February 3, 2022 – The explosion of interest in non-fungible tokens — digital assets of unique internet content — is a result of, and an important player in, the next phase of the evolution of the internet, according to technology experts.
More companies are entering the so-called metaverse, a virtual world that mimics the real world, where real social interactions happen through avatars. Facebook has rebranded to become Meta in an effort to get ahead of this evolution, and Microsoft’s proposed purchase of Activision-Blizzard is to also be in part a proposal to get its foot into the metaverse.
But another relatively recent development in the space is the creation digital memorabilia known as non-fungible tokens, which are purchased and sold through no intermediary — that is, no payment processing company or bank gets involved in the transaction.
The way it works is that users enter a marketplace that features listings for these digital assets, which can be a digitized news item or even a memorable tweet from social media platform Twitter. The users will have a digital wallet that will store the items and will have a purse for cryptocurrencies, which are themselves on a decentralized ledger known as the blockchain.
When a transaction is made, all users of the blockchain will have a copy of the deal. This process is said to make fraud difficult, as opposed to a centralized ledger that would keep all deals on one system, keeping eyes of those not involved off transactions.
The development and increasing acceptance of these assets — and the move toward the metaverse largely — are what experts at The VON3 Summit last month are calling the next phase, the third big cycle, in the internet’s evolution.
In this third phase, the internet is focused on communities and users having control of their creative assets, unencumbered by large technology companies and banks trying to get a slice of them through transaction fees and the like.
“Web1 was a promise of an open internet. Web2 was a promise of social connection. Web3 is a promise of creative content ownership,” said Jeremy Lipschultz, a professor at University of Nebraska Omaha and participant of the conference.
Jeff Pulver, founder and host of The VON3 Summit, declared that Web3 is the “dawn of a new era of the internet.” He said, “Web2 is really about companies, products and then community, and Web3 has a characteristic that is community first.”
By selling, gifting, redeeming or trading NFTs through the blockchain, in other words, creators have complete control of their content and who has access to it, the summit heard.
‘Internet of Value’
Web 3 has been coined by some of Pulver’s contemporaries as the “Internet of Value” because individuals will have complete control of all their assets on the internet without an intermediary. This new reality would mean that the economic world we know today would completely shift, say proponents.
“The tools are there, the value to be created is there, it requires one thing: Imagination,” said Pulver.
Non-fungible tokens are the reason Web 3 could be critical to the creative community, the summit heard. NFTs are defined by Bret Kinsella, VON3 panelist and founder and CEO of Voicebot.ai, as the “bridge between Web 2 and Web 3.”
Beyond creativity, NFTs could also be the future of nonprofits and charities. Carole Baskin from Big Cats Rescue has used the power of NFTs to raise money that will save large cats like tigers and lions around the world. Even wineries are trying to get involved, said Jacob Ner David, CEO of one called Vinsent.
As pioneers discover and decide what is possible for NFTs as a result of Web3, Pulver was quick to remind listeners that “this is new for all of us. We’re in this together.”
Users owning their data
Jeremiah Owyang, an industry analyst based in Silicon Valley and one of the speakers at the conference, said that in the ideal Web3, “we can own our data, we can own our identities, and we can own our equity.”
Instead of internet platforms taking users’ data and making money from that, the users would have ownership and control over that data.
“That’s the vision,” said Owyang.
This vision was shared by other speakers, such as the co-founder and co-chair of location technology company Foursquare, Dennis Crowley. He said that while it would be the user’s choice what to do with their own information, maybe we, as users, would be able to “hold onto some of the value [of our data] and monetize them.”
Bringing back micropayments?
This vision also tied into an idea of Koji CEO Dmitry Shaprio: Bringing back transaction costs for messages or phone calls as a way to deter spam messages and robocalls.
Lower costs for voice and data communications have been a godsend for many. But the fact that there is no charge (beyond access to an internet service provider) to send email messages led in the early internet to the proliferation of spam.
More recently, the widespread use of digital telephony and a U.S. regulatory system in which termination charges have been eliminated for cellular calls has led some to appreciate the value that toll charges impose in ensuring that the communicators aren’t scamming recipients of their messages.
Or as Shaprio put it, “Want to send me a message? Pay the price.”
Chris Fine, a technologist and business leader, also emphasized the value of time, saying that in Web3, there should be “some way to filter” the messages and calls received.
Pulver agreed. “Pay me for my time,” he said.
Theadora Soter contributed reporting to this article.
Finance Experts Weigh Merging Regulatory Agencies to Tackle Cryptocurrencies
‘A lot of regulatory gaps exist because we have two regulators.’
WASHINGTON, May 19, 2022 – Crypto market observers are calling for a change in the regulatory system and laws to tackle the quickly growing world of digital currencies.
“We will need new substantial law,” Douglas Elliott, financial regulation expert and partner at consulting firm Oliver Wyman, said on a panel hosted by the Federalist Society on Tuesday. “There are too many ambiguities” with the current regulatory system, he added.
As state and federal governments consider how the growing crypto industry should be regulated, various crypto experts further argued Tuesday for a redesign of the regulatory structure, while others said there was no need for a consolidation of agencies.
Part of the reasoning behind the consolidation is confusion about whether cryptocurrencies are commodities or securities. As such, some are recommending a merger between the Securities and Exchange Commission and the Commodity Futures Trading Commission to handle the regulation of the digital money.
“A lot of regulatory gaps exist because we have two regulators,” said Michael Piwowar, executive director at the Milken Institute Center for Financial Markets, suggesting that Congress merge the two into a single regulatory body.
Thomas Vartanian, executive director at the Financial Technology and Cybersecurity Center, backed the agency merger idea. Vartanian explained that despite the existence of cryptocurrencies for fourteen years, crypto remains largely unregulated.
“Bottom line is we’ve built a business of ten trillion dollars with no regulation and that is a financial risk,” Vartanian said. “We are building a financial time bomb.”
But Dawn Stump, former commissioner of the CFTC, said the best way to address these gaps in crypto regulation is not to redesign the regulatory system.
In August 2021, Stump said in a public statement that due to public misunderstanding about the CFTC’s regulatory oversight authority, “there has often been a grossly inaccurate oversimplification offered which suggests these are either securities regulated by the Securities and Exchange Commission or commodities regulated by the Commodity Futures Trading Commission.”
U.S. Facing Pressure from China as Digital Currency Adoption Debate Continues
Experts expressed concern about the U.S. falling behind China on the development of a central bank digital currency.
WASHINGTON, May 12, 2022 – The U.S. is falling behind China as the central bank ponders whether to adopt a digital currency, according to observers.
“If other countries are innovating in a direction that could represent a technological advantage, and the US is not prepared to meet that challenge, the U.S. will be at a disadvantage,” said Stephanie Segal, senior associate of the economics program at the Center for Strategic and International Studies. She and other panelists were speaking at a CSIS event on Thursday.
Segal’s comments were supported by her colleagues at the center, which hosted panelists to discuss the promises and pitfalls of creating a central bank digital currency. These stablecoins, as their called, are backed by other currencies, including fiat money.
Matthew Goodman, senior vice president for economics at CSIS, noted there is a lot of uncertainty surrounding this debate on the digital dollar. While there has been interest in the U.S. for developing such a currency system, Goodman said the US is relatively “behind” and delayed in conversations about CBDC compared to countries like China.
According to Fariborz Ghadar, scholar and senior advisor at CSIS, developing a CBDC is no easy fix, and is a risky step. However the concern about China having already developed a CBDC is a “major triggering point” he said.
Steven Kamin, senior fellow at the American Enterprise Institute, called China’s development of CBDCs “nearly operational” and potentially problematic for the U.S., with China as a world leader in technology. Kamin was speaking at an AEI event in April.
Risks of such a digital currency
A CBDC has upsides, but also presents risks to privacy and cybersecurity, according to Segal. She said a CBDC could create fear about data collection methods, regarding who has access to the data, and wonders if privacy protections would be provided.
Additionally, instead of having various intermediary points of security with the current banking system, a central bank digital currency would only have one point of security, making cybersecurity more vulnerable to threats, according to Segal.
Central Bank Wise to Move Cautiously with Digital Currency, Event Hears
‘The Fed seems a little bit more uncertain about’ digital currency versus other nations, another panelist said Tuesday.
WASHINGTON, April 21, 2022 – The Federal Reserve is “very wisely moving cautiously” about whether to adopt a central bank digital currency, an American Enterprise Institute event heard Tuesday, as other countries move forward on adopting the latest financial instrument.
“The Fed has been approaching this in a very sagacious manner by putting out the issue for public debate, thinking about the pros and cons and arguing that they will not move forward unless there is broad political and public support. But, I think the reality is this is where we are going, and it’s going to be in some ways an interesting world,” said economist and author Eswar Prasad, who published a book last year called, “The Future of Money: How the Digital Revolution Is Transforming Currencies and Finance.”
“The world of CBDCs is going to be an interesting one,” Prasad said at the think tank event. “And this is certainly what we are moving towards.”
The current conversation surrounding CBDCs in America, which would ride on a digital ledger called the blockchain and are backed by the nation’s dollar, is delayed in comparison with other developed countries that have already made strides in government adoption of federal currencies.
“Among the advanced economies, Sweden’s Riksbank seems nearly dead-set on issuing an e-crono, while the Bank of England, European Central Bank and Bank of Canada are giving CBDCs serious consideration. The Fed seems a little bit more uncertain about it,” Steven Kamin, senior fellow at the AEI, said at the event.
At a Federalist Society event last Thursday, academics argued that such digital currencies backed by other currencies, such as stablecoins, can improve financial inclusion. It has also been said previously that these digital currencies could expedite federal payments to citizens. And because they’re backed by the government, there is a perceived added level of security and trust.
The panelists’ discussion also veered into the developments of China’s CBDCs, which are “nearly operational,” according to Kamin. This could potentially be problematic as the US economy is already grappling with the effects of China being a world leader in the manufacturing and distribution of semiconductors, a key product of important technology.
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