Opinion

Most blockchain advocates haven’t even used Bitcoin

Bitcoin, the original blockchain, struggles to gain traction among blockchain advocates; an opinion from one of Europe’s largest blockchain conferences.

Bitcoin (BTC) popularised the term blockchain. Blockchains, or “decentralized and distributed digital ledgers used to record transactions across a network of computers,” have been around for over thirty years, the household name for a blockchain is Bitcoin.

That’s despite the fact that the Genesis block was mined well over 14 years ago when George W. Bush was president and “I Gotta Feeling” by Black Eyed Peas topped the charts–Bitcoin is still top of the blocks.

It’s to be expected, then, that most blockchain advocates would have used, understood or a the very least experimented with Bitcoin.

Nope. Not so.

*Speaking with Victoria Gago, co-founder of the European Blockchain Conference. Source: José Val Bal*

Here’s an example. While MC’ing at the European Blockchain Conference in February, I asked the audience for a show of hands. I inquired of the circa 250 blockchain believers sitting in front of me:

“Who here has used Bitcoin?”

Maybe 20 audience hands shot up. “Okay. Keep your hand up if you’ve used Bitcoin’s Lightning Network,” I said. The Lightning Network or (LN) is the payments network built on top of Bitcoin which allows near-instant, near-free transactions. Over half those hands went down.

One data sample is insufficient. So, the following day I quizzed the audience on stage. I was surprised to receive the same result. Four-fifths of the blockchain conference audience had never used Bitcoin.

Why is that? Why is it that so few people have touched arguably the only blockchain that solves what is known as the “scalability trilemma;” that of decentralization, security and scalability?

The Bitcoin blockchain, or timechain as Satoshi Nakamoto called it in the white paper, is still relatively small. Anyone with an old laptop can download the entirety of all transactions in order to run a node; the network can scale to reach millions and soon billions of people with layers, while the Bitcoin blockchain has never been hacked. And yet at the blockchain conference, very few attendees run nodes or have transacted on Bitcoin.

However, there are not enough data points to yet form this conclusion. I wanted to quiz individuals across the conference if they were blockchainers or Bitcoiners–and if so, why is that the case?

I quizzed conference-goers about a simple question. I asked around 15 conference goers to choose Web3 or Web5, and only one person of the fifteen chose Web5. Ironically, the sole Web5 proponent in the interview is Bitcoiner Antonia Roupell, whose job title is “Web3 lead” for Save the Children.

If @JoeNakamoto happened to give you one #Bitcoin at the @EBlockchainCon, what would you do with it? pic.twitter.com/tV3hdEIA0n

— Cointelegraph (@Cointelegraph) February 20, 2023

Most respondents looked confused when presented with the choice of webs. “What is Web5?” They queried.

Web3 is a world of reportedly decentralized blockchains in which tokens (and token sales) drive the economy forward; Web5 is the decentralized internet built on Bitcoin. Naturally, Bitcoin maximalist Jack Dorsey champions Web5.

Dorsey explained in December 2021 that Web5 will allow true ownership of identity and data, unlike Web3. Dorsey explains that “Web3″ has the “Same corporate incentives [as Twitter] but hides it under “decentralization.”

The Twitter founder reckons Web3 will never achieve true decentralization as underneath the marketing spiel and tokenomics it’s the venture capitalists and limited Partners who own the blockchains and the data underpinning the systems.

Web5 already boasts social media applications such as Zion in which users can easily send Bitcoin to one another and own their data, built atop one decentralized blockchain and. Which blockchain? You guessed it, Bitcoin.

Web3 has existed since Ethereum coder Gavin Wood coined the term in 2014 and thus has more time on its side. Plus it’s a catchy, catch-all term that is often used interchangeably with blockchain, crypto and metaverse. It’s hard to define, underline or frame without referring to financially lucrative projects.

It finally struck me that the focus of most attendees at the European Blockchain Convention was business over Bitcoin. Or to put it another way–and to attempt to be a little less naive–the attendees wanted to make money over work towards a new monetary policy.

Moderating a panel on Web3 during the conference. Source: José Val Bal

I had the same experience when discussing Nostr, which stands for Notes and Other Stuff Transmitted by Relays. The relatively new, decentralized network enables private messaging and uncensorable communication–among other projects.

One of the applications of Nostr, called iPhone app Damus, helped Nostr reach nearly half a million daily users in mid-February. User count multiplied by 5 since its listing on the Apple iOS store and the protocol is full of Bitcoin advocates.

I asked conference attendees for their public key so I could follow them on Nostr. I was met with bemused looks. The blockchain believers and champions of decentralized protocols had not tested nor heard of Damus.

Do you want one more example?

An employee at a popular Bitcoin company–who I won’t dox in this opinion piece–approached me during the conference. “I saw you sending sats to people on stage. You sound like a [Bitcoin] maxi,” he joked.

“Guilty, officer” I joked. I only hold Bitcoin and am passionate about bringing Bitcoin to the world, especially those living in financially kneecapped countries.

“You would probably recognize the company I represent then. I work for Blockstream.”

Of course! I told him. I actually played Jenga in the park with Blockstream’s CEO, Adam Back, recently. We immediately bonded.

The Blockstream employee confided in me that not a single conferencegoer had clocked his employer. Blockstream is a well-known Bitcoin companies. Blockstream pioneers lightning adoption, side chains, affordable hardware wallets and liquid, while Back was one of the few names mentioned in the Bitcoin white paper published in 2008.

He shared his surprise with me, but it was 5pm on the last day of the conference–by this point I understood. “It’s a Bitcoin company, mate” I explained. And after all, “Bitcoin and blockchain don’t really mix.” Bitcoin has a marketing problem, I said.

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

Most blockchain advocates haven‘t even used Bitcoin

Bitcoin, the original blockchain, struggles to gain traction among blockchain advocates — an opinion from one of Europe’s largest blockchain conferences.

Bitcoin (BTC) popularised the term blockchain. While blockchains, or decentralized and distributed digital ledgers used to record transactions across a network of computers, have been around for over 30 years, Bitcoin is the household name for a blockchain.

That’s despite the fact that the genesis block was mined well over 14 years ago, when George W. Bush was president of the United States and “I Gotta Feeling” by the Black Eyed Peas topped the charts. Bitcoin, however, is still top of the blocks.

It’s to be expected, then, that most blockchain advocates have used, understood or — at the very least — experimented with Bitcoin.

Nope. Not so.

*Speaking with Victoria Gago, co-founder of the European Blockchain Convention. Source: José Val Bal*

Here’s an example. While emceeing at the European Blockchain Convention in February, I asked the roughly 250 blockchain believers sitting in front of me in the audience for a show of hands:

“Who here has used Bitcoin?”

Maybe 20 hands in the audience shot up. “Okay. Keep your hand up if you’ve used Bitcoin’s Lightning Network,” I said. The Lightning Network is a payments network built on top of Bitcoin that allows near-instant, near-free transactions. Over half those hands went down.

One data sample is insufficient. So, the following day, I asked the audience on stage. I was surprised to receive the same result. Four-fifths of the blockchain conference audience had never used Bitcoin.

Why is that? Why is it that so few people have touched arguably the only blockchain that solves what is known as the “scalability trilemma” — that of decentralization, security and scalability?

The Bitcoin blockchain — or “timechain,” as Satoshi Nakamoto called it in the Bitcoin white paper — is still relatively small. Anyone with an old laptop can download the entirety of transactions in order to run a node. The network can scale to reach millions and soon billions of people with layers, and the Bitcoin blockchain has never been hacked. And yet at the blockchain conference, very few attendees said they run nodes or have transacted on Bitcoin.

However, there are not enough data points yet to form this conclusion. I wanted to quiz individuals across the conference to see if they were blockchainers or Bitcoiners — and if so, why was that the case?

I quizzed conference-goers with a simple question. I asked around 15 people to choose Web3 or Web5, and only one person chose Web5. Ironically, the sole Web5 proponent was Bitcoiner Antonia Roupell, whose job title is “Web3 lead” for Save the Children.

If @JoeNakamoto happened to give you one #Bitcoin at the @EBlockchainCon, what would you do with it? pic.twitter.com/tV3hdEIA0n

— Cointelegraph (@Cointelegraph) February 20, 2023

Most respondents looked confused when presented with the choice of webs. “What is Web5?” hey queried.

Web3 is a world of reportedly decentralized blockchains in which tokens (and token sales) drive the economy forward, while Web5 is the decentralized internet built on Bitcoin. Naturally, Bitcoin maximalist Jack Dorsey champions Web5.

Dorsey explained in December 2021 that Web5 would allow true ownership of identity and data, unlike Web3. He highlighted that “Web3” has the “same corporate incentives [as Twitter] but hides it under ‘decentralization.’”

The Twitter founder reckons Web3 will never achieve true decentralization, as underneath the marketing spiel and tokenomics, it’s the venture capitalists and limited partners who own the blockchains and the data underpinning the systems.

Web5 already boasts social media applications such as Zion in which users can easily send BTC to one another and own their data, built atop one decentralized blockchain. Which blockchain? You guessed it, Bitcoin.

Web3 has existed since Ethereum coder Gavin Wood coined the term in 2014 and thus has more time on its side. Plus, it’s a catchy, catch-all term that is often used interchangeably with blockchain, crypto and the metaverse. It’s hard to define, underline or frame without referring to financially lucrative projects.

It finally struck me that the focus of most attendees at the European Blockchain Convention was business over Bitcoin. Or to put it another way — and to attempt to be a little less naive — the attendees wanted to make money over working toward a new monetary policy.

I had the same experience when discussing Nostr, which stands for Notes and Other Stuff Transmitted by Relays. The relatively new decentralized network enables private messaging and uncensorable communication, among other projects.

One of the applications of Nostr, the iPhone app Damus, helped Nostr reach nearly half a million daily users in mid-February. Its user count has multiplied by five since its listing on the Apple iOS store, and the protocol is full of Bitcoin advocates.

Do you want one more example?

An employee at a popular Bitcoin company (who I won’t dox in this opinion piece) approached me during the conference. “I saw you sending sats to people on stage. You sound like a [Bitcoin] maxi,” he joked.

“Guilty, officer,” I joked. I only hold BTC and am passionate about bringing i to the world, especially those living in financially kneecapped countries.

“You would probably recognize the company I represent then. I work for Blockstream.”

“Of course!” I told him. I actually played Jenga in the park with Blockstream’s CEO, Adam Back, recently. We immediately bonded.

The Blockstream employee confided in me that not a single conferencegoer had clocked his employer. Blockstream is a well-known Bitcoin company that pioneers Lightning adoption, sidechains, affordable hardware wallets and Liquid, and Back is one of the few names mentioned in the Bitcoin white paper published in 2008.

He shared his surprise with me, but it was 5:00 pm on the last day of the conference — by this point, I understood. “It’s a Bitcoin company, mate,” I explained. And after all, “Bitcoin and blockchain don’t really mix.” “Bitcoin has a marketing problem,” I said.

Cointelegraph Top 100, 2023 edition: The toughest one yet to pick

With profiles 21–30 available now, only one week remains until the top spot in Cointelegraph’s Top 100 for 2023 is revealed.

A lot is riding on 2023 after such an eventful year for the cryptocurrency industry, and we look forward to seeing some vindication for the entire space. January may have given us a glimpse of hope, but more recently, with Kraken staking services and the Paxos-issued Binance USD (BUSD) stablecoin taking a beating from ever-unpredictable regulators, the crypto space is seemingly being shown its place, and we are reminded that the worst may not be over even if we wish it to be.

But we have a few things going for us. We believe in decentralization, which has never let us down, and we have hope — hope that the global economy will eventually recover. With the Bitcoin (BTC) halving looming in the back of our minds, we look forward to discover new heroes and champions to take this vibrant space to new heights.

DISCOVER COINTELEGRAPH’S TOP 100 IN CRYPTO AND BLOCKCHAIN 2023

And that’s what this year’s Cointelegraph Top 100 list is all about. The editorial team attempted to highlight those who either made or will make a noticeable impact on the industry; in some cases, it could be both. The list represents a bit of everything. Members of our editorial team had a big say on those included, and we even opened up the list for the community to vote on via a separate landing page. Among all the bots that attempted to skew the results, there were some genuinely great suggestions that we considered. Thank you!

We thought it was important to mention the good contributions and the bad ones, hence the whole crypto heroes and villains narrative. Yes, it hurts, and some dreadful stories happened as a result of Terra and FTX, among others, going down. But as an industry, those failures allow us to learn and reevaluate how we approach growth and defend what we believe in. Hardly any rise of a prominent technology goes without hiccups. We tried to be open about embracing those failures and show how we can continue on our path to global adoption of blockchain and crypto tech.

Another issue of great importance to the wonderful visual department here at Cointelegraph was to make sure that this edition would not be like any other that came before. As a custom, a new theme was chosen for the individual profile pictures, but this time around, the team opted to go further and spend countless hours creating dynamic backgrounds for the profiles. Given the recent boom of artificial intelligence (AI) and its apparent potential to reshape the creation process, having dynamic pictures was our way of saying that humans can still do it better, at least for now.

Speaking of AI, did you see the Top 100 profile written by ChatGPT on what impact AI will have in 2023? And as a bonus, there was one other profile written up by the AI tool. Can you guess which one? Check back on our Twitter later on. We will reveal the results there.

We are coming up on the top third of the list, and with exactly one week to go until it is fully unveiled, everyone will soon find out who took the top spot. Stay tuned.

Powers On… Insider trading with crypto is targeted — Finally! Part 2

“Frankly, it’s about time that the SEC and U.S. attorney’s offices focused on real crimes and fraud.”

This is the second part of my column about the crackdown on insider trading involving crypto. In the first part, I discussed the criminal indictment of Nathaniel Chastain, a former product manager at the OpenSea NFT marketplace. I also discussed the SECs allegations against former Coinbase employee Ishan Wahi, his brother and his friend, based on the misappropriation theory of insider trading.

Powers On… is a monthly opinion column from Marc Powers, who spent much of his 40-year legal career working with complex securities-related cases in the United States after a stint with the SEC. He is now an adjunct professor at Florida International University College of Law, where he teaches Blockchain & the Law.

Since the United States v. OHagan Supreme Court case in 1997, the misappropriation theory of insider trading liability has been explicitly recognized. Both before that date and after, misappropriation of company secrets or confidential information used in connection with stock trading has been an active area of Securities and Exchange Commission enforcement and criminal prosecutions.

Examples include a former writer for The Wall Street Journal in United States v. Winans; employees at the magazine stand Hudson News in Securities Exchange Commission v. Smath; a printer at a company that printed tender offer documents in Chiarella v. United States; and more recently, financial analysts in United States v. Newman and Salman v. United States. On the same date as the SEC filing against Ishan Wahi and his two associates, the U.S. attorney for the Southern District of New York unsealed a parallel criminal indictment that charged these same three defendants with wire fraud and wire fraud conspiracy.

Tippees that receive material, nonpublic or confidential information from a tipper violate insider trading rules if they know the tipper breached a duty they owed to another and received some sort of personal benefit from the tip. The Supreme Court said in the 2016 Salman case that the personal benefit need not be financial or pecuniary. The benefit requirement is satisfied by bestowing a gift of this information on a trading relative or a close friend.

Frankly, its about time that the SEC and U.S. attorneys offices focused on real crimes and fraud. This is precisely what insider trading is: fraud. Its an unfair trading advantage by someone who learns confidential information and trades on it for economic gain and profits. But this Wahi case begs the question of what exactly insider trading is. As I stated before, insider trading involves trading in securities. Accordingly, to bring its case, the SEC is alleging that at least nine of the tokens listed on Coinbase and traded in advance by the defendants fit within the investment contract analysis of the Howey test. But do they really?

The SEC says that some of the tokens are purported to be governance tokens but are securities. So, it is worth noting this warning shot. For those token issuers taking comfort from lawyers who have decreed their tokens non-securities because they are governance tokens, beware and perhaps get another opinion from a qualified securities lawyer.

Apart from the interesting aspects of this particular case, what does it mean for others, such as Coinbase itself? Well, the SEC is claiming that certain tokens on its exchange are securities. If that is so, then Coinbase should be registered as a securities exchange pursuant to the Securities Exchange Act of 1934. Not surprisingly, a few days after the SEC filing, it was reported that Coinbase was under SEC investigation.

My view is that SEC Chairman Gary Gensler is using this case as a further land grab to take jurisdiction over digital assets and crypto specifically away from the Commodity Futures Trading Commission. I have said this before. Indeed, CFTC Commissioner Caroline D. Pham also sees through the SECs efforts.

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On the day of the complaint filing, she issued a public statement, saying: The SECs allegations could have broad implications beyond this single case, underscoring how critical and urgent it is that regulators work together. Major questions are best addressed through a transparent process that engages the public to develop appropriate policy. […] Regulatory clarity comes from being out in the open, not in the dark.

Pham also said, SEC v. Wahi is a striking example of regulation by enforcement. Four days later, on July 25, CFTC Chair Rostin Behnam spoke at the Brookings Institute and echoed the view that the CFTC would be the natural and best regulator to have oversight over crypto.

What about those nine issuers of the nine tokens the SEC claims are securities? Well, they, too, can expect to be subject to independent investigations by SEC staff looking into registration violations. Each of their ICOs or offerings is within the five-year statute of limitations for the SEC to bring enforcement actions against them. Stay tuned.

The opinions expressed are the authors alone and do not necessarily reflect the views of Cointelegraph nor Florida International University College of Law or its affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice.

Powers On… Insider trading with crypto is targeted — Finally! Part 1

It took a few years, but government crackdowns on insider trading involving digital assets have finally arrived. Its about time! Insider trading occurs often in our securities markets, so it was only a matter of time before crypto and other digital assets would be exploited improperly by miscreants for financial gain.

Back on June 1, the U.S. attorney for the Southern District of New York announced a criminal indictment against a former product manager of the OpenSea marketplace, Nathaniel Chastain. He is charged with using the confidential information about which nonfungible tokens were going to be featured on OpenSeas homepage to buy them in advance of that event, and then sell them after they were featured. It is alleged that to conceal the fraud, Chastain conducted these purchases and sales using various digital wallets and accounts on the platform. He is charged with wire fraud and money laundering through making approximately 45 NFT purchases on 11 different occasions between June and September 2021, selling the NFTs for 2x to 5x his cost.

There are a few interesting things to note about the indictment in United States v. Chastain. First, the criminal charges do not include securities fraud. Why? Because while there may be occasions when an NFT sale involves the sale of investment contracts, which are one kind of security under the federal securities law, it seems here that the NFTs in question did not fall under that categorization. Also, even if some of the NFTs might be securities, the U.S. attorney wisely found no need to tack on that added charge, given that wire fraud carries the same prison term. Wire fraud is also easier to prove.

Second, the indictment does not indicate the amount of financial gain Chastain obtained from this purported scheme. Given this, I can only assume it was a relatively small dollar amount, probably less than $50,000.

Third, while a bit esoteric, what happened here is not traditionally referred to as insider trading, as the U.S. characterizes it. To most securities lawyers, it is more like a trading ahead scheme. Insider trading generally involves the improper advance purchase or sale of a security. Here, the NFTs at issue do not appear to be securities.

Finally, it is worth emphasizing that the Securities and Exchange Commission has not brought any complaint against Chastain for this conduct. This validates my thinking that the NFTs at issue in the scheme are not securities, as the SEC only has jurisdiction over conduct involving securities.

More interesting is the insider trading case against Ishan Wahi; his brother, Nikhil Wahi; and his close friend, Sameer Ramani, in SEC v. Wahi, et al. On July 21, the SEC filed its complaint in the SDNY alleging that the three realized about $1.1 million in ill-gotten gains from their scheme, which ran from June 2021 through April 2022. It fell apart because of Coinbases compliance department, from which Ishan a Coinbase employee misappropriated confidential information about tokens to be listed on the exchange and traded on them in advance of listing announcements.

Ishan was called by the compliance department on May 11 to appear for an in-person meeting at Coinbases Seattle, WA office on the following Monday, May 16. On the evening of Sunday, May 15, Ishan purchased a one-way ticket to India that was scheduled to depart the next day, shortly before he was to be interviewed by compliance. In other words, it seems from the allegations that he was attempting to flee the country! Thankfully, Ishan was stopped by law enforcement at the airport prior to boarding and was prevented from leaving, so he will have his day in court here in the U.S. to explain his conduct and prove his innocence.

The SEC complaint alleges that Ishan was in breach of his duty of trust and confidence owed his employer, Coinbase. He was a manager in Coinbases Assets and Investing Products Group, responsible in part for determining which digital assets would be listed on the exchange. He traded ahead of 10 listing announcements involving 25 different cryptocurrencies. Ishan was a covered person subject to Coinbases global trading policy and digital asset trading policy, both of which prohibited using token listings for economic gain. It is alleged that Ishan tipped off his brother and close friend with details about which cryptocurrencies would be listed, in advance, and that they used the material, nonpublic information to buy these cryptocurrencies.

In other words, the SEC parrots the elements of insider trading in the complaint: purchasing or selling securities based upon material, nonpublic information, in breach of a duty. If the duty by the trader or tipper is owed to the issuer of the securities, like a public company, then what has occurred is known as classic insider trading. If the duty is owed not to an issuer but rather to someone else, like an employer, then the misappropriation theory of insider trading applies. Here, what is alleged is the misappropriation theory in Section 10 (b) of the Securities Exchange Act of 1934 and Rule 10b-5 violations.

In the second part of this column next week, I will discuss the legal development of the misappropriation theory, tippee liability in insider trading and some of the implications of the Coinbase employee case.

Powers On… Summer musings after two particularly bad months in cryptoland

This columns goal has never been to provide investment advice on cryptocurrencies or other digital assets, nor has it been to provide individualized legal advice. It has mostly been about my desire to freely set forth in writing my thoughts on the state of the crypto market and the legal affairs surrounding it.

So let me state the obvious: It has been a particularly bad past two months in cryptoland. Both in activities relating to digital assets and crypto prices. However there are silver linings to consider. And when considered, perhaps readers will gain a greater perspective and not act in a reactionary way with their digital assets or blockchain business.

It has been a particularly bad past two months in cryptoland. However there are silver linings to consider.

As I have alluded to in prior columns, I believe Bitcoin, Ether and other cryptocurrencies are here to stay. No one country, or group of countries or regulators, can stop their use and development nor can a series of failures or freezing of assets by a stablecoin issuer, other large crypto lenders like Celsius, or crypto hedge funds such as Three Arrow Capital which filed bankruptcy proceedings here in the United States last Friday. I also believe, like many blockchain and crypto experts including Dan Morehead at Pantera Capital, that over time, the prices for many of these cryptocurrencies, which are backed by solid blockchains or blockchain businesses, will recover and go higher.

First, there was the complete collapse of the stablecoin TerraUSD now known as TerraUSD Classic following a rebranding in early May. When I reported on this in my last column, I cautioned that crypto investors needed to better understand their stablecoin investments lack of protection, both in their failure to be tied and backed exclusively or even partially by a reserve currency like the U.S. dollar and by the lack of clear, guaranteed redemption rights in ones ability to convert the stablecoin to dollars. In addition, there was no government backstop for when the issuer of a stablecoin failed, such as SIPC insurance provided for securities at traditional SEC-registered brokerage firms and FDIC insurance at traditional OCC-licensed banks.

I also made the point in my columns takeaways from the debacle that investors should not take comfort in other stablecoin issuers with BitLicenses from New York state. That license does not create federal SIPC or FDIC protection for investors in stablecoins issued by the likes of Circle, with USDC, and Tether, with USDT. Moreover, nothing required them to provide redemption rights or be fully collateralized by the dollar.

The response from Congress and regulators

So, what happened within two weeks of my column? A very welcome development. Indeed, it seems that New York State Department of Financial Services Superintendent Adrienne Harris read my concerns and those of others. On June 8, Harris announced new regulatory guidance for BitLicense holders regarding stablecoins. In relevant part, the new regulations require all stablecoin issuers to have their coin fully backed by a reserve of assets, which are limited to U.S. government instruments and bank deposits. Equally important, investors must have clear redemption rights into U.S. dollars. Finally, the reserve assets must be segregated from the other proprietary assets of the issuing entity and not commingled with its operational capital.

The New York guidance came a day after another significant event for crypto. On June 7, United States Senators Cynthia Lummis and Kirsten Gillibrand introduced new legislation, the Responsible Financial Innovation Act. This is important in its bipartisanship and the breadth of areas covered involving digital assets. Of particular significance is a provision providing primary regulatory oversight to the Commodity Futures Trading Commission, not the Securities and Exchange Commission, and the effort to provide legal clarity around the Howey test. This is done by defining certain assets that would be deemed ancillary assets and reducing their reporting obligations to twice per year. Given the importance of this proposed legislation, I likely will devote another full column to it and its implications. Suffice to say for now, it is an encouraging, thoughtful piece of legislation for the nascent industry that protects it and investors without overbearing regulation and costly requirements.

Finally, it is worth emphasizing a May 3 announcement from the SEC. On that day, Chairman Gary Gensler announced that the SEC would double the size of its newly renamed Crypto Assets and Cyber Unit to 50 staff members. The release notes that the unit was created back in 2017 and has brought over 80 enforcement actions, obtaining monetary relief of over $2 billion. To me this was a clear land grab effort by Gensler to assert wide-ranging jurisdiction for the SEC perhaps aware that the soon-to-be-announced LummisGillibrand legislation would make the CFTC the primary crypto regulator. The release stated that the focus of the unit would be on investigating possible securities law violations related to crypto offerings, crypto exchanges, crypto lending and staking providers, DeFi platforms, NFTs and stablecoins. It seems like that covers pretty much the entire space for blockchain financial uses, no?

What these moves actually mean

As I wrote back in early 2021 when he was initially nominated to be SEC chair, Gensler in my view is ambitious overly so and could be dangerous for the industry, as he is focusing on enforcement efforts by the SEC rather than ways to assist the industry in its healthy growth. Even Commissioner Hester Peirce was displeased by this expansion of enforcement staff at the SEC. On the same day as the announcement, she tweeted:

The SEC is a regulatory agency with an enforcement division, not an enforcement agency. Why are we leading with enforcement in crypto?

— Hester Peirce (@HesterPeirce) May 3, 2022

Well said, Crypto Mom!

I believe Gensler is, over time, further and further revealing himself to be in the mode of former SEC Chair Mary Jo White, a former criminal prosecutor, rather than a civil regulator. This is not a good thing, in my humble opinion. Its not good for blockchain. Its not good for innovation in technology. Its not good for more efficient, less costly financial services. Its not good for financial inclusion for all. And its not good for those citizens in parts of the world where their governments are corrupt, repressive or irresponsible and they need to protect the value and ownership of their assets and wealth without government interference or involvement.

Marc Powers is currently an adjunct professor at Florida International University College of Law, where he is teaching Blockchain & the Law and Fintech Law. He recently retired from practicing at an Am Law 100 law firm, where he built both its national securities litigation and regulatory enforcement practice team and its hedge fund industry practice. Marc started his legal career in the SECs Enforcement Division. During his 40 years in law, he was involved in representations including the Bernie Madoff Ponzi scheme, a recent presidential pardon and the Martha Stewart insider trading trial.

Are expiring copyrights the next goldmine for NFTs?

Most people think of digital art when it comes to NFTs, but in the future, expiring copyrights could be preserved, refreshed and repurposed using nonfungible token technology.

Although nonfungible tokens (NFTs) are most commonly known in the form of digital art, they exist in many other forms and represent much more than just art.

In the creative industry, NFTs have been used by musicians such as Kings of Leon to release their latest album. In the sports industry, NFTs are created to record the highlights of major sporting events such as the NBA. In the consumer product industry, Nike, Gucci and many others are selling their digital branded products in the form of NFTs. A lot more real-world applications of NFTs are still to be explored and one of them is the digital publishing industry.

The game-changing implications of publishing and promoting books with NFTs have already been discussed extensively by many. For example, the Alliance of Independent Authors is helping indie authors to promote their latest books using NFTs. Other associated items for the fans club such as character cards are also made into NFTs. Tezos Farmation, a project built on Tezos network, even uses the complete text of George Orwell’s Animal Farm book and slices it up into 10,000 pieces to use as titles for the NFTs.

NFTs created from existing books are normally bound to copyrights. However, in the case of Tezos Farmation, the copyright had already expired. The text from the book can be used by any party for free. This triggers a very interesting question: How can NFTs preserve copyrights and royalties for books with expired copyrights?

The NFT application in the publishing industry is so far mostly focused on books that still have royalties and are within their copyright lifespan. But, there are authors whose work lives on long past both their mortal existence and that of their copyrights; can NFTs provide their estates a means to extend the life of the book and its royalties?

The journey from copyright to public domain

Copyright laws are complex and vary widely throughout the world. Although few countries offer no copyright protection in line with international conventions, most jurisdictions work on the premise that copyright is protected for the author’s life plus a minimum of 25 years after their death.

In the European Union, copyright is protected for 70 years after the death of the latest living author. It is the same in the United States, with the exception that books originally published between 1927 and 1978 are protected for 95 years after the first publication. No matter how long the copyrights are protected, given enough time, anything will end up free in the public domain.

When celebrated literature enters the public domain, the future value of the work is essentially reduced to zero. However, there often remains a disconnected community that intrinsically values the work.

Estates holding copyrights that are about to fall into the public domain have a unique opportunity to create a tangible asset in the form of NFTs from the intangible goodwill embedded in the disconnected community.

A good example would be Winnie-the-Pooh, a fictional anthropomorphic teddy bear created by English author A. A. Milne and English illustrator E. H. Shepard is loved by fans all over the world. The first collection of stories about the character was created in 1926. After almost 96 years, the copyrights had expired, and the book moved into the public domain on January 1, 2022. The estate holding the copyright will receive no future value from Winnie-the-Pooh, even though the commercial value of such a worldwide famous cartoon character will remain high for a long time.

Just prior to the copyright expiration, the controlling estate has the window of opportunity where no one else is legally entitled to do anything with the works. If the estate had spent time connecting fans with an interest in NFTs, building or collaborating with a project that resonates with them, and launching the NFT collection prior to the completion of the copyright period, the outcome would have been very different. There could have been a much longer copyright lifespan for Winne-the-Pooh.

Extending the value of an expiring copyright

Currently, publishing houses have no incentives to collaborate with the estate of copyright holders that are about to enter the public domain because the work will soon be free. A certificate of authenticity represented by a tradable NFT might provide an incentive for such collaborations.

After the copyright expires and the work goes into the public domain, the NFTs will carry the royalty further into the digital world. Royalties can be generated through sales in the NFT marketplace on the blockchain or through even more complex smart contracts created for specific use cases for first edition, limited edition or signed vintage copies.

The estates holding expiring copyrights have credibility, which is a precious asset in the NFT world, and they have nothing to lose. They are in the box seat to capitalize on their current ownership and potential for a digital community.

Beloved characters and the worlds they inhabit can be a solid foundation for not only NFTs that can extend copyrights but also extended creativity across mediums like literature, gaming, Metaverse, charity, education and many more to come.

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.

5 metrics to monitor before investing in crypto during a bear market

Everyone is a genius during a bull market, but how does one invest during lengthy downtrends? Here are five things to consider before buying into a crypto project.

Cryptocurrency bear markets destroy portfolio value and they have a dangerous tendency to drag on for longer than anyone expects. Fortunately, one of the silver linings of market-wide pullbacks is that it gives investors time to re-focus and spend time researching projects that could thrive when the trend turns bullish again.

Here’s five areas to focus on when deciding whether to invest in a crypto project during a bear market.

Is there a use case?

The cryptocurrency sector has no shortage of flashy promises and gimmicky protocols, but when it comes down to it there are only a handful of projects that have delivered a product that has demand and utility.

When it comes down to determining if a token should continue to be held, one of the main questions to ask is “Why does this project exist?”

If there is not a simple answer to that question or the solutions offered by the protocol don’t really solve a pressing problem, there is a good chance it won’t gain the adoption it needs long term to survive.

Identify a competitive advantage

In the cases where a viable use case is present, it’s important to consider how the protocol compares against other projects that offer solutions to the same problem.

Does it offer a better or simpler solution than its competitors, or is it more of a redundant protocol that doesn’t really bring anything new to the table?

A good example of unnecessary redundancy is the oracle sector of the market, which has seen a handful of protocols launched over the past three years. Despite the growing number of options, the oldest and most widely integrated oracle solution is Chainlink (LINK) and it remains the strongest competitor in the field.

Does the protocol generate revenue, and how?

“If you build it, they will come,” is a cliche expression tossed around in tech circles, but it doesn’t always translate into real-world adoption in the cryptocurrency sector.

Operating a blockchain protocol takes time and money, meaning that only protocols with revenue or sufficient funding will be able to survive a bear market.

Identifying whether a project is profitable and where the revenue comes from can help guide investors who are interested in buying decentralized finance (DeFi) tokens.

*Projects with the highest protocol revenue. Source: Token Terminal*

If a project shows limited activity and revenue, it may be a good time to start evaluating whether it’s undervalued or a investment that should be avoided.

Are there cash reserves?

Every startup is meant to have a war chest, treasury or runway as prior to investing, it’s important to identify whether or not the project has sufficient funds to survive downtrends, especially if providing yield on locked assets is the primary incentive for attracting liquidity.

As mentioned earlier, running a blockchain protocol isn’t cheap, and the majority of the protocols out there might not be liquid enough to survive a lengthy bear market.

Every successful NFT project should bring in a crypto financial manager/treasurer to properly diversify/hedge their war chest, not just keep everything in ETH.

A project needs to know how to take profit too.

— $trawberry Sith (@StrawberrySith) May 10, 2022

Ideally, a DeFi-style project should have a large treasury containing a variety of assets like Bitcoin (BTC), Ether (ETH) and more reliable stablecoins like USD Coin (USDC) and Tether (USDT).

Having a well-funded and diversified treasury that can be pulled from during tough times is crucial and as $trawberry Sith suggests, projects need to learn when to take profit, and not leave a majority of the protocol treasury in Ether or the platform’s native token.

Are roadmap deadlines kept and met?

While past performance is not necessarily an indicator of future results, a project’s history of following its roadmap and meeting important deadlines can offer valuable insight into whether it is prepared to endure tough times.

In addition to keeping track of roadmap milestones, sites like CryptoMiso and GitHub can help investors peer behind the curtain to see the frequency of development and developer activity for a protocol.

If a team is displaying little to no signs of activity as roadmap deadlines come and go, it might be time to consider the possibility that a slow rug pull is occurring and that it may be time to get out before further losses are realized.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.