RECAP: PANEL DISCUSSION “INTO THE WORLD OF NFTs” AT HODL 2021
A CRYPTO ASSET CONFERENCE
The recap will reveal many exciting insights into the world of NFTs by sharing the crypto experts of Bholdus, Zebpay, Elliptic, and Rario.
The First edition of HODL 2021 was organized by the Blockchain and Crypto Assets Council (BACC) of the Internet and Mobile Association of India (IAMAI) on 7th and 8th September 2021. Together with Ronald Le from Bholdus – Singapore's NFTS-based startup with an outstanding success of raising over $2.34 million in just two months through the Private Sales and Early Bird rounds of BHO token sales, the panel discussion was participated by Mr. Rahul Pagidipati, CEO of Zebpay – one of the oldest Indian cryptocurrency exchanges; Mr. David Carlisle, Head of Policy and Regulation Affairs, Elliptic – a crypto compliance and legal solutions provider. Mr. Wadhwa, the CEO of Rario, moderated the conference.
NFTs – a bubble or a long-term bet?
The discussion started with the question, "NFTs – a bubble or a long-term bet?". Rahul responded that NFTs are not a bubble. In his opinion, like bitcoin or smart contract, NFT is one of the most significant new ideas in the next several decades. When he first heard about the word, like most people, he was also confused about what fungible and non-fungible were. It was just a word that came out of nowhere.
In his opinion, fungible means interchangeable. And he explained more about the difference between Bitcoin and NFTs. Bitcoin is fungible, while NFT is not. It is even more impressive and prominent compared to bitcoin. It can be considered a store of value and a way to do measurements. Since the world is diverse and different, they are not the same if we want to exchange something for something others have. Over time, things like aeroplane tickets, concert tickets, insurance, art, or your driver license will become NFTs.
Ronald added that NFTs would be a tremendous new type of trend in the market. It has been only popular in limited assets, such as digital arts, movies, music, etc. However, he firmly believed that it would be a good trend and fantastic opportunity to move forward in the next decade together with Metaverse. It creates a whole type of marketplace where users can purchase any virtual products. It makes another kind of Amazon, which is a new kind of trillion-dollar market.
Is NFTs the game a few people are playing amongst themselves?
Painting a little bit of the other side of the story, Wadhwa, CEO of Rario, the moderator, shared that most people feel unfamiliar with these concepts. He also wondered whether NFTs is the game that few people are playing amongst themselves?
David from Elliptic shared that NFTs could be a great long-term bet. He also agreed to Ronald that there would be a tremendous future for the NFTs space. He believed it would be where the direction of digital and online ownership going. And it's a coincidence that we saw this market take-off during COVID, where our lives have just moved more and more online. In his opinion, NFTs space might be where the crypto space was ten years ago when if we asked someone about bitcoin in 2014, they would have had no idea what bitcoin was. Even now, it could argue over what constitutes mainstream adoption. Anyway, he had no doubt when looking at the number of use cases, NFTs would be in more people's lives in one way or another.
However, even though it's going to be a significant thing with staying power over time, we will see sort of sub bubbles within the industry come and bust, then other things will take their place. Those bubbles are often the things that will capture the attention of the regulators because they'll move in response to those massive gyrations in the market, which in the long term may not mean a lot but have much significance when it comes to the near-term performance.
Rahul added that the cool thing about how NFTs works is that we can authenticate what we own. Right now, we live in a digital language, and before coding, we would be doing this stuff in the physical world. The other thing which he considered the most successful NFTs was the crypto punks. They have a market calculation of about four to five billion dollars. At the same time, NFT is a mixture of privacy, art, collection, and this lollapalooza effect will breakthrough. However, Rahul also warned that if someone intended to invest in the space, they should be cautious since many scammers are there. Just take baby steps at first, and never invest more than you are comfortable doing.
**The link between Crypto and NFTs **
To answer the link between Crypto and NFTs, Ronald explained an asset-based token with a total supply circulating in the market for cryptocurrency. But for NFTs, there was a unique asset ownership right in which a single piece presents your amazing art or movie or even an IP. So there was no circulating supply. He gave an example of creating an amazon e-commerce marketplace for Metaverse, and the asset-based token could be a fantastic native token. Whenever you transact to buy a product, you must pay a fee in the form of a digital currency. That is the asset-based token, and the token itself is a piece of NFTs.
In Rahul's opinion, the link between crypto and NFTs is that we use digital currency to buy digitally made goods. For example, Indians will not use their bitcoin to purchase physical goods like a Persian rug but a digital version. He considers each blockchain a different country, like Ethereum, Binance Smart Chain, or Solana. Each of them has its own endangered digital native goods. So, the connection is that you can use cryptocurrency to buy some NFTs within that specific blockchain universe.
In the next part, the panellists discussed NFTs fractionalisation. David shared his ideas that indeed fractionalisation started to raise a few questions. People are participating in the purchase through fractionalisation like an investment syndicate expecting returns on their investment. When that happens, they can start to trigger securities laws. This fractionalisation is one of several issues that authorities will investigate. In terms of deciding, how do some of our existing laws and frameworks potentially apply to this space? It's an exciting concept, and it's the development of technology that hopefully makes it more accessible to more people. But it may start to trigger some additional regulatory scrutiny as regulators try to understand. It is a fractionalised purchase of a particular NFTs. It is equivalent to an investment contract that other securities markets would regulate.
Are the prices real or manufactured?
Ankit raised an interesting question of whether the prices are actual or manufactured, and he could realistically sell my doodles for a million dollars.
Ronald suggested that people invest with spare money, not all assets, because cryptocurrency was high-risk. They can be excellent traders but need to understand the game and have financial knowledge. However, if they want to invest in the long term or a long-term holder, it is tied to business fundamentals. They should dive into the industry and have belief in the projects that they choose. Thus, the prices are natural or manufactured; it depends on the different investor's perspectives.
Rahul shared another viewpoint. He advised to put a fraction of your net worth into crypto and put a fraction of your crypto network into NFTs. And his financial advice was to buy bitcoin and Ethereum since they were very liquid and safe. For him, those two bitcoins are so massive, and it is tough to manipulate those prices.
Regulatory and money laundering concerns
In David's opinion, one of the issues regulators have will be market protection through due diligence. In any market, the moment to attract the attention of regulators is when you get NFTs selling for hundreds of thousands or even millions of dollars regularly. The regulator wants to know whether there is fraud or money laundering, or these markets are being manipulated, and consumers are being provided with fair and accurate information.
The focus of regulators is to identify any outright fraud or criminality in the NFTs market. Some of those scams emerge where fraudsters say posting an ad for a supposed NFTs with all sorts of false information about it. They take money from victims and then disappear and left the victims with worthless NFTs.
He provided an example that involved the artist Banksy, the famous street artist in the UK. Last week, an attacker managed to hijack Banksy's website and post a link to an NFTs sale on OpenSea. A victim almost immediately purchased it for about 330,000 dollars, but it turned out it was not by Banksy. The post by the attacker was just a scam, and the buyer had fallen for it. In that case, the fraudster returned the money to the buyer, probably due to the public attention the case got.
Fraud can very quickly occur in the crypto space, where prices are moving. It makes scams very easy to pull off. Therefore, anyone launching a platform or business operating in the space needs to think about it even though regulators are still clarifying their position or clarifying how specific existing laws will apply to this space. And they will provide more and more clarity on that over time.
The most significant use cases of NFTs and mainstream in the next ten years?
Rahul shared the first thing was a profile picture PFP or an avatar. People are buying these things because (1) they like the way it looks, (2) in a sense to validate that they understand what the uniqueness of entities are. Many very famous people such as musicians and sportspeople have been buying NFTs for either collection or investment. For example, in the US, Steph Curry, an NBA basketball player, bought a Bored Yacht Club or Steve Aoki, a famous DJ, owns a crypto punk. Even crypto influencers, for example, the founder of UniSwap, Compound, these avatars are big, and then what does that mean in the Metaverse.
They make emoji usernames, and it is a phenomenal concept. Billions of people around the world use emojis, and they are making emoji NFTs. In the Metaverse, people will want to say that they can become their avatar, almost a quarter-million dollars. These avatars might be the most prominent use case.
Rahul also shared that the mainstream NFTs in the next ten years would be movies and games. Movies are what people love doing the most with the significant market cap things like Netflix. Netflix has a market capitalization of almost half a million dollars. And regarding games, epic games, once connected into the crypto world, will have a skin or an avatar and live in this Metaverse.
Ronald agreed with Rahul and added that GameFi would be enormous game fun with Metaverse. A lot of hardware manufacturers are trying to team up with the GameFi players in the market. Even for Bholdus, his team planned to open up a GameFi incubator in Singapore where they partner up with some Singaporean partners to help GameFi startups and developers. And he believed that the trend would expand to Southeast Asia as well.
David added that the fusion of this space in sports would be massive and continue to grow. The sporting world is just moving online in terms of fantasy sports and e-gaming. Industries with this space will be around with us.
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