human traffickers and assorted scammers.
Over the past 18 months, DigitalMint, which accounts for only 5% of total BTM transaction volume, has rejected and returned $5 million to fraud victims, said Sattler, who is also a leading contributor to the recently convened Cryptocurrency Compliance Cooperative.
“Large retailers need to make sure they know the vendor they’re getting into bed with and what that organization is doing to manage risk,” Sattler said in an interview.
Kevin Reynolds contributed reporting.
After a 100%+ move to a new all-time high, profit taking kicks in and Bitcoin traders brace for a possible retest of the $58,000 to $62,000 zone.
Whipsaw price action has returned to the cryptocurrency market after Bitcoin’s (BTC) price lost steam at $67,100 and retracted to the $62,000 level.
An early morning 87% flash crash in the price of BTC at Binance US saw the price briefly touch $10,000 and it may have set the market on edge, but generally, it appears to have been an isolated event. Data from Cointelegraph Markets Pro and TradingView show that bears have briefly taken control of the market with the price now fluctuating between $62,000 to $63,500.
Here’s a look at what traders and analysts are saying about the recent price action for Bitcoin and what could be next for the top-ranked digital asset.
$66,000 needs to become support
The rapid climb in Bitcoin over the past three weeks pushed the price back to the major resistance level it faced in April, a fact highlighted by independent crypto analyst ‘Rekt Capital.’ As shown below, there was a firm rejection near the $63,500 resistance level.
The main difference this time around is that now bulls are attempting to establish this level as the new support zone, which will give BTC a good foundation for a further push higher.
For the short term, this has now become a key price level to keep an eye on as the market heads into the final week of October.
Q4 has historically been bullish
The breakout to a new all-time high has many across the space debating whether now is a good time to take profits or if it’s time to increase position sizes instead.
According to David Lifchitz, managing partner and chief investment officer at ExoAlpha, “In crypto-land, everything is possible,” and he suggested that “a continuous uptrend taking BTC to $80,000 shortly from here, or a mild pullback down to $58,000 or even down to $53,000 before pulling higher toward $80,000 and above” were both well within the realm of possibilities.
Historically speaking, “probabilities would favor some pullback after the recent torrid ride,” according to Lifchitz, who highlighted the $64,500 and $58,000 levels as some of the key areas to keep an eye on for the potential to “lighten up positions in case of a pullback and load-up again in the $53K region if the pullback deepens, or reload where the first stops were hit if the pullback doesn't deepen.”
Overall, Lifchitz indicated that the path ahead looks positive for Bitcoin and the wider cryptocurrency market as it enters the final quarter of 2021.
“The 4th quarter has historically been bullish, so it favors an upside target by year-end. So overall bullish mid-term but maybe some light turbulence ahead.”
Bitcoin needs to hold $62,000
A final perspective was offered by pseudonymous Twitter user ‘E-Club Trading’, who posted the following chart showing the recent price action and important support and resistance zones.
The analyst said:
“A bit of profit taking in BTC as it drops below the previous high of $65,000. It needs to hold above $62,000, or we could retest $58,000 in the next few sessions. Glad to be out of the way for the moment.”
The overall cryptocurrency market cap now stands at $2.548 trillion and Bitcoin’s dominance rate is 46.5%.
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 vast majority of digital assets are being used for legitimate purposes, but for those that are primarily in the business of furthering criminal enterprises, we plan to use our tools to go after them,” said Wally Adeyemo.
Wally Adeyemo, the Deputy Secretary of the United States Department of the Treasury, said the department would likely be enforcing more sanctions on companies involved in illicit transactions related to ransomware payments.
Speaking at an online event hosted by the Center for a New American Security with former Treasury Secretary Jack Lew and Ambassador Paula Dobriansky, Adeyemo said the U.S. government would likely be dipping into its toolbox by employing sanctions when criminals threaten national security interests. He specifically mentioned “crypto exchanges or mixers that are fundamentally in the business of furthering cybercriminals” as possible targets.
“Our view is that the vast majority of digital assets are being used for legitimate purposes, but for those that are primarily in the business of furthering criminal enterprises, we plan to use our tools to go after them,” said Adeyemo. “We also have to admit to ourselves that ultimately the growth of digital assets is a challenge that we have to address when it comes to our sanction regimes.”
Adeyemo added any investigations into illicit crypto sanctions would include collaboration with the FBI, the intelligence community and other agencies. His comments come following an Oct. 18 report saying the department needed to do more to develop its infrastructure and policies in regards to digital assets, as they were hampering the implementation of sanctions while balancing funds from legitimate humanitarian organizations. The report suggested the U.S. Treasury should modernize to include the “right expertise, technology, and staff” to tackle digital assets.
The government department has been employing sanctions as part of the United States’ efforts to fight ransomware attacks threatening the country’s infrastructure, such as when Russia-based DarkSide hackers attacked the Colonial Pipeline system in May. Last month, the department announced it would impose sanctions on the Czech Republic as well as Russia-based business Suex OTC for allegedly allowing hackers to access cryptocurrency sent as payment for ransomware attacks.
This episode is sponsored by NYDIG.
Last year, Paul Tudor Jones wrote a paper called “The Great Monetary Inflation” that would end up creating narrative motivation for many traditional retail and institutional investors to allocate to bitcoin as an inflationary hedge. On today’s episode, NLW looks at the rising discussion of inflation in the media and in mainstream American society. He discusses why the inflation conversation, even more than the ProShares bitcoin futures ETF, might be driving bitcoin’s current rise. He also shares Paul Tudor Jones’ latest comments from “Squawk Box” on CNBC regarding the inflation issue.
“The Breakdown” is written, produced by and features NLW, with editing by Rob Mitchell and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Only in Time” by Abloom. Image credit: Michael Nagle/Bloomberg/Getty Images, modified by CoinDesk.
Data monopolists like Google have abused their position, according to Internxt's Fran Villalba Segarra. Decentralized architecture offers a solution.
Privacy-focused blockchain file storage service Internxt has a lofty vision: leverage decentralized technology to break Big Tech’s monopoly over user data. Its first product, Internxt Drive, aims to compete as an alternative to Google Drive and Dropbox — without compromising personal privacy and data ownership.
In an exclusive interview with Cointelegraph, Internxt CEO Fran Villalba Segarra described the core technology behind his product and explained why privacy should be considered a fundamental human right. He also explained the perils of centralized architecture, why Big Tech constantly violates user privacy and what’s in store for internet users in the era of Web 3.
Although privacy advocates have long been concerned about Big Tech’s exploits of user data, Facebook’s Cambridge Analytica scandal in 2018 blew the lid wide open on the subject. (As a refresher, Cambridge Analytica is a British consulting firm that was able to obtain data on millions of Facebook users without their consent. Their information was then used for political advertising.) In July 2019, the Federal Trade Commission fined the social media giant a whopping $5 billion for privacy violations.
In retrospect, exploits like Cambridge Analytica didn’t surprise Segarra, who told Cointelegraph that protecting users’ privacy conflicts with the business model of companies like Facebook, Google and Microsoft. “That’s why these companies collect more data than what is actually needed,” he explained. “Their services aren’t an end per se, but a means to an end.”
“Zero-knowledge file storage service”
The erosion of personal privacy by Big Tech compelled Segarra and his team to create a new business model based on decentralization. The company’s first product, Internxt Drive, is described as an alternative to Google Drive and Dropbox that’s based on zero-knowledge encryption and geodistributed data centers. He explained:
“Files uploaded to Internxt Drive are fragmented, client-side encrypted, and distributed all over the globe, so that a server never holds a complete file, but instead an encrypted data shard [...] In these architectures, files are often split into evenly sized segments of data. Each segment or block has its own address but no metadata to provide context about what it is. The storage target can be configured to replicate data across storage arrays or distributed file systems.”
Unlike centralized systems, where user data is stored on physical servers owned and operated by the cloud provider, decentralized architecture provides enhanced security with respect to cloud functionality.
“If a decentralized component is compromised or encounters a runtime error, which is an unrecoverable worst-case scenario in that the component goes offline while the rest of the cloud continues to function normally,” he explained. On the other hand, with centralized cloud storage systems, core functions are interlaced within the same space. “If an error or attack manages to destabilize a centralized component, the entire cloud is at risk.”
Web 3 and the future of privacy
Web 3 — a broad concept that refers to the new paradigm of internet services where users retain more control of their personal data — has been heralded as a potential solution to society’s growing privacy concerns. The current paradigm, dubbed Web 2, is mainly driven by companies that provide services in exchange for personal data.
The advent of blockchain technology has made decentralization nearly synonymous with Web 3. The decentralized cloud storage technology being championed by Internxt aligns with the narrative that Web 3 changes the very nature of data ownership and puts more control in the hands of users as opposed to the Big Tech companies. Industry observers have rightly noted that this new paradigm could challenge existing privacy regulations, especially as decentralized applications continue to grow.
“Web 3 is certainly going to be huge,” Segarra said, adding that consumer-centric applications that allow users to protect themselves online is “going to be hugely demanded by the market.”
Internxt is coming off a successful seed round, having raised $1 million in a raise that was led by Miami-based venture fund Venture City. Segarra said adoption is growing, with the company expected to generate 1,500% year-over-year growth by the end of 2021.
Blockchain interoperability might just be becoming a reality, with cross-chain NFT games taking the lead.
Society is headed towards a new form of digital ownership with an economy and greater metaverse based on the blockchain. The concept of "the metaverse" is typically depicted as actual and augmented reality-based in a virtual world. Most recognize this concept since it is present in several fictional movies of dystopian futures like Ready, Player, One, Minority Report and Avatar. However, the concept has since quickly gained attraction from the technology industry, making it more viable than ever before.
The metaverse is seen by many as the natural evolution to what comes next after what people are already doing on social media. Industry experts believe that people are already seeking new places to interact with each other, collect virtual likes and gain recognition. Still, other individuals see the metaverse as an opportunity to live life in a more child-like way, in a setting free from the confines of today's societal structure.
Currently, no clear definition for a metaverse exists, although developers agree on several attributes as necessary. While many representations of the metaverse are heavily weighted towards games and entertainment, technology experts suggest the metaverse concept must include a lot more than that. Other attributes deemed essential to include a fully-fledged economy and unprecedented interoperability so users can take avatars and goods from one place to another, no matter who is "in charge of a particular section of the metaverse."
Unfortunately, before the metaverse becomes a reality, there have been some questions about how much interoperability is required. Some believe that a metaverse would require a single operator, while others believe a heavily involved decentralized platform would be necessary.
Although some debate still exists here, one fact continues to ring true: the number of different blockchains has created a complicated ecosystem that will need to be addressed before the metaverse comes to life.
As new use cases become more prevalent, more blockchains have arisen to solve each specific set of needs. While many chains have successfully solved the problems they've set out to, numerous solutions have increased the number of isolated chains. The major concern is that data stored on the chain is restricted to the chain or chains they were created on.
In practice, this means users can't even exchange Bitcoin (BTC) for Ethereum (ETH) without going through a centralized exchange. It is also impossible to send a token like USDT from the Ethereum blockchain to the Binance Smart Chain (BNB), even if both chains support the token. The same is true for any digital asset represented by a nonfungible token (NFT).
Therefore, as the current blockchain world exists, there is no way for anyone to take advantage of the full benefits of the ledger technology unless users are willing to participate on multiple chains. Furthermore, the lack of interoperability between chains has become added friction for new users who must spend time learning the already new and complex technology.
For blockchain, this means the pressure for cross-chain technologies has grown in response to concerns around reducing the fragmentation of NFT platforms and marketspaces. Technology companies continue to push for interoperability. However, gamers may already be living in a world where an NFT can be traded with anyone regardless of the blockchain they use.
Achieving cross-chain compatibility
The game Evolution Land provides a potential solution to NFT interoperability as a DeFi (decentralized finance) and NFT cross-chain game leveraged by Darwinia Network. According to the team behind Evolution Land, "the multi-chain Web 3.0 world hasn't come yet, but Evolution Land has created one in the Metaverse." That said, the game will also operate as a multi-chain NFT gateway, with support for multi-chain NFTs like Crypto Kitties and PolkaPets.
The game can be described as a cross-chain, business game and virtual simulation. In it, users can buy and sell property, govern their space, grow crops and create buildings, collect and trade NFTs, hire others to help mine elements on their land across 26 continents, each representing a different blockchain. Currently, five continents exist, including one on Ethereum, known as the Atlantis Continent and another built on Tron (TRX). Players must abide by governance parameters, including a trade tax rate. However, this will be set by the players.
Each player uses Avatars called Apostles, which can be purchased using RING, the game's native utility token. Apostles each have their own unique genes and talents that determine their abilities, much as people do in the real world. Healthy apostles can even breed healthy offspring whose genes are determined based on the parents’ genetic algorithms, meaning they can also inherit any genes or mutations from their parents.
Taking advantage of play-to-earn mechanics, players gain the opportunity to use these Apostles to mine resources, own NFT land and use NFT mining tools called “Drills.” Users may choose to hold their NFTs or sell them in the marketplace for funds that can be converted into cash in the real world. Furthermore, 70% of the revenue earned by the game will be shared with the players, meaning the entire community has the opportunity to share in its success.
More than ten projects have announced plans to build communities in Evolution Land to present project information and give back rewards to the community fans. The result is that to date, the game’s DeFi farm APR reached over 1000% and resource token prices have increased 20-60 times.
Now recognized as one of the top 15 ETH game projects by volume, the team continues to seek out big updates over the next year. Designed to be both self-evolving and scalable, any developer will have the opportunity to build their DApp in the Evolution Land game and evolve the game long into the future.
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.
Bitcoin’s price briefly crashed 87% and then recovered within the span of a single minute early Thursday on Binance.US, in a fleeting but very real flash crash that the cryptocurrency exchange attributed to a “bug” in an institutional customer’s trading algorithm.
At 11:34 UTC (7:34 a.m. ET), the price fell from around $65,760 to as low as $8,200, then quickly bounced back up to almost exactly where it was before.
“One of our institutional traders indicated to us that they had a bug in their trading algorithm, which appears to have caused the sell-off that was reported this morning,” a Binance.US spokesperson told CoinDesk.
“We are continuing to look into the event but understand from the trader that they have now fixed their bug and that the issue appears to have been resolved,” the spokesperson said, declined to comment on further details about the crash.
On other cryptocurrency exchanges, bitcoin’s price dropped around the same time, but by nowhere near as much. On Bitstamp, for example, the price fell about 2.3% at 11:34 UTC but never got below $63,600.
Omkar Godbole contributed reporting.
Bitcoin's surge to $67,000 has given bulls an advantage in Oct. 22's $1.8 billion BTC options expiry.
Two or three weeks ago, when Bitcoin (BTC) was trading below $52,000, a trader betting on $65,000 by Oct. 22 would have been considered extremely optimistic. The fact that 98% of the put (sell) options for Bitcoin's weekly options expiry on Oct. 22 has been placed below that price proves that this is true.
Fast forward to this week, and the successful launch of the first BTC exchange-traded fund (ETF) in the United States and news that Digital Currency Group (DCG), the parent company of the Grayscale Bitcoin Trust, increased its limit to acquire up to $1 billion worth of GBTC shares, boosted Bitcoin price to new all-time highs.
The $40.5 billion investment vehicle has been available for trading on United States markets since March 2015, and it recently filed a request to the United States Securities and Exchange Commission (SEC) to convert its GBTC product to an ETF.
The parabolic move to the $67,000 all-time high on Oct. 20 has also been fueled by billionaire investor Carl Icahn's bullish remarks. With four decades of splendid returns, Icahn warned of an impending financial crisis and highlighted Bitcoin's strength as an inflationary hedge.
Furthermore, Vasiliy Shpak, Russia's deputy minister of Industry and Trade, reportedly filed a proposal to use the country's oil exploration gas production to power cryptocurrency mining. The Russian government has attempted to reduce gas flaring to cut emissions but has struggled to meet targets due to its underdeveloped infrastructure.
Even though Oct. 22's $1.8 billion options expiry is a landslide victory for bulls, it wasn't like that a couple of weeks ago.
At first sight, the $1 billion call (buy) options dominate Oct. 22 expiry by a mere 23% compared to the $810 million puts (sell) instruments.
However, the 1.23 call-to-put ratio is deceptive because the recent rally will likely wipe out most of the bearish bets if Bitcoin's price remains above $64,000 at 8:00 am UTC on Oct. 22. There is no value on a right to sell Bitcoin at $60,000 if it's trading above that price.
Bulls seem pretty comfortable above $65,000
Below are the four most likely scenarios for the Oct. 22 expiry. The imbalance favoring either side represents the theoretical profit. In other words, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:
- Between $60,000 and $62,000: 8,670 calls vs. 3,070 puts. The net result is $335 million favoring the call (bull) instruments.
- Between $62,000 and $64,000: 10,780 calls vs. 2,100 puts. The net result is $540 million favoring the call (bull) instruments.
- Between $64,000 and $66,000: 13,050 calls vs. 280 puts. The net result is $830 million favoring the call (bull) instruments.
- Above $68,000: 13,680 calls vs. 20 puts. The net result is complete dominance, with bulls profiting $940 million.
This crude estimate considers call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.
For example, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin above a specific price. But, unfortunately, there's no easy way to estimate this effect.
Bears need a 7% price correction to reduce their loss
In each of the scenarios drawn above, bulls have absolute control of Oct. 22's expiry. This week's positive newsflow leaves little reason for investors to take profit or accept a price correction ahead of the expiry. On the other hand, bears need a 7% move below $62,000 to avoid an $830 million loss.
Traders must consider that during bull runs, the amount of effort a seller needs to pressure the price is immense and usually ineffective. Currently, options markets data point to a considerable advantage from call (buy) options, fueling even more bullish bets for the monthly expiry on Oct. 29.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Brian Frye, a conceptual artist, film maker and law professor, encourages people to plagiarize everything he’s ever created or said.
“I’m the legal academy’s leading plagiarism advocate. I’m also the legal academy’s only plagiarism advocate, which makes it very easy to be number one,” the bespectacled Frye said in a video call yesterday. Well, professor, I’m stealing that joke.
This article is part of CoinDesk’s Policy Week, a forum for discussing how regulators are reckoning with crypto (and vice versa). A version of it published first in The Node newsletter, which you can subscribe to here.
This pro-plagiarism stance is part of Frye’s continuing campaign against copyright, the legal instantiation of the idea that ideas can and should be owned. Over the past decade and a half, Frye has written countless legal reviews and op-eds discussing how copyright is antiquated in a world where the internet eliminates the costs associated with reproduction and distribution.
“Ideas are non-rival,” he told CoinDesk. “You don’t need to value them because there’s no scarcity, so they should be valueless.”
This contrarian opinion has brought him to the world of non-fungible tokens (NFT), the blockchain-based technology often credited with bringing “scarcity” to digital goods. It’s an idea for which lots of people are willing to pay big bucks.
A representative example: Ether Rocks is a series of virtual pet rocks that “live” on the Ethereum blockchain. There are 100 unique tokens – each corresponding to a near-identical cartoon JPEG – that even the creators say serve “NO PURPOSE” beyond speculation. Though the original image was a royalty-free piece of clip art, some people have spent millions of dollars on these tokens.
But, as Frye notes, what people are buying when they buy any NFT is “worthless.” By and large, NFTs do not represent ownership of the digital goods to which they supposedly correspond, do not confer copyright and may, in fact, one day be classified as securities. “So the owner of the NFT gets nothing other than the right to claim ownership of the NFT,” he wrote in August.
That’s not nothing. In fact, Frye is learning NFTs have a lot going for them. For one, there’s a sort of community-wide acceptance that people can sell even things they don’t possess. He sold an NFT of the Brooklyn Bridge for $500 – stealing the idea from an infamous scam artist.
NFTs are the “reductio ad absurdum” of contemporary art markets, meaning they reduce the “concept of ownership to its purest essence, it’s the ownership of ownership,” he said, and of art to pure market functions. Art, he said, has always been more about status than anything, and the blockchain just makes this pecking order more visible and open.
Further, NFTs are a sort of blunt instrument to wield against legacy institutions. In September, Frye minted a series of NFTs tied to a paper he wrote called “SEC No-Action Letter Request,” which raised the question of whether selling shares of ownership in the paper is an illegal unregistered security.
There was the implicit promise of income, which, to his surprise, actually came through. He brought in tens of thousands of dollars worth of ETH in the sale. This proved his thesis: The project called into question standing securities law, which Frye thinks is overly broad in covering “any investment in a common enterprise that generates profit from the efforts of others,” and lays out a possible argument the Securities and Exchange Commission (SEC) could use against him.
It’s easy to call everything meaningless: art, securities rules, copyright. As part of a series we’ve called “Gensler for a Day,” which is asking informed and influential people to give their ideal crypto policies, CoinDesk reached out to see if Frye has any concrete plans, not just concepts. It’s not too far out there: Frye did once run for public office.
What follows is a condensed version of our conversation, covering NFTs, the SEC and the merits of writing while taking a bath. You can read a full version on CoinDesk.com. And feel free to steal his ideas.
“Break a contemporary museum into pieces with the means you have chosen, collect the pieces and put them together again with glue.” [That’s a line from Yoko Ono’s poetry book “Grapefruit,” which Frye has cited as inspiration.] Does that mean anything to you?
The idea is to just give people something to think about when they think about what they’re doing and why they’re doing it, you know, and also to do it by kind of ostentatiously plagiarizing someone else at the same time. All my good ideas are stolen from someone else.
Is that what you’re doing with NFTs? I mean, I think so. I’m not sure what I’m doing in NFTs, yet. When the NFT thing first hit the public consciousness over the summer, somebody called me from Business Insider and wanted me to talk about what was going on. The first thing I said to her was, “I have no idea what’s happening, but I love it.” That’s still true, I have no idea what’s happening. I don’t think anyone has any idea what’s happening, but something is happening. I’m just trying to do my best to be open to whatever it is that’s taking place enough to help me see even though I can’t figure out what it is.
Are you purposefully goading the SEC to make a determination?
They won’t talk to me, they don’t want to talk to me, they’re terrified of what I’m asking them. This is existential for the SEC.
What do you mean by that?
OK, look, everyone asks the wrong question. People keep saying, “is it a security?” If the SEC wants to regulate it – that’s the only real question. The SEC transforms things into securities by the magic of regulation. Anything can be a security as long as the SEC decides to characterize it as a security because the definition is overinclusive, it means everything.
I don’t mean I’m agnostic as to how we should go about doing this. Maybe a probationary regime of securities regulation is what we want. Maybe we do want a kind of SEC exercising discretion about what it regulates. But the problem is the SEC. The people there are morons. They have no idea what they’re doing and they don’t actually realize that the term “security” is meaningless.
So this is a problem for them because all of a sudden they’re confronted with something that is terribly, existentially terrifying to them because they don’t know what to do with it.
You’re doing the work for them. They can plagiarize it if they want.
A friend of mine said to me when I did the SEC “No Action” letter requests as a work of conceptual art – the conceptual art consisted of me sending the “No Action” letter request to the SEC asking them to “regulate me baby.” I explained to them, this is a security according to your definition, therefore you should prohibit me from selling it. My friend said this is probably the first ever “Action” letter request. Because nobody sends a letter to the SEC, saying, “I want to do something illegal, please stop me.”
You’ve received broad acceptance from the NFT community, from the media – Business Insider, Bloomberg, CoinDesk. But it seems like your true audience – the SEC – has rejected your work. (They could also just move slowly.) How does that make you feel?
I love it. If the SEC had it in them to respond to what I’m doing I think it would make the art less fun. The whole point is to be trolling the government. The SEC is basically nerd cops. They want to be in the business of being in charge. The one thing you’re not used to is people punking them. No one does this.
Except for Elon Musk.
Fair. He’s got balls of steel to punk the SEC while having something actually on the line. No one questions whether or not it falls within the sphere of securities regulation. He’s playing chicken with them. In my case, there’s no risk. What are they going to do to me? It would be too humiliating for them to prosecute me. Bringing an action against me would be like throwing me in the briar patch.
You said that a lot of people suddenly wanted to spend a lot of money to buy nothing, because that’s what an NFT is – nothing. Are your ideas worth less than nothing?
I mean, ideas are valueless because they don’t need to have a value. Ideas are non-rival. You don’t need to value them because there’s no scarcity, so they should be valueless. What I find most interesting about NFTs is that they sort of are the reductio ad absurdum of the art world in a really beautiful way.
Everyone talks about Walter Benjamin and the “aura of authenticity of the work of art.” You know, God bless him, I think he was actually onto something, but he was totally wrong, but it wasn’t his fault that in 100 years there’d be the internet, let alone cryptocurrency or NFTs. The problem is he saw the aura as being attached to the authentic object; but what he missed, I think, was that the aura is really all about ownership. The concept of ownership. The peculiar thing about NFTs is that they reduce the concept of ownership to its purest essence, it’s the ownership of ownership, and that’s it.
Right. You don’t own the object, you own a token that may correspond to an object.
You own a token that the relevant people are willing to accept as corresponding to ownership of something valuable. Something that they care about, that matters, is meaningful. It’s all about status, really, it’s about other people’s recognition. When you buy art, what you’re buying is a spot in some artist’s catalog or resume – sometimes a dirty piece of cloth or a lumpy rock comes along with it.
You’re sometimes credited, but not always, with the idea that copyright holders are like landlords. Insisting that an idea has value and then charging a type of tithe for people to use it. Who fixes the drain when something is clogged in this analogy?
No one! That’s part of the problem. Corporate owners are the worst landlords because they don’t do any maintenance, and they think they’re God’s gift. Regular landlords at least have a bit of humility. The whole point is not to say that there’s anything wrong with landlords, it’s just to say that there is something wrong with idolizing copyright owners and authors by association with their ideas. There’s nothing special about collecting rent, and that’s all you’re doing when you assert copyright ownership.
Do you have thoughts about the idea of copyright in NFTs?
The beautiful thing about NFTs is that they might actually solve a problem, at least some of the problems, that arise in that landlord scenario. What we’ve done with this technology and various other kinds of internet-based platforms has eliminated entirely all the costs associated with reproducing and distributing works of authorship. That used to be the most expensive part of getting culture out to the public. The whole reason that copyright came into existence in the first place was that the cost of reproduction and distribution had come down slightly when the printing press was invented. When the cost came down a little bit – from manuscripts to printed books – copyright made sense.
The problem is that now the cost of reproduction and distribution is zero. It’s zero. The only cost is associated with producing the work in the first place, but we’re stuck with the same mechanism designed for a world where transaction costs associated with reproduction and distribution were significant.
My hope is that NFTs have the potential to actually compensate authors without having to have copyright at all. Imagine two different potential worlds: You can have one world where you own the right to control the use of the works of authorship you create – you can tell people what they can and can’t do with whatever it is that you produce. But you don’t really get any money if no one really cares or wants to give you money for it. In the other world you don’t own anything. You have no right to control how people use the work of authorship that you created, but somebody is willing to give you 100 grand for it. Which do you prefer?
I’m greedy. I want the money, upfront. I don’t give a [care] about control. We don’t need control anymore as long as you can get paid up front. And, to my mind, NFTs might make that possible. A lot of people are still stuck in this controlling mindset.
What are the concrete policy considerations you want to throw on the table? Eliminate copyright?
I think it has to happen on its own. I’m not delusional enough to think anyone gives a [hoot] what I think. All I can do is throw ideas out there and see what sticks. The landlord thing was great: I put it out there, Mike Masnick picked it up, people ran with it, nobody attributes it to me, but they use it all the time and I love it. It was viral. No one’s going to listen to me to make copyright policy or any other kind of policy, but if we can shift the window a little bit and help people see that this is something actually positive and potentially liberatory that’s going to give people an opportunity to get outside of our regime of ownership that is not productive.
So plagiarism is productive?
I think creators are very narcissistic and they should get over themselves. I like to say I’m the legal academy’s leading plagiarism advocate. I’m also the legal academy’s only plagiarism advocate, which makes it very easy to be number one.
Why do you write in a bathtub?
It’s comfortable. It’s relaxing. It gives me a little bit of time off. Alan Greenspan used to do it.
A little Randian in the tub.
I like to think he would be horrified by everything I stand for.
Do you still think NFTs have the ability to collapse the traditional art market by siphoning off capital?
I think yes. I mean, ideally, yes. But I would put it a little bit differently. I think NFTs have the potential to make the traditional art market irrelevant, which will be a wonderful thing because I think that there’s a fetishization of objects that I think is unhealthy. Taking the money away lets us think about the art more. Art is a consumer good that consumers don’t understand. Consumers understand money – that’s why we talk about art in terms of money, because that helps people understand it. We talk about law schools in the same way, in rankings. We have stock markets – someone won a Nobel Prize for telling us that price is just a way of communicating information.
[Laughs, Googles Joseph E. Stiglitz, cries.]
The art market is a way of communicating information about consumer preferences. The problem is consumers don’t actually know what they want to buy. All they know is what the price tells them about what they’re supposed to buy. What they’re ultimately buying isn’t the object, it’s the status associated with the object. NFTs make the work available to everyone on the same terms, and make it very clear that what you’re buying and what you’re trading is just the status associated with being the owner.
Some notable art critics have said there’s little aesthetic value in NFT art.
Most art critics are idiots. I’m in the process of trolling Chris Knight right now – the least-deserving Pulitzer Prize winner in the history of Pulitzer Prizes. I will concede that what people are trading is in many respects not to my aesthetic preferences. But I don’t think that matters. Who cares what my aesthetic preferences are? If people like it, who’s to say?
I also think that it’s too early to really know what people are going to ultimately value and find worthwhile, and why they’re going to value it and find it worthwhile. The wonderful thing about NFTs is we don’t actually need them – they’re a technical solution to a problem that never actually existed, but we need to figure out how to solve anyway.