NFTs & Digital Assets

[Audio] NFTs & Digital Assets Is crypto the primitive for a new financial economy or just an overhyped bubble? Let's examine the facts….

[Audio] What we will cover today NFT Stories & Case Studies NFT Definitions, Pros & Cons NFT Marketplaces DeFi, NFTs & Smart Contract Applications What it means for traditional finance.

[Audio] NFT Stories & Case Studies. . . NFT Stories & Case Studies.

[Audio] Let's step back to 2014 where the first NFT was made …. And subsequently sold for $ 1.47M USD in a Sotheby's auction.

[Audio] In more recent times, this piece (sold for $ 63.9M) by Beeple called " Everydays: the First 5000 Days", made up of a mosaic of his first 5000 vector images and gifs.

[Audio] It's not just in art but also in music, Grimes made $ 6M from NFTs by selling images and videos set to music.

[Audio] Steve Aoki made more with one NFT drop than 10 years in music.

[Audio] NFT Definitions, Pros & Cons. . . NFT Definitions,.

[Audio] So what exactly are NFTs and why are they so valuable? NFTs- Non-fungible token Fungibility - the concept of something being divisible (e.g. money or Bitcoin is fungible but not a one of a kind trading card this is non fungible).

[Audio] NFTs can provide ownership enforced by the blockchain When you purchase an NFT on marketplaces like OpenSea you can prove that you verifiably own the piece of art on the blockchain.

[Audio] NFTs provide new angles for artists and corporates to monetise UNICEF is using funds from an NFT launch to fund promising initiatives of the UNICEF Global Office of Innovation, including Giga, a UNICEF and ITU initiative to connect every school in the world to the Internet using new technologies like low-earth orbit satellites, machine learning, and blockchain.

[Audio] NFTs can be fractionalised to improve access Baconcoin is fractionalising US real estate and providing accessibility by turning a physical asset (e.g. a home) into an NFT..

[Audio] NFTs owners can own the IP and rights to their NFT Bored Ape Yacht Club owners can audition their apes into a movie trilogy that is being created and will earn $ 10,000 licensing fee paid in BTC or Ape Coin..

[Audio] NFTs enable royalties to be built in to empower artists NFTs allow artists to gain a passive income when their artwork sells on the blockchain - this is enforced via a smart contract which is an immutable piece of code that lives on the blockchain and enables trustless interactions between third parties..

[Audio] NFTs are good vehicles for money laundering This is because of the high price volatility which makes it difficult to determine the fair market value of the NFT. Elliptic, a crypto research firmed, has identified over $ 8M in money laundered through NFTs. These launderers use services like Tornado Cash to obfuscate the source of funds..

[Audio] NFT theft cannot be protected as there is no regulations Seth Green was creating a movie with his Bored Ape NFT when it got stolen. In most cases, law enforcement could help him retrieve it but because it is on the blockchain it is hard to trace and contact who exactly the hacker is. There is also no regulation on the blockchain to prevent or enforce against NFT theft..

[Audio] NFT prices are volatile (even for the blue chips) Even blue chip NFTs such as Bored Apes saw an almost 70% decline in USD values from its peak - NFTs are usually also priced in ETH which even adds more volatility..

[Audio] NFT Marketplaces. . . NFT. Marketplaces.

[Audio] Why are NFT marketplaces needed? 1. Price discovery for specific NFT collections 2. No physical venues to actually sell NFTs 3. Exchange is made much more simply via a marketplace vs in a peer to peer way 4. Counterparties don't need to trust each other to use an NFT marketplace.

[Audio] Opensea was one of the first NFT exchanges They are a peer-to-peer exchange which enables users to buy and sell NFTs and take a service fee of 2.5% for facilitating the trade. Opensea is the largest NFT marketplace right now. 2.5% fee Dec 2017.

[Audio] Looksrare innovated on the Opensea model by introducing a token called LOOKS which was paid out to users of the platform This caused a surge in trading volume which combined with their reduce 2% fee made them see 2x the transaction volume of Opensea. 2.0% fee Jan 2022.

[Audio] Sudoswap is the newest exchange that uses smart contracts instead of a peer to peer model ( Opensea, Looksrare) The use of smart contracts also enables a lower 0.5% trading fee as counterparty discovery is easier on a liquidity pool. Sudoswap incorporates new features such as floor sweeping which does not exist in previous exchanges. 0.5% fee Jul 2022.

[Audio] DeFi, NFTs & Smart Contract Applications.

[Audio] Decentralised vs centralised finance. . .

[Audio] Smart contracts are what differentiate DeFi from CeFi.

[Audio] Uniswap, a decentralised exchange, was the first AMM (automated market maker) to make smart contracts mainstream Uniswap is an automatic market maker that allows digital assets to be traded in a trustless way, this directly disrupts the traditional broker-client model that we see in equities, bond markets where we have market makers and intermediaries who we trust. Fees are much lower ( 0.3% for Uniswap).

[Audio] NUSIC DAO allows artists to unlock future yield of their streaming income via NFTs Streaming income is guaranteed via digital service providers ( DSPs) such as YouTube and Spotify and then assign an NFT bond which is sold to public markets. The artist then pays off these bonds via real yield from their streaming income..

[Audio] KlimaDAO is bringing transparency to carbon credit markets by bringing carbon offsets on-chain Traditional carbon credit markets are very fragmented and KlimaDAO is solving this by bridging this onchain and creating a token called BCT ( Base Carbon Tonne) that is compatible with other carbon tokens. An NFT is minted to represent ownership of the liquidity pool where trading for BCT happens..

[Audio] Alchemix enables self repaying loans Alchemix enables self repaying loans by locking up your collateral staked and then earning a yield on it. Since you can only go 50% LTV, the staking interest can overcome the loan payments..

[Audio] Pool Together guarantees a no lose lottery It does this by using deposits and then earning interest from a DeFi yield source then distributing the yields to the depositors as prizes..

[Audio] Tornado Cash enables completely anonymous transactions It operates by using a coin mixer where depositors put money into a single address and can withdraw it to any arbitrary address using a private key..

[Audio] Golden.xyz is a web3, decentralised version of Wikipedia Users can submit triplets of information which are the primitive of the knowledge graph and can be used to power various DApps..

[Audio] Cross border payments are a feature of crypto networks Traditional infrastructure such as SWIFT, Visa and Mastercard are at risk to crypto rails due to payments being simplified via crypto rails since networks like Ethereum are agnostic to geography. 0x89… 76F 0xf7… 35o.

[Audio] In fact Visa is thinking of using Etherum to settle USDC Visa is using Ethereum to provide settlement services to custodians and exchanges such as Coinbase & Crypto.com via USDC..

[Audio] Stablecoins create separation of money and state USDC and USDT the world's largest stablecoins are not actually government owned even if they are regulated and the combined market cap of stablecoins is greater than the network they live on ( Ethereum). USDC is backed 1:1 by cash equivalents..

[Audio] But not all are created equal … UST was an algorithmic stablecoin that failed to maintain its peg to the USD because it was not collateral backed - instead it relied on the Terra to maintain its peg. You promise that people can always exchange one UST for $ 1 worth of Luna - this leads to overinflation.

[Audio] The Metaverse can also be used to promote sustainability DBS is entering the Metaverse via the Sandbox game to profile social entrepreneurs in Asia who have been driving positive impact through innovative business models. DBS will work with partners and collaborators from the Government, community, business, and technology sectors to develop meaningful concepts to enrich the DBS BetterWorld experience. DBS will also purchase carbon offsets such that the land and production on DBS BetterWorld will be carbon neutral..

[Audio] NFTs provide the ownership primitive inside the metaverse JP Morgan recently bought a piece of land (launcing their Onyx Lounge) in Decentraland and became the first bank to enter the metaverse in 2022 (they anticipate over a trillion dollars in revenue within the metaverse). They entered because "In time, the virtual real estate market could start seeing services much like in the physical world, including credit, mortgages and rental agreements". Virtual land also doubled in the latter half of 2021..

[Audio] Crypto as currency for Web3 What is the link between financialisation and gaming? Gaming is often the first instantiation of a sophisticated financial economy outside the real world. Crypto enables one to "realise gains" of in-game earnings. Launched in 2003. Item trading is illegal according to T&C's of game developers Native currency ISK has to be traded illegally against USD Launched in 2019. Users can earn ICE and DG tokens for playing This currency can be legitimately traded against USDC stablecoins.

[Audio] Decentraland allows NFT holders to earn in game tokens This is an ICE poker casino inside Decentraland, essentially a game inside a game. Users who hold NFTs which are wearables are eligible to play and earn rewards whenever they win. These can be traded for stablecoins like USDC to lock in the earnings..

[Audio] NFTs allow new business models to be built such as scholarships Axie Infinity was a game launched in Dec 2017 that at one point enabled people in the Philippines to earn 2x the minimum wage through playing games. They would rent NFTs from asset owners and use the NFTs to earn in game tokens. These tokens can then be exchanged for real world items such as those shown below ….

[Audio] In fact Sky Mavis built their own economy inside the game Users who play Axie can swap their in game token SLP for USDC which is a stable currency. The Axie NFTs which had in game utility were the foundation for this ' financialisation' of the game..

[Audio] NFTs can also act as the fuel for ponzi-like schemes Overinflation eventually killed Axie Infinity where demand for NFT assets could not keep up with supply and this meant the earning was not sustainable..

[Audio] So what does this mean for traditional finance?.

[Audio] Much of crypto is still unregulated across geographies.

[Audio] US is perhaps slowest in terms of regulation First major bipartisan legislation aimed at regulating the crypto market on June 7. This will most likely be rolled out in 2023 instead to give senators time to digest the proposal. In April, a new regulatory framework around stablecoins was also introduced. The Securities and Exchange Commission ( SEC) is also under increasing pressure to propose rulemaking that would clarify when crypto asset providers need to register with the SEC and comply with some additional disclosure requirements. The Federal Reserve continues working on a digital U.S. dollar. After a first whitepaper published in January, the Fed hasn't publicly stated its position in this debate. However, recent public interventions by board members showed a very positive attitude toward a central bank digital currency ( CBDC)..

[Audio] UK crypto regulations are still loose Cryptocurrencies are not regulated in the United Kingdom and there is no compensation for consumers who lose their digital assets. The FCA said last year that Binance, the world's largest crypto exchange, was not allowed to undertake any regulated activity in Britain because it was "not capable of being effectively supervised" (whereas other markets such as Spain, Italy and France allow Binance to operate) The U.K. government has been pushing for a crypto sandbox that would allow crypto providers to test new products in a safe regulatory environment. On the digital pound, the Bank of England and lawmakers, unlike their EU peers, don't seem to be in a rush to decide whether the U.K. needs a retail CBDC..

[Audio] The EU is perhaps the most progressive in terms of regulation On June 30, the EU institutions agreed on the proposed legislation that will regulate crypto asset providers in Europe, the Markets in Crypto-Assets ( MiCA) regulation. This will be implemented in the coming months. Two EU regulators, the European Securities Market Authority ( ESMA) and the European Banking Authority ( EBA) will need to adopt new competences to regulate the crypto asset market, including the authorization to issue stablecoins. On the digital euro, the European Central Bank is very active. The central bank is planning to run a pilot test later in the year with merchants and consumers to assess the needs of a CBDC and how to design a digital currency that pleases everyone. Potential legislation for CBDCs could come in 2023 despite the lukewarm reception of the idea..

[Audio] In Indonesia there is also a push for a CBDC given high public interest in digital assets Data from Indonesia's digital asset market regulator the Indonesian Commodity Futures Trading Regulatory Agency, known as Bappebti, reveals that over 11 million people in the country have digital asset holdings. The country's trading volume reached $ 57.7 billion in 2021, rising more than 1,000% from 2020. Despite its popularity, Indonesia still bans digital assets from being used as currency. Indonesia's central bankl in July that the design of its wholesale central bank digital currency, which will be an alternative legal tender, will be ready by the end of 2022..

[Audio] Despite the innovation, regulation is still needed ….