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CoinFund’s NFT thesis and our investment in Rarible

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CoinFund’s NFT thesis and our investment in Rarible

Jake Brukhman

NFTs [1] are not just cat pictures that people trade on blockchains. Today digital art [2], collectibles [3], and in-game assets [4] are the most visible use cases for these nifty non-fungibles. But the market holds an inconspicuous secret: there is a staggering diversity of online digital content that can be placed on a blockchain in the form of NFTs.

  • Amazon, Netflix, and Hulu host over 23,000 pieces of on-demand video content. Disney+ and HBO Max have added nearly 10,000 more.
  • AR and VR creators are busy populating the Metaverse with 3D models. Marketplaces like TurboSquid are offering 60,000 3D models today [5] and are poised for growth.
  • In music, the world releases about 100,000 albums every year, [6] each with multiple tracks that can generate millions of plays. Recording artists are moving toward self-publication models [7] on services like SoundCloud and Audius [8] and toward self-distribution models like Spotify.
  • Shutterstock is home to over 330 million stock photographs which can be licensed and collect royalties. [9]
  • Over a billion domain names are registered each year, with 400m registered in the first quarter of 2017. [10]
  • We upload nearly 1.8 billion images per day [11] to the Internet, or a stunning 657 billion images per year.
  • In social media, we generate around 200 billion tweets per year [12], some of which accrued tens of millions of views and become iconic pieces of history or popular culture. [13] There are over 600 million blogs on the internet today.

This list is just scratching the surface of the broad spectrum of digital content. But we shouldn’t think of NFTs as tokenized digital content itself. A core insight is that NFTs are much better understood as encapsulating intellectual property rights to the assets they describe. [14]

To fully appreciate this view, consider that we seldom own anything on the internet today: we license ebooks from Amazon, we rent music plays from Apple Music, and we make payments to borrow domains from a registrar for a little while. Even when we create our own content, the rights to it are often owned by the content platform, distributor, or label. (In one case of recording artists and music labels, Taylor Swift wasn’t allowed to perform her own music [15] after having signed over rights.)

Different kinds of online, digital content.

Most importantly, if we cannot truly own digital content, or easily license it, we will almost surely never resell it.

Blockchains and NFTs will change this state of affairs dramatically. First, they will digitize the rights to digital content in the form of blockchain assets. Second, they will allow for the assets to be placed on secondary markets. Thus, we can view NFTs as liquid intellectual property (“liquid IP”) [18] for all forms of digital content, a marketplace which is measured in trillions of units that is about to be tokenized.

Tokenizing IP assumes, of course, that the creator assigns over actual intellectual property rights, enforced by law or smart contract, as part of the issuance process. This comes with some technical problems to solve, like choosing legal jurisdictions in which the rights would be enforced and connecting legal agreements to the minting process. Luckily, there is some precedent for these structures [16] and Aragon may become one option for a global, digital jurisdiction in the near future. [17]

But why should we want to own digital content when we already have it?

If NFTs are liquid IP, then holders will eventually own the property’s cash flows. This fact makes non-fungible tokens a financial asset class.

In the future, purchasing an NFT will entitle the owner to certain rights related to its content: the right to own and keep; the right to sell, license, and lend; as well as the right to royalties, the right to confer reuse (i.e. “movie rights”), and so on. That’s why taking a photograph of the Mona Lisa is not the same as actually owning Leonardo da Vinci’s masterpiece. You will not be able to charge 10.2 million yearly Louvre visitors an admission fee to see the print. [19] A similar principle applies to digital objects and their future cash flows.

As intellectual property rights inevitably move onto the blockchain as NFTs, trillions of units of digital content will move onto secondary markets. This will unlock tremendous illiquid value and become the biggest asset class in blockchain. Tokenization creates new ways of working with IP that were previously unavailable or too expensive to set up. For example, blockchain technology will automate IP provenance, use tracking, and rights management. Using existing standards and smart contracts, NFTs can be fractionalized, co-owned, and governed by multiple users or communities. Fractionalized tokens can be traded, crowdfunded, and incorporated into other financialization schemes to manage risk or unlock further value. (Projects like OpenLaw are venturing into new royalty technology and artist royalties are a popular topic in the #cryptoart scene. [20])

While tokenization will impact the liquidity of classic IP, digital-native use cases will arise as we look toward the future. Imagine owning the royalties to a Taylor Swift’s new album Folklore, or trading an index of your favorite digital artists like Frenetik Void [21] or Pak. [22] Imagine selling a digital 3D model you built or licensing a stock photograph you shot directly from your phone into a global marketplace. More exotically, imagine supporting your favorite blogger or influencer by purchasing and owning their blog post or Insta story.

While the Metaverse seems like a distant digital dream, its digital assets are already here and new kinds of investors are taking notice. Andrew Steinwold’s Sfermion is a Metaverse-native firm that invests in “esoteric digital assets” [23], that is, NFTs of virtual worlds, digital art, and related assets. I suspect these assets won’t be esoteric for long. Companies like Fortnite are already measuring revenue streams in billions based on in-game digital objects, while Dapper Labs’ NBA Top shot just brought digital collectibles to the sports industry.

NFTs are about to become a new, voluminous financial asset class. To capture its value we need venues for selling, auctioning, and trading these new assets.

Rarible

Rarible is the first NFT marketplace in the blockchain space to launch a governance token. The token, called $RARI, can be obtained in exchange for marketplace participation and has found its initial liquidity on decentralized venues at Balancer and Uniswap. If you’ve ever transacted on Rarible or made an NFT purchase or sale on-chain, there is a good chance your address is eligible for the $RARI airdrop. [24] [25] [26]

The team at Rarible, founded by Alex Salnikov and Alexei Falin, is based in Moscow, Russia but engages the blockchain space globally and is open for business to anyone in the world who has a smartphone. [27]

The Rarible team has continued to raise the bar on user experiences for both cryptonatives and mainstream users. Today, Rarible comes with state-of-the-art features and experience for NFT creation: ERC-721 and ERC-1155 standards support, multi-edition mining, custom on-chain collections, and creator verification and moderation. On the demand side, top notch tools are in the works in the areas of discovery, engagement, and displaying works. Users new to blockchain should find friendly user experiences with Magic and Zerion integration, as well as upcoming credit card support. And, of course, Rarible’s moderated incentive program distributes $RARI rewards for users who transact on the platform.

But the real innovation of Rarible is that it is on a path of gradual decentralization toward community ownership, making it a highly competitive venue to attract participants. Rarible is currently in the process of implementing full decentralized governance, just like many DeFi projects are launching today. As a result, the platform’s core features, economics, and smart contracts will eventually be totally in the hands of the Rarible community through $RARI ownership.

Over time, we think cryptonative monetization and the core value propositions of crypto networks [28] implemented by Rarible will make it highly competitive with other digital marketplaces and Rarible will be a premiere venue for NFT liquidity. The community-building properties of digital assets have been discussed previously [29] and Rarible has already seen an immense response in platform metrics following the launch of the digital asset. Using $RARI, Rarible will be able to shore up a strong, loyal community that maintains an active 2-sided marketplace.

At CoinFund, we’re excited to support the Rarible team’s highly cryptonative approach as the asset class of non-fungibles continues to develop. Mint or browse some NFTs on Rarible today.

Read Rarible’s announcement here.

Source: https://blog.coinfund.io/all-digital-content-is-going-on-chain-ae26a7071657?source=rss—-f5f136d48fc3—4

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Goldman Sachs Plans to Relaunch Its Cryptocurrency Trading Desk

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Reports on Reuters today revealed that American multinational investment bank, Goldman Sachs, will offer bitcoin futures and non-deliverable forwards on behalf of its clients starting next week.

According to sources familiar with the matter, the move is part of the bank’s effort to take advantage of the fast-growing crypto space, which is gradually becoming an investment of choice for institutional players. 

Notably, the bank is also considering developing a Bitcoin Exchange-Traded Fund (ETF) soon as part of its commitment to fully venture into the industry. 

Based on this regard, the unnamed source noted that Goldman Sachs had already “issued a request for information to explore digital asset custody.” 

Goldman’s First Shot At Crypto

In late 2017, Goldman Sachs became the first Wall Street biggest firm to ever consider offering crypto-related products, as the bank was planning to open a cryptocurrency desk.

At the time, the Wall Street financial institution was working on how to address security challenges associated with the business, as well as how it would custody the assets.

Plans were on the way for the launch slated for late 2018 when reports emerged in September that same year that the bank has chosen not to offer crypto-related investments. 

Sources said that the bank dropped its crypto plans due to the regulatory concerns associated with the industry, with regulators breathing down the neck of most projects. 

The issue of regulatory uncertainty has been the major stumbling block that hindered several institutional players from getting involved with cryptocurrencies. 

Interestingly, there have been clearer regulations in recent times luring institutional investors like Microstrategy and Tesla. 

The entrance of these large corporations has given other institutional investors the greenlight that crypto is safe compared to how it was viewed in 2018. 

Thus it could be the reason Goldman Sach is making plans to restart its cryptocurrency trading desk in earnest.

A Change Of Heart? 

However, Goldman Sachs’ second shot at launching a cryptocurrency trading desk comes less than a year after the bank told its clients during a conference call that bitcoin and cryptocurrencies are not an asset class.

Reports at the time suggested that part of the reason for the call was to discourage its customers from including bitcoin and cryptocurrencies in their portfolio.

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Source: https://cryptopotato.com/goldman-sachs-plans-to-relaunch-its-cryptocurrency-trading-desk/

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Bitcoin Still Has an Uncertain Future: Citibank Analysts

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In a 100-page deep-dive report dubbed “Bitcoin, at the Tipping Point,” Citibank’s global perspectives and solutions team noted that the cryptocurrency could potentially “become the currency of choice for international trade.”

The analysts acknowledged that the massive interest shown by several large institutional investors like Tesla, Microstrategy, and PayPal is one of the major propellants for the digital asset gaining mainstream adoption.

The team further noted that several other factors, including a wide range of digital payment options like stablecoins and Central Bank Digital Currency (CBDC), could also increase the chances of bitcoin adoption for cross-border settlements.

An Uncertain Future

The report also pointed out that a side-by-side comparison of the risks associated with bitcoin and the opportunities it presents makes it very easy to conclude that the digital asset is at a tipping point.

They wrote:

 “There are a host of risks and obstacles that stand in the way of Bitcoin progress… Weighing the potential hurdles against the opportunities leads to the conclusion that Bitcoin is at a tipping point… Bitcoin’s future is thus still uncertain, but developments in the near term are likely to prove decisive as the currency balances at the tipping point of mainstream acceptance or a speculative implosion.”

Bitcoin Going Mainstream Already 

The concluding part of the report quoted the famous philosopher, Schopenhauer, who said,

“All Truths pass through three stages, first it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.”

The team states that the positive change in stance on issues about bitcoin by several financial institutions very well prove these words of Schopenhauer, which he said more than 150 years before the bitcoin idea was born.

Several banks had actively shunned bitcoin in the past, arguing that it has no intrinsic value as it is allegedly backed by mere speculations from its proponents.

However, bitcoin’s immense growth has forced its former critics to re-evaluate their stance and join the bitcoin adoption trend. Some of the biggest banks in the world have started offering bitcoin services to their clients.

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Source: https://cryptopotato.com/bitcoin-still-has-an-uncertain-future-citibank-analysts/

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Matic, xDAI (STAKE) and Loopring (LRC) rally as Ethereum gas fees rise

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The start of a new month has brought renewed fervor from the cryptocurrency market as Bitcoin (BTC) price steadily climbed from a low of $43,537 on Feb. 28 to a high of $49,200 during today’s early trading hours. 

As traders get excited about positive moves in the market and look to re-enter positions, the increasing use of DeFi continues to drive fees on the Ethereum (ETH) network higher, shining the spotlight on the top layer-2 (L2) protocols that offer working solutions.

Three protocols that have emerged as top L2 contenders with working platforms are Polygon (MATIC), xDai (STAKE), and Loopring (LRC). Each offers its own unique layer-2 approaches to helping ease high traffic on the Ethereum network. 

MATIC/USDT

Polygon, previously known as Matic, officially launched as a layer-two aggregator for Ethereum on Feb. 9 as a way to offer an interoperability protocol for the network.

Since excitement for the rebrand began, MATIC price has increased by 400% from $0.05 to an all-time high of $0.245 on March 1. Growing excitement for the Aavegotchi (GHST) mainnet launch on March 2 has also brought a boost of attention and trading volume to MATIC.

MATIC/USDT 4-hour chart. Source: TradingView

Aavegotchi was one of the first projects to bridge over to the Polygon network and it will likely be joined by other projects if its mainnet launch on the network go smoothly.

MATIC also received a boost on Feb. 26 when it was announced that gaming giant Atari would be integrating Polygon in order to “bring their NFT & token products to Layer 2,” along with the launch of “the first EOS-Polygon cross-chain bridge,” that was done in partnership with pNetwork (PNT).

XDAI/USDT

 xDai is another layer-2 solution that has caught the attention of investors over the past few weeks. The xDai (STAKE) chain is a stable payment blockchain created by the POA Network, an Ethereum open-source public side-chain which offers a framework for smart contracts.

STAKE is designed to be a multi-chain staking token that validators and delegators offer as collateral in order to participate in the consensus mechanism and receive staking incentives for block production. The goal of the xDai platform is to offer fast and inexpensive transactions on the Ethereum network.

Since trading at a low of $7.50 on Jan. 2, STAKE price increased 500% to a new all-time high of $43 on Feb. 21 before falling under pressure alongside the wider cryptocurrency market.

XDAI/USDT 4-hour chart. Source: TradingView

A scroll through the project’s Twitter feed shows multiple recent partnerships and integration announcements that have helped propel STAKE higher in recent weeks.

Notable mentions include an integration with the Binance Smart Chain (BSC) that allows users to move funds from Binance to xDAI using a BSC-to-xDai Bridge as well as the announced migration of the up-and-coming Bao Finance (BAO) to the xDai network.

LRC/USDT

Loopring is a layer-2 solution that specifically focuses on the creation of decentralized cryptocurrency exchanges (DEX).

One of the major sources of congestion on the Ethereum network is the ever-growing activity of popular DEXs like Uniswap (UNI) and SushiSwap (SUSHI).  A separate side-chain made specifically for exchange trading could help alleviate congestion on the network and this is what Loopring aspires to provide.

The overall goal of the Loopring protocol is to combine the advantages of decentralized exchanges with the liquidity and order book management offered by centralized exchanges to help increase the efficiency of order execution and enhance the liquidity of the DEX ecosystem.

Since Jan. 2, LRC has increased by 430% from $0.165 to a high of $0.88 on Feb. 12 .

LRC/USDT 4-hour chart. Source: TradingView

After falling to a low of $0.46 on Feb. 28, LRC price rallied 30% after it was announced that the Loopring exchange added multiple WBTC/Stablecoin pairs, offering “6 new ways to trade WBTC on Ehtereum L2.”

VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for LRC on Feb. 28, prior to the recent price rise.

The VORTECS™ score, exclusive to Cointelegraph, is an algorithmic comparison of historic and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (green) vs. LRC price. Source: Cointelegraph Markets Pro

As seen on the chart above, the VORTECS™ score for LRC reached a high of 73 on Feb. 28, just as the price was beginning it’s 30% rally to $0.59.

Continued increases in the price of Ethereum, which rose back above $1,500 on March 1, will only exacerbate the pain felt by traders attempting to use popular DeFi protocols on the network.

The amount of gas needed to conduct basic transactions as well as the price of these fees will continue to drive users to trial the alternatives be offered by layer 2 solutions, and Polygon, xDai and Loopring are three protocols well-positioned to capitalize on this trend.

Source: https://cointelegraph.com/news/matic-xdai-stake-and-loopring-lrc-rally-as-ethereum-gas-fees-rise

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