In this issue
- Proof of work: Stay of execution
- CryptoPunks: Under new management
- Mango TV: NFT foray bears fruit
From the Editor’s Desk
The past several weeks have brought a torrent of news ranging from dismal to dreadful. But a rare bright spot is clearly visible in the cryptocurrency space.
The latest encouraging sign for the industry was a vote in the European Parliament this week to scrap a measure in proposed legislation that would have imposed a de facto ban on the proof-of-work consensus mechanism that keeps Bitcoin and many other cryptocurrencies running.
The vote, from which a significant number of lawmakers abstained, was not a landslide in favor of continuing to allow proof-of-work to operate, but neither was it an indictment of the energy-intensive process.
Bitcoin, in particular, has attracted much criticism over the carbon footprint produced by the energy generation required to sustain it. Yet the carbon emissions of the world’s oldest cryptocurrency pale in comparison with those generated by the traditional banking sector. European lawmakers appear to have taken heed of this fact as they got to grips with the fact that BTC is no worse an environmental vandal than many other industries.
Crypto has also recently won increased legitimacy in other ways.
U.S. President Joe Biden last week urged the federal government to make plans for a digital dollar, and to overhaul the country’s regulatory approach to crypto and other digital assets, making clear that the crypto space has grown up sufficiently to be welcomed into the mainstream.
And amid sweeping sanctions imposed on Russia following its invasion of Ukraine, crypto exchanges around the world have, largely voluntarily, fallen into line with the positions taken by many governments, blocking targeted Russian crypto accounts and, in the case of South Korea, even slapping an across-the-board ban on Russia-linked accounts.
For years, the crypto sector has struggled to display such manifestations of maturity. Yet in these dark times, it has enjoyed several swift successes in terms of official acceptance and showing it has a moral compass, and we should be grateful for the glimmer of faith in the future that it brings.
Until the next time,
Founder and Editor-in-Chief
1. Crypto crisis averted
By the numbers: Vote MiCA — over 5,000% increase in Google search volume.
The European Parliament this week agreed on a version of the Markets in Crypto Assets (MiCA) bill that does not include a ban on proof-of-work cryptocurrencies, bringing huge relief to the crypto industry.
- On Monday evening, the legislature’s economic and monetary affairs committee adopted, by 31 votes to four, with 23 abstentions, a MiCA framework without the provisions that would limit crypto mining in the European Union’s 27 member states.
- MiCA is an EU regulatory framework containing 126 articles that seeks to tighten regulation around digital assets by establishing a licensing regime and a uniform set of rules for member states. It was unveiled in its draft form by the European Commission in 2020 as a part of the bloc’s digital finance strategy.
- At issue in Monday’s debate were significant differences between two versions of the draft that were up for a vote, one of which contained language that could outlaw operations related to cryptocurrencies that rely on proof-of-work protocols, requiring token issuers to submit detailed accounts of their compliance with environmental sustainability standards — an impossible task in the case of Bitcoin and a number of other cryptos.
- The next phase of MiCA will be a three-way round of negotiations by the European Parliament, the European Commission and the Council of the European Union.
- The EU adopted a version of the bill that would require transparency and disclosure in the issuance of digital assets as well as the closer supervision of crypto asset service providers to better protect consumers and prevent market abuses.
- The parliamentary session directed the European Commission to present members of the legislature with a plan to include any crypto asset mining that contributes substantially to climate change in the EU’s classification system for sustainable activities by Jan. 1, 2025, a move that may nevertheless impose environmental requirements on cryptocurrencies.
Forkast.Insights | What does it mean?
The European lawmakers’ decision to avoid a ban on proof of work — and with it the world’s two biggest cryptocurrencies, Bitcoin and Ethereum — was the right thing to do.
The continent has the world’s largest crypto economy, according to blockchain analysis firm Chainalysis. Kicking out the two biggest currencies would cripple the industry in the EU and deprive the bloc of a high-growth sector that doesn’t need huge amounts of space and resources to grow, discounting its sizeable energy requirements. Those energy needs, which are ever-increasing, however, remain an issue.
Over the past 12 months, an exodus of proof-of-work miners from China has brought difficulties wherever those miners have landed. Kazakhstan saw energy prices surge, a development that was followed by civil unrest. Similar problems are emerging in Russia’s far east. Even in countries like the U.S., home to such energy-rich places as Texas, Bitcoin mining is causing headaches for lawmakers.
Although Ethereum is slowly moving away from proof of work and toward proof of stake, and the number of energy-efficient networks is growing, Bitcoin remains stubbornly wedded to its energy-hungry consensus model.
Bitcoin’s reluctance to change its ways shouldn’t be ignored, and European legislators should salvage parts of MiCA bill that compel cryptos and their communities to do more to reduce their carbon footprint or face being kicked out of the world’s No.1 crypto economy.
2. CryptoPunks sell out
By the numbers: Yuga Labs — 4,300% increase in Google search volume.
Yuga Labs, creator of the Bored Ape Yacht club (BAYC) series of non-fungible tokens, has acquired the intellectual property rights to CryptoPunks, the world’s biggest and most valuable NFT collection, from Larva Labs.
- Yuga Labs confirmed last Friday it had acquired the IP rights to the CryptoPunks and Meebits collections. As part of the acquisition, Yuga Labs now owns the copyright for both collections, including 423 CryptoPunks and 1711 Meebits NFTs.
- According to a statement by Yuga Labs, following the acquisition, the company aims to build a “new community with the transfer of IP and commercialization rights, teeming with creators and third-party developers to incorporate CryptoPunks and Meebits into digital and physical projects across the world.”
- Yuga Labs launched BAYC in April 2021, and it has become one of the most traded NFT collections. Yuga labs had previously granted all BAYC owners full rights to use the images they own for any commercial purposes they choose.
- Larva Labs, however, has been reluctant to grant CryptoPunks owners similar privileges, which has resulted in legal proceedings, and holders of delisted original CryptoPunks NFTs wrapped their “inauthentic” NFTs again and traded them on exchanges.
- CryptoPunks, launched in 2017, had reached a total sales volume of more than US$2.1 billion at press time, while BAYC has reached a trading volume topping US$1.41 billion in less than a years.
Forkast.Insights | What does it mean?
Yuga Labs is doing what big brands have done forever: snap up underutilized and undervalued smaller brands and turn them into giants.
CryptoPunks are the world’s most traded NFT avatars, and Meebits is in the top 10 by lifetime trading volume, according to NFT data aggregator CryptoSlam. But these NFTs’ utility has changed little under Larva Labs’ stewardship. Yuga Labs wants to change that and has already created a successful playbook for doing so.
With BAYC, Yuga Labs struck a deal with Animoca Brands to develop a game using Bored Ape characters. It has also inked a deal with Universal Music Group to create a band using the apes as avatars. Additionally, owners of the NFTs already get access to exclusive events, and Yuga Labs has enticed luxury brands to pay for access to those owners.
The company is one of the few NFT projects that has identified the potential to be a conduit between Web 3.0 and the rest of the world. Dapper Labs — the maker of CryptoKitties and more recently NBA Top Shot — has been helping sports teams and leagues access new revenue streams in the crypto world.
Now, Yuga Labs has already emerged as one of the industry’s leaders in applying a similar model to its newest acquisition.
3. Chinese video platform makes NFT debut
Mango TV, one of China’s biggest online video platforms, has launched a blockchain-based non-fungible token marketplace, with the first batch of collectibles selling out within seconds of opening.
- Mango TV has completed the deployment of its own blockchain, named Guangmang Chain (光芒链).
- The platform, founded in 2014, is an online video service owned by Hunan Broadcasting System, China’s second-biggest state-owned television network, with more than 50 million subscribers at the end of 2021.
- The Chinese market for NFTs — which are now referred to as “digital collectibles” locally after state media outlets issued denunciations and warnings against NFTs — has surged recently. Tech giants including Tencent, Alibaba, JD.com, Xiaohongshu and NetEase have launched their own digital collectible trading platforms. Xinhua News Agency, China’s official state press agency, launched the country’s first digital collectible based on news coverage in December 2021.
- According to research by state web portal China.com released in January, there were at least 38 NFT platforms in China in 2021, generating a total trading volume of around US$23 million.
- Trading of digital collectibles between consumers is banned in China in an apparent effort to prevent speculation, a policy with which Mango TV complies.
Forkast.Insights | What does it mean?
Mango TV’s foray into NFTs comes as regulatory headwinds continue to buffet China’s video-streaming industry.
Since last year, Chinese internet content watchdogs have been cracking down on the entertainment industry and online content they deem inappropriate. Last summer, they cracked down specifically on internet celebrities they accused of promoting lavish lifestyles.
Adulation of artists by armies of fans is a particular concern for China’s authorities, and the Chinese government has also bashed what it claims is a toxic culture of “fandom.” In September, the National Radio and Television Administration even laid out guidelines calling a ban on “sissy idols” and “effeminate men” to promote “correct” standards of personal appearance.
All that regulatory pressure has taken a toll on streaming platforms. Major streaming service iQiyi had to drop a wildly popular idol audition show just before its finale. Mango TV had to make adjustments to its content scheduling, airing some major shows only this year.
Yet Mango TV is expected to have recorded net profit growth of 6.6% in 2021 on the back of its proprietary content, according to an earnings forecast.
The platform’s new NFT venture has considerable potential to help diversify its revenue through such moves as integration with Mango TV’s e-commerce platform Xiao Mang, which went live in early 2021.
Nevertheless, as the regulatory environment for NFTs in China includes a lingering measure of uncertainty, Mango TV will have to take compliance costs into consideration as it aims to grow its new business.