Dear Reader,
Every once in a while there comes a time that we need to take matters into our own hands.
And for the blockchain industry, that time is now.
Not long ago, I wrote about how Coinbase went to extraordinary lengths to engage the U.S. Securities and Exchange Commission (SEC) in advance of its plans to launch what amounts to an interest-bearing offering.
It was a simple construct that is used widely in the industry. Holders of digital assets simply lend their cryptocurrency to provide liquidity for a period of time and get paid what amounts to interest on that asset for the duration.
It’s no different really than lending U.S. dollars or euros to a bank or fund and receiving an annual interest rate in return.
And yet the SEC threatened to go after Coinbase if it launched the product. Making things even more ironic is how widely used this kind of digital asset lending is in the industry.
The best part is that this kind of lending is available to all investors, accredited and nonaccredited alike.
And investors can not only earn interest rates that are many multiples larger than what they’ll get in their bank accounts…
Thanks to the artificially low interest rates set by the Federal Reserve, they’ll typically see the appreciation in the digital asset relative to the corresponding fiat currency.
After nearly a decade of working with the Financial Industry Regulatory Authority (FINRA), the SEC, the Commodity Futures Trading Commission (CFTC), and other regulators around the world… Coinbase finally threw its hands up.
Coinbase was always early and proactive in engaging with regulators. It followed the rules, always asked for clarification, and was buttoned up and compliant… But no matter how hard it tries, the SEC simply hasn’t provided clear regulatory guidance to the blockchain industry with regards to digital assets.
So Coinbase proposed its own framework. It took matters into its own hands. Days ago, Coinbase proposed four regulatory pillars upon which a new framework for regulating digital assets could be built.
One: Regulate digital assets under a separate framework
Two: Designate one regulator for digital asset markets
Three: Protect and empower holders of digital assets
Four: Promote interoperability and fair competition
These are all very reasonable points. And they make perfect sense to be adopted. Some elements likely will.
But the one that will be blocked by the current administration is number two – the creation of a new regulator to oversee the digital asset markets. Sadly, it is the one that is most necessary.
After all, the current securities laws in the U.S. were designed back in the 1930s. It’s no surprise that they are not well-structured to account for cryptocurrencies and all of the decentralized finance instruments that are being created in real time.
It’s no one’s fault, of course. Who could expect that regulators and policy makers in 1933 would have been able to anticipate the internet, let alone blockchain technology and cryptocurrencies?
And that’s precisely the point.
The employment of a technology with built-in economic incentives operates well beyond our existing regulatory framework.
And with the current administration trying to slow us down – and the SEC and CFTC fighting each other over the “right” to regulate the blockchain industry – it’s clear that a completely new framework, one that is digital first, would benefit all participants.
The team at Coinbase isn’t naïve. I’m sure behind closed doors they know that they’ll never get the digital-first, pro-business, pro-innovation regulator that they desire. That’s not the point. Coinbase is putting a stake in the ground to elicit a response from the SEC. They’ve done it thoughtfully and professionally.
And they’re not the only ones. As if in coordination, Andreessen Horowitz, which recently raised the largest crypto venture capital fund in history ($2.2 billion), did something similar.
The industry is rising up for change. For many of us, this is a single-issue vote. Companies and decentralized organizations should be able to operate, innovate, thrive, and create jobs within a clear regulatory framework.
And all investors should be able to participate in the largest wealth creation event in a generation… the next generation of the internet.
There are so many things happening right now with respect to building new worlds full of incredible economic activity. It’s as if a light switch turned on over the last four or five months and said “Go!”
Of course, I’m talking about the exponential growth in building metaverses. For the sake of new readers, a metaverse refers to a virtual world in which people can meet and interact with one another. There will be many different metaverses for consumers to choose from as the industry develops.
Right now, the hot trend in the metaverse space appears at the junction of multiplayer gaming, blockchain technology, and non-fungible tokens (NFTs). We talked about this when we discussed Axie Infinity a few weeks ago.
What’s incredible about Axie Infinity is that players in Southeast Asia are earning a full-time income within the metaverse right now. That’s because Axie Infinity rewards players with NFTs for completing tasks within the game. These NFTs can then be sold for Ethereum (ETH), which can be converted into the player’s national fiat currency.
And that brings us to an exciting new entrant into the metaverse space. It’s called Treeverse. And it will employ a “play-to-earn” model similar to Axie Infinity.
Treeverse has been highly anticipated and designed very much like older games in the massively multiplayer online role-playing game (MMORPG) genre. It features an open world where players can explore and “level up” their character by completing tasks and fighting monsters.
The Treeverse World
Source: Treeverse
As we can see, Treeverse resembles old-style adventure games that were once popular among gamers. What makes it unique, however, is that players will be able to own their own plots of land in the game. These plots come in the form of NFTs.
In fact, Treeverse just auctioned 10,000 plots of land in its metaverse. It priced the NFTs at $520 each… and they sold out within an hour. That’s how much demand there is right now. (You can find my presentation on how to get started investing in this space here.)
And get this – those same plots of land now trade for over 2 ETH on the secondary market. That’s $6,800 at today’s price – up 1,200% from just a few weeks ago. Not too shabby.
That said, Treeverse isn’t up and running yet. The team just raised a $25 million seed round that will finance the metaverse build. We’ll certainly keep an eye on the project. This is one of the most anticipated games in the industry.
Bigger picture, we are witnessing the natural evolution of the gaming industry here. This play-to-earn model (based on NFTs and cryptocurrency) enables players to share in the wealth that’s created by successful game launches.
As players perform tasks that add value to the metaverse, they are rewarded with a digital asset that can be sold and converted into an income stream.
It’s now inevitable that the gaming industry will go in this direction. After all, once gamers get a taste of earning real money while playing games, many won’t go back to games where they are not compensated for their efforts.
And here’s the big insight in all of this…
Social media will go in this direction too. It’s just a matter of time.
Companies like Google and Facebook never realized that they could grow their business by sharing revenues with their users. Instead, they’ve treated users as a commodity to be strip-mined and monetized.
People have put up with this model simply because there aren’t any better alternatives. But that will change as soon as next-generation social media platforms launch with this play-to-earn or revenue sharing model.
Once people can make money just by participating in social media, they won’t go back to the big tech giants that have dominated the internet up to this point.
This will be a generational shift, a transition that unfolds over more than a decade. But the younger, digital-first generations will be quick to make the move.
It’s about time.
Self-driving startup Aurora just announced its go-to-market business model. This announcement gives us an early view of what the autonomous driving industry is going to look like.
As a reminder, Aurora acquired Uber’s self-driving division last year. It has been a major player in the burgeoning autonomous driving space.
And with the release of its go-to-market strategy, we now see what Aurora has planned. The company has launched three separate subscription services to license out its technology.
The first service is called Aurora Connect. This is a ride-hailing platform. It will allow companies to build and manage a fleet of self-driving cars using Aurora’s technology. This includes the self-driving software, data collection systems, and mission-control functionality.
In other words, any company that purchases an Aurora Connect subscription can launch its own self-driving car fleet basically overnight. Aurora’s tech handles all the difficult work.
Aurora’s second subscription is called Aurora Horizon. This is a self-driving logistics platform for semi-trailers. It will allow companies to launch their own fleet of self-driving delivery trucks.
And the third subscription is called Aurora Shield. This is a roadside assistance and support platform. It’s basically an add-on subscription that pairs perfectly with the first two.
What’s interesting here is that Aurora has no interest in operating its own ride-hailing services or logistics business. Instead, it simply wants to license out its technology.
That makes it very much like a software-as-a-service (SaaS) company. And this will also help bring self-driving technology into the mainstream by allowing other companies to access the technology at will.
Of course, the timing of this announcement was no accident.
Aurora is about to go public this week. The company is backing into a special purpose acquisition corporation (SPAC) called Reinvent Technology Partners Y.
The shareholder vote is scheduled for Wednesday. That means Aurora could be trading as a public company as soon as Thursday. I sent my Blank Check Speculator subscribers an alert regarding the upcoming vote earlier today. Paid-up subscribers can catch up right here.
And once Aurora is a public company, my prediction is that it will strike a deal with one of the major car rental companies within the next 12 months. The logic here is simple…
The car rental business has been struggling in a major way. Uber and Lyft have eaten into its business. And COVID-19 cratered travel for 12+ months.
Yet these car rental companies already have a strong logistics infrastructure in place. They are good at fleet management, and they can clean and service their vehicles very efficiently.
That makes them perfect candidates to launch and manage autonomous vehicle fleets. I have to believe that one of the major players will be bold enough to implement a new business plan like this. It may be in their own name, but a more likely outcome is that they will partner with a ride-hailing company to launch the new service.
This isn’t five years from now… it’s in the near future.
In the span of just a few months, the United States has become the top country for bitcoin mining. This is a fantastic development.
Here’s a chart that demonstrates just how incredible this rise has been:
Here we can see that China was the dominant country for mining bitcoin for years.
In fact, over 75% of all bitcoin mining happened in China back in September 2019. At the time, only 4.1% of mining took place in the U.S.
China’s dominance did gradually decline over time, but it was still standing at nearly 52% in February of this year. That’s significant because any party that captures 51% or more of bitcoin’s mining power could potentially manipulate transactions on the blockchain.
For this reason, the concentration of mining in China posed an existential threat to bitcoin.
Fortunately for the Bitcoin ecosystem, China banned all cryptocurrency mining within its borders in September. That’s why China’s market share suddenly dropped to zero.
And China’s ban led to an explosion of bitcoin mining in the U.S. Today, 35.4% of all bitcoin mining takes place in the U.S. That leads the world.
In addition, we now have a much more even distribution of mining power. The second most popular country for mining is Kazakhstan, with 18.1% of the market. That’s followed by Russia with 11.2%. This makes the Bitcoin network far more secure and more resilient than it’s ever been.
And what I especially like about this is that there is a much bigger focus on mining using clean energy sources here in the United States. That includes using hydroelectric, wind, and solar power where possible. That’s a bonus.
So this is a very bullish development for Bitcoin and the blockchain industry. I remain incredibly excited about the space as we move into 2022.
Regards,
Jeff Brown
Editor, The Bleeding Edge
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The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
