Unchained - Unconfirmed: Legal Issues With NFTs: Would a Fractionalized Mona Lisa Be a Security? - Ep.287

Episode Date: November 5, 2021

At Non-Fungible Castle 2021, an NFT exhibition in Prague, four NFT experts discuss the legal implications of NFTs. Guests include Jonathan Victor, product/business development at Protocol Labs; Louis Baudoin, advisor at Monax; Diana Stern, product counsel at Stripe; and Shant Marootian COO at Fractional.art. Show highlights: what users are receiving with the purchase of an NFT how the terms of service for different NFT marketplaces change NFT rights how on-chain storage and off-chain storage affects NFT ownership what rights do creators need to mint an NFT what recourse creators have if someone mints their art as an NFT and profits from it whether NFT marketplaces should respect NFT royalty standards on resales how NFT marketplaces could make it easier for creators to clarify licensing and royalty standards whether NFTs should be regulated under existing laws and what gaps in regulation need to be filled when an NFT should be considered a security how different jurisdictions may work together to regulate NFTs why money laundering is a problem for NFTs how a DAO could go about owning an NFT or IP what would happen to NFTs and DAOs if Ethereum were to suffer a hard fork again why DAOs should stay compliant with traditional regulations how to improve licensing and industry standards for NFTs whether NFTs should be considered as financial objects what would happen if a museum fractionalized the Mona Lisa   Thank you to our sponsors! Avado: ava.do Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021  Nodle: https://bit.ly/3AXGydJ    Episode Links:   Non-Fungible Castle 2021 Website: https://www.nfcastle.com/ Conference recordings: https://www.nfcastle.com/conference Twitter: https://twitter.com/nf_castle  Tweet thread of Laura’s experience at NFCastle 2021:  https://twitter.com/laurashin/status/1449731658928824320    Jonathan Victor LinkedIn: https://www.linkedin.com/in/jonathan-victor-69a44255  Louis Baudoin LinkedIn: https://www.linkedin.com/in/lou-baudoin-5b847a151/  Twitter: https://twitter.com/MerkleData  Diana Stern Linkedin: https://www.linkedin.com/in/dianajstern  Shant Marootian LinkedIn: ​https://www.linkedin.com/in/smarooti/  Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, all, before we begin, some quick announcements. And a note about today's show. First, just a reminder that the links for the weekly news recap at the end of the show can be found in my Facebook Bulletin newsletter, which is at laura shin bulletin.com. There you can find additional articles on news not available on the pod or in my daily newsletter. Be sure to subscribe today. Second, my book, The Cryptopians, Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Cray is available for pre-order on Amazon, Barnes & Noble,

Bookshop.org, or any of your other favorite bookstores. Go to bitly slash cryptopians. That's b-it.l-l-Y-slash-C-R-Y-P-T-O-P-A-N-S to pre-order today. Finally, today's episode is a panel I moderated at NF Castle, put on by the Czech noble family, the Lopkowitz family, at their palace in Prague Castle. It was a wonderful weekend, bringing together 200 artists, builders, collectors, and more, for a day of panels and talks, tours of the family's art collection,

and its NFT exhibition. And it concluded with a gala dinner and live entertainment. I'm not going to lie, one of my favorite parts was getting to dress up for the gala, especially after being locked in our homes for the pandemic. But what I really fell in love with was the fascinating mission of the Lopkowitz family and how they're combining old and new in a novel way. I'm excited to tell you more about it at a later time. But first, take a listen to this really engaging panel discussion about legal issues around NFTs. As I know many people in the space are getting interested in NFTs right now, or beyond interested, obsessed maybe, this is a good discussion to give you a heads up about any potential issues. Enjoy the show. Wish you could earn crypto but don't want to spend thousands on

hardware? Just download the Nodalcash app on your smartphone. Visit nodle.io slash unconfirmed. That's N-O-D-L-E dot I-O-S-U-Cash to start earning noodle cash today. The crypto.com app pays you up to 8.5% interest on your Bitcoin. Get $25 when you download the crypto.com app with code Laura. The link is in the description. Tired of your exchange taking 25% of your staking profits? The Avato blockchain computer allows you to stake Ethereum and other crypto at home and keep 100% of the rewards.

go to AVA.DO. All right, so in the last panel, we discovered all different kinds of N-O-T controversies. And one big one we didn't touch was all the legal controversies, and there are many from many different sides, which is a super fun thing. But why don't we quickly have each of you just sort of introduce yourselves, and then we will get the discussion started. Awesome. Hi, nice to meet everyone.

My name is Jonathan Victor. I work on product and BD at Protocol Labs. on things like IPFS, Filecoin and NFT storage. I'm Louis. I'm part of the product team at Monax. Monax is a digital property management protocol, really helping creators and owners to derive values from their digital ownership in a safe and compliant way. And really two layers to this.

There is the protocol primitive layer, and then there is the trustless, legal layer that we're building. My name is Diana Stern. I'm a product council at Stripe, which is a global tech company that helps online businesses start and scale. And I've been working at the intersection of blockchain and IP for some time now. Hi, everyone. Sean Maroudian. I guess I'll start with the views and opinions I share today, or solely my own opinion, and do not express the stance or any views of the company that I

work for. But that being said, I run operations at Fractional, which is, you know, a trustless, decentralized, community-driven fractionalization platform, which basically, in simpler terms, it allows, if you own an NFT, it allows you to democratize the access to that NFT, and basically allow you to turn them into fractions for other collectors to buy who have been traditionally priced out of it due to the current market conditions, and really provide them access to the communities around those NFTs. There's been a lot of discussion about community today and also even new communities that have we been seeing form around those specific NFTs. And so I run operations there.

And yeah, it's going to be a great discussion. I have to plus one, the disclaimer as well. Oh, okay. Right, of course. All the disclaimer. We can get them out. It's the legal panel. So why don't we just start with a really basic question.

This kind of goes back to the previous panel, you know, what is an NFT? But from a legal perspective, when you buy an NFT, what are you buying? and I'm guessing maybe the lawyerly response will be, it depends. But anyway, who wants to start? I mean, I'll go. I think the answer is it depends. So with the NFT, literally it's just like what is the URL that's inside of there? And depending on who you're buying the NFT from or like what platform is minting,

there could be a variety of things that they put in there. And so I think at the lowest level, ideally people think and they are buying like a link to at least the asset. So that picture, that video, that 3D rendering, and that thing, at the very least, they own a digital representation that they can move around on like Ethereum or whatever blockchain. But practically, I don't think that necessarily imbues other rights. And I think that fuzziness and that grayness leads to open questions where people aren't sure if commercial rights come with those assets or if maybe specifically that's something that's owned by the artist and that needs to be granted separately. So I think part of this is because it's a new space,

there's clarity that just needs to be created. And I think standards will emerge, and some orgs are already taking steps on that front. But yeah, really does depend. Diana, did you. I have a slightly, I mean, I think it's true that you are not generally getting, you know, owning the underlying image.

But the crazy thing is it usually depends on the terms of service of the marketplace you buy from. And all of those marketplace terms require you to go, you know, read paragraphs and paragraphs of legalese, and sometimes you do get a license to the underlying art, sometimes you don't, and the rights that you may have, sometimes you have commercial rights, sometimes you don't. So it's actually quite complicated to figure out what you own, because, of course, someone can buy on one marketplace, one marketplace, have certain rights,

resell on another marketplace, and they might not even have the rights that the second marketplace says you're representing that you have. So it's a bit of a mess right now. Wait, so when that happens, then is it just whatever the most recent sale was, that those are your rights? Because that was where you bought from? Or I guess these questions need to be worked out? Yeah, I mean, that's a really good question. I think probably right now that's the easiest way to think of it, but I'd be really interested if anyone ever takes this to court and you have to kind of go back and trace. I mean, we have great provenance. You could go back and trace sort of, okay, well, what rights did you actually end up having? The thing I would add to that too is I think unpacking what it is your buying is probably valuable to the audience as well. I know I've had a couple conversations with folks like, well, how do you understand an NFT? But before going into that too, related to the rights associated with it, it's not defined currently, right? There's no law on record that I know of that uses the term NFT anywhere in a document. And so it's such a new idea.

NFT specifically have yet to be officially regulated. in some tangible way. But related to what you're buying, when you're buying an NFT, as John mentioned, it's a certificate to something that exists or a digital image. However, you'll hear the concept of off-chain NFTs,

on-chain NFTs. There's also this idea of IPFS, which is a decentralized storage system. So essentially, when you buy an NFT, ultimately, it's a token that's on Ethereum or other chains that's non-fungible. We've covered that topic. but the image associated with it is where it gets,

it can vary. So if it's off-chain, the token itself has metadata within it that links to either a URL or some database that's hosting that image. And so that just tells you, hey, I own that image that's hosted on the database. But if that database essentially managed,

there's that question of, in 100 years, what happens if the company managing that database goes down? And that image is gone forever. Now you just own a token that links to something that doesn't exist. So that would be off-chain. and there are issues there, problems there. There's also this idea then,

okay, what if you decentralize that storage, right? And that's where IPFS comes in, which stands for interplanetary file system. When you get people on the internet, those are the names they come up with. And so essentially, that IPFS is a way to host that image decentralized way. As long as users on the network continue to propagate that network,

it's more likely to be there longer term, right? And there are storage constraints to Ethereum, which make it difficult to, store like a large, let's say, 4K video or high-definition piece of art directly on-chain. And then there's pure on-chain storage, which is when the token itself actually contains metadata written into it, in which you can take that code, put it into, let's say, a compiler or some other area where you could run program or run code, and it will reproduce that image. And so all the things you need to create that image are on-chain and always immutable

and always stored when you buy that NFT. And so I think that's an important thing to understand for when we say NFT, there are different ways in which the data and what you're buying are stored and which could also change the question of what are you buying. Louis, did you want to add anything? Yeah, sure. I think there are a lot of different use cases. If we take just the basic ownership use case, say, Laura, you're stealing my seat phrase, you're stealing my NFT. Code is low, but are we going to say that you're the proud owner of my NFT? Not really.

are we going to be able to make the case to a broader set of ownership that this is the case? Probably not. So I think we're missing a number of recourse mechanism around edge cases. Then there is

the cases of, yeah, I want to lend you my NFT, I want to license my NFT, I want to sell my NFT with specific rights around it. Like right now we're just signing with a metamask wallet in a browser. None of this.

is here. But if we're thinking about like what makes a buyer, a borrower, or anyone accept something, it's not signing a Metamass transaction. It's really like clearly accepting terms around the transaction. Could it be sell, buy, swap, land, license, lease, anything. Yeah. So one related question that keeps coming up is, you know, whether or not a creator can imbue certain rights into their work. But actually before we get there, and I really do want to get there because I was discussing this beforehand with Mitchell Chan, who did something super interesting. But why don't we just actually also establish that when you're a creator, what rights do you need to have to the original artwork in order to create the NFT? Like, do you have to be the copyright owner?

Like what happens when someone just, you know, takes a photo that's popular on the internet and, like, creates an NFT of it and sells it? Like, does the original creator of that, photo or that digital artwork have any recourse? Like what, you know, from the creator side, you know, what rights are associated with an NFT or need to be? Anybody can go. It's just, if you have a thought, speak it. Yeah, I mean, I think the cleanest would be if you own the copyright outright. So if you register with the copyright office, you own the copyright, you can do what you want with it. But alternatively, if someone licensed that worked to you or it's licensed under Creative Commons, then you can do, you know, depending on what Creative Commons license it is, you can use it to create an NFT.

I mean, there is kind of a question of how exactly are you using the image when you mint an NFT out of it? Is that a derivative work? Maybe a form of distribution because there's certain rights that you have under a copyright act, including distribution and then creating copies and derivative works. So you kind of have to think about how you are using the art when you are creating an NFT. But if you, and then what happens in the case where, let's say I'm some famous photographer or something, and I've created a photo and someone else like you, you decide to make an NFT of it and you sell it. And let's say, Louis buys it, then I say, hey, that's, that's, that's, that's, that's, that's my photo.

So what recourse do I have and what recourse does he have? And do you just make off with the money because, you know, got bought in Ethan, you don't have to send it back? Or how does this all work? Yeah. So hopefully the marketplace that's listed on has a notice and take down policy. So you could follow that DMC. There's a, in the U.S. anyway, the Digital Millennium Copyright Act has this process called notice and takedown where you give notice to the marketplace, hey, someone has my copyrighted

work on your website and doesn't have my permission. And then the website would like, you know, there's kind of a back and forth that can happen, but generally would remove the work. I actually don't know the answer on what would happen for, Louis, because he purchased the NFT and also as a practical matter, like, you might not want to send it back to, you know, Laura. So that is a bit tricky because of the permanence issue. It also gets a little complicated with like, so we were just talking about when you create an NFT, you have this like reference that you're using. And if that's something like IPFS, it's not like there's a single person who's necessarily holding it. And it could also be the case that the same image has the same fingerprint that's used to the, multiple NFTs. So a takedown that affects this like forgery NFT would also affect the real one too. So it's not like there's a simple answer of like we take it down. I think like it really

has to come down to the marketplaces and what sort of standards are there. How did they do their vetting of the different artists that are like posting on the platforms? How they like have their own potential like recourse? Maybe like they don't do immediate payouts through Ethereum. I think this is the question when you have something that's permissionless, anyone can do anything, which is both part of the beauty of the system, but also then the danger of the system. And so part of it is coming up with like the social consensus rules around how do we actually want to manage this process? How do we want to make sure that the original creators are able to retain the value of their work while also not creating artificial gatekeeper roles that make it difficult for people

to create and actually share their work? That's interesting that you said that you wouldn't even know if he would want to send the counterfeit NFT back because I assumed that he would be like, I've been scammed, but you're right. they might be like, no, I've got what I want. I don't care that the person who got paid wasn't the original creator, which is interesting. But then this leads us to the next question about, so if I'm a creator and I want to imbue my NFT with certain rights, does that mean that I can't sell on these other platforms that attach to their own terms and conditions? Or like, how does it work? You know, because, I mean, honestly, I think what the promise of NFTs brought to a lot of creators is

oh, I can, you know, program it to receive royalties in the future from secondary sales. And then when I interviewed Devin Finzer, the CEO of OpenC here on my podcast, he was like, well, you know, whether or not that can actually be enforced on second series sales is an open question. It has a career. I was like, what? Like, you know, this is exactly why I'd want to do this. And he was kind of questioning whether or not buyers and future resellers will even want to, you know, send a bit of the royalties back to the original creator. But yeah, so how can creators put rights that they want to put into each work into them in a way that sticks? In my opinion, it's an open question for the space.

If I was the CEO of OpenC, it wouldn't be an open question. I would just respect the royalty standard, which they are not. And if I was a creator, I would just not go on Opency. I would try to bring together a bunch of builders in the space that will be able to, like, build a cross-chain, royalty standard that's going to walk across a bunch of primitives. And I wouldn't work with the... I mean, I love OpenCy,

but I wouldn't work with the vampires of the space. And I'm saying vampires because they haven't been complaining to the royalty standard, which is not a good standard, but it would at least be a way to tell creators that they're here for them. And if we believe that... I mean, we're all talking about financial inclusions and all of that.

And if we want to help creators, we have to actually implement those types of standards. Otherwise, you're going to have some central focal points that are going to just like swallow the entire value. And it makes very little sense given all the very nice visionary sentences that we drop around financial inclusion on such.

So are you saying that actually OpenC really isn't enforcing this? Because I didn't know that. They have their own standards, but they haven't made any efforts, and none of the marketplaces, it's not just open. See, it's a bit like in 17, 16, 15, you had a lot of centralized exchanges that you just couldn't talk to

because they were too busy making money. Right now you have NFT marketplaces that are too busy making money to care about those type of things, but if we're thinking about the tenure vision of what blockchain can bring to creators and to the creators' economy, like this needs to happen for sure.

And so I personally would love to have like a, I don't know, cross company, cross blockchain, cross-dow initiatives really working on this. If anyone is interested, I would love to talk with them. And I think the jurisdiction question gets really interesting as well, right? Because the nature of blockchain is it's cross borders, it's composable across platforms, where the people are buying from right now, as long as they're not a Fiat on-ramp, like OpenC isn't required to, you know, collect anybody's information, any K-YC laws there. and so having some sort of open collective to which creators could agree to these are the rights or these are the standards we want to attribute to it and it would in any way go cross-border would be I think really powerful yeah a lot of complexities and considerations I would say like the short-term legal hack that I would use is to put a link to the license that you want in the description field and the metadata of your nfti and when you mint it and I have a sample license on my GitHub if you want to use it and yes you would be

competing with the terms of service of the marketplace, but I think you could put a provision that says, you know, this license supersedes the terms. And marketplaces also might want to consider allowing artists and making room for artists to have their own license that do supersede their terms to just really provide clarity. Yeah. Well, this goes actually to my conversation with Mitchell. I don't know where he is, Mitchell Chan, who was on a previous panel, but he was saying that he did some NFTs back in 2017 and that he put the metadata in the smart contract, and he made it so you couldn't just buy it on a platform, and you had to mint it yourself using, you could use ether scan, which is probably the most user-friendly way, but he also

had people do it directly using the parity client, which is funny for those of us in the crypto space, because that's not used widely anymore at all, I don't know. But, you know, he was like, this is how I'm kind of overriding what the terms of service are. So I think, I don't know, maybe Mitchell isn't here, but I'm just curious how the resales are done, then can you even resell that on OpenC, or is it just people who are very technically savvy now traded?

I think OpenC has an API that if you create an NFT that meets the specs, you'll be able to interoperate with them. But even if you didn't do that, everything on these open blockchain base layers still gives you the flexibility to, like, if other people create a marketplace and you're compliant with whatever standards, it's just like a technical compatibility thing of like, can they

interpret that what you've created is an NFT and then be able to like process? Okay, so maybe it's not so challenging, but just in general, like, do we feel that traditional regulations cover NFTs or are there gaps? And if so, what are the big gaps and questions that need to be resolved? I think short term DAOs are trying to take the lead. You could definitely take an NFT case that have proper legal rights around them to court, maybe a much longer process than working with the DAO, provided that the DAO is actually taking care of their community. So that's short term. Longer term, I think we said it 20 times today. Any assets is going to be

an NFT. So once every asset is an NFT, I'm assuming that different jurisdictions are going and take a very, very strong look at it and start really thinking about it. But short term, it may take a bit of time to take your NFT case to court. Better use a DAO or use smart contract or use other ways. I think there is also interesting questions of, like, if you think about what is an NFT, we talked about the technical implementation. But really, it's just like a set of standards that people follow. And so it could be in the future.

There is a third standard that comes out that supersedes 721 and 1150. And so even as we think about what's smart regulation, like, how do we have something that can evolve as the technology evolves? Because really, it's like people coming on social consensus to implement a specific thing and then interpret it a specific way. And I think the same is true even for respecting royalty rights. Like, at the end of the day, it's pretty trivial if you wanted to, like, to get around that. Like, you could send an NFT to someone for zero cost and then have them send you the money out of band. And so, like, really, it comes down to like, how do we build up the right tools? And, like, really it comes down to, like, how do we build up the right tools? And, like, social culture around these things in order to actually enforce the things that we want to enforce where it would be extremely frowned upon to intentionally try to subvert an artist and not pay the royalty fee and things like that.

Yeah. And something actually really interesting, you mentioned royalties. There's also this emerging model of artists wanting their fans to benefit as well from the royalties of their works as well and participate. And as fans of that artists also receive royalties as they grow. So there's like a platform called royal.

which enables just that. And so there's a question now where I think a gap in regulation could be, you know, now that if they own an NFT for this artist, which they love, they love their music, they were early there, they could show people, hey, I was listening to this guy before he blew up. Everyone loves being able to say that, right? They were there first. But if they're receiving royalties from that, does that turn the NFT into a security?

And there's a question there, right? And with that, what does that mean then for the artist and everything surrounding it, right? And so those kind of gray areas that will need to be worked through. Yeah, I think the more exotic NFT structures can start to look like financial instruments. And so there will probably be gray area. But I'm not generally in favor of technology-specific laws. So I think generally the laws we have today should work. I mean, earlier there was some talk of consumer protection.

I mean, the FTC regulates unfair and deceptive acts and practices. And state attorney general generally have consumer protection authorities. So I think that we have the laws we need. It's just going to be a question of how do we apply them and still allow the NFT ecosystem to flourish? Because we want a lot of creative use cases. We want to find new ways to use NFTs for artists to engage with their fans or other creators. So I think hopefully we can not have anything too horrible happen where regulators kind of dive in and we can sort of let the ecosystem grow.

Someone else had said previously like NFTs can be used in many different ways. I think the most prominent thing that we see today is like art. But in the future, it could be like game assets, it could be tickets, it could be literally anything at the event last night. We had popes that were being given out, which are like little button NFT type things. And so really when we start thinking about like how do we create smart regulation, I think a lot of it can't be as specific. And we have to be thinking about like what are the actual types of harm that we're trying to protect against. Yeah, well, to go back to what Sean was saying, I mean, I, to my mind, mind. Not that I'm a lawyer. I'm definitely not a lawyer, but it does sound like a security.

If it's, you know, related to somebody's future earnings and you're getting a share of that. But we did see that there was even an issue with a Dow that was doing something similar, is a Dow Turtle or Turtle Dow? I think it's Dow Turtle. It got delisted from, it was Opency, I think, because they were, you know, saying, like, there are these incentives and you get royalties and stuff like that. So, I mean, are we all just going to agree that that's a security, or do you feel like people are going to push the envelope? And, you know, how, because a Dow is not an LLC. It's, like, not kind of a legal entity. So I'm just curious, like, is that a gray area or is that just settled and done?

So, I mean, it's security law. It's very facts and circumstances based for each individual case. And so if I don't, I'm not familiar with that one particularly, like the facts are circumstances around it. But, you know, if they're promising, probably. And if they're saying we are going to work hard to make sure that the thing you get is going to provide you that profit, the fact that they've communicated that, set those expectations and built it that way with the people buying it would make it that, right? Yeah, well, I mean, here we are, many of us are American. And so we're actually, we're talking about this is how in the U.S. it would be decided. But when you have these global marketplaces and, you know, things that are considered securities in the U.S. are not elsewhere, which is,

why we have things like air drops for everybody but Americans. You know, I'm curious, then for these NFTs that maybe would be viewed as securities in the US, then is the marketplace just closed off to Americans and it's like those can trade elsewhere, but

is that how this is going to be resolved? Or should there be some kind of global agreement about it? Or is it just going to be continuing jurisdiction by jurisdiction? In my opinion, short time, if I was to launch such a project, I would try to be a bit creative to not fall under SEC regulation.

I think SORA is a very good example. Fantasy game. Practically, you could say it's a security. You could say it's gambling. The UK laws is now saying it's gambling. So I would say for builders, I would try to be a bit creative, a huge gray area.

And I think Europe is going to be, Europe and other jurisdictions are going to be much easier than the SEC. But yeah, marketplaces, if there are companies, there are companies, and they have to answer to, the ICC. So it's more you as a builder, what do you want to deal with?

One question that's interesting also is like given how, I mean, these are permissionless technologies, anyone can spin things up. Like, I think the game of whack-a-mole will be much harder. And so partially this is going to be like a really interesting question. Like, how do different countries tackle this and like work together? Because if you can have anyone spend up a project, it doesn't take that many people, like the number of these, the number of these project, like even if you just go on Twitter, you'll see a thousand of them that spring up daily. And so, like, how do we actually think about

like reducing the rate at which, I don't know, things that are harmful for folks spread? But yeah, there's a lot of open questions there. The scorebed app here with trusted stats and real-time sports news. Yeah, hey, who should I take in the Boston

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19 plus, Ontario only. If you have questions or concerns about your gambling or the gambling of someone close to you, please go to conicsonterio.ca. With Amex Platinum, almost every purchase made with your card can be covered with points, including new tastes, new fits, and virtually everything in between. That's the powerful backing of Amex. Conditions apply. So I'm going to bring all the bad stuff, but I think one thing that's worrying me from the legal standpoint is money laundering with NFTs.

If I want to lend money today, it's easier to sell NFTs than going on Binance or OKX, which is already not too hard. And so I think this is coming and that really makes me worry because regulators are going to come in, they're going to see that. and I don't want them to take just a very generic approach to this because it's going to limit creativity, it's going to limit innovation, and that's what scares me a bit about the NFT right now. Is that as much of a concern when you have full provenance on chain and proper regulation at FIA RRMs? So long as at the places where people are able to exit,

is that as much of concern if you can, like, with a block explorer and chain analysis, look through and see what was the history of trying to do? transactions, what was the source of this addresses funds and so on? But I think that's the problem. It's because chain analysis and cipher trace on all those people, they are making money off of telling regulators that bad stuff is happening. So very soon they're going to tell regulators that bad stuff is happening.

Regulators are going to take a look, and they may not have a very subtle approach to it. So that's my concern. In some countries, art laws already require a certain level of KYC, so I think it's probably a matter of time until we see that applied in the U.S. in the NFT context and probably already kind of a best practice. Yeah, so a couple things, first of all, disclosure. CypherTrays is a former sponsor of my shows, we just want to get that out there.

But this issue actually has already come up where, I think for CoinBase's NFT platform, which they just announced, you're going to be able to participate just straight from your own address or wallet, and so you don't have to do KYC if you do it that way. But I think FTC also announced that they were going to launch an NFT marketplace

or they might have just launched it. And you have to do full KYC for that one. So KYC, for those of you who don't know, is, know your customer. It's like giving your identity to the bank, and it's all, you know, to kind of monitor money, or to comply with anti-money laundering compliance rules. But what's funny is that you brought this up right now

because literally right before I got up on stage, G-Money from the previous panel, said to me, oh, by the way, it's so funny you mentioned Etherrock because we could have talked about another controversy, which is money laundering. He said it was, people were surmising and was going on with ether rocks. And so just to like lay out this

process for people, I take it, you have dirty funds and then you buy an NFT with it. And so you've kind of like, then through that you can swap it into something else and cash out. Is that a simple? Yeah, I mean, if I have a hundred of malicious people that are deciding to assign value

to my GPEG and then we're bringing up like some more community that have no idea what we're doing and we're just like, minting and selling to them those NFTs, then we just have London money. And yes, there is cipher trace and channel analysis and such. But my only concern is that when we look at the SEC regulation, when we look at Malta, that has a lot of good intention,

but that did really wrong, I'm just worried about regulators coming in and taking very, like a very simple approach to things. I think especially in permissionless networks, it becomes complicated to think about how do you write or get this balance correct? where you have things that are completely open and you want to enable people to, like, be able to participate. On the same side, you don't want to enable bad things to do bad, or bad people to do bad things. And so I think especially the KYC problem is not NFT specific. I think it's also like a defy problem as well. But coming up with the tools that do that in a way that doesn't just compromise everyone's privacy.

And also, like, for very good reason, if we all imagine that there will be more blockchains and more crypto in the world, it becomes much more dangerous if any individual entity can, like, effectively docks like any user. And just think about who are the worst people in the world. They would be able to dox other people. That's a bad thing to enable as well. So I think it's going to be a challenging way of, like, coming up with the right tools, the right processes. But, yeah. Did you know that exchanges take up to a 25% cut on your staking rewards?

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Grow your crypto with crypto.com earn, which pays up to 8.5% interest on your Bitcoin and 14% interest on your stable coins. When it's time to spend your crypto, nothing beats the crypto.com visa card, which pays you up to 8% back instantly and gives you 100% rebates for your Netflix, Spotify, and Amazon Prime subscriptions. Download the crypto.com app now and get $25 by using the code Laura. The link is in the description. I also actually just wanted to shift back to the Dow question and relate that maybe to the earlier topic about IP rights. So I'm just curious. So we were talking about how originally, you know, if you're going to create or if you're going to mint an NFT, you should be the copyright holder. But we have all these DAOs that are forming and they're creating these different NFTs. So when a DAO creates an NFT, do they, does the Dow get the copyright?

Or do you have to actually be an entity? or like how does that work? I think the licensing use cases are interesting one. You have a few dows now that are saying whomever has one NFT of that collection can either or not build the derivatives collection. So pretty much making their own rules with code and some fallback mechanism when code doesn't cover.

And they can allow or not. We've seen both cases. We've also seen people building derivatives. evasive's collection without being allowed and without the NFT coming from a DAO either. So another gray area. We should keep a list of them because long last. And when you said that they also create a fallback mechanism, is that something that can apply across many jurisdictions?

Or like, what does that look like? No, I think you need to go to the DAO. If you go to a jurisdiction and say that the DAO told you that, I mean, I don't see unless there are legal documents for the jurisdiction to look at, you're really trusting the DAO, which I think is extremely powerful. I'm not sure it's going to scale to all the assets, especially the real world assets, but for the native, native digital assets,

I think it's very powerful that DAO's not realizing that they can define their own rules and be their own jurisdictions somehow. Diana, he looked thoughtful. I don't know if you wanted to add to that. No. Oh, well, I said Diana. Oh, sorry.

It's interesting. I mean, I'm trying to think of, so I think someone had brought up earlier when we were talking about that in the U.S. anyway, only humans can have original copyright ownership of something. Like there was a case where a monkey took a picture of itself, and it didn't own the copyright. So we're talking about like an algorithmically created thing that a Dow made, but we can go a little bit more simple. like let's say there's a picture that someone in the Dow community created and the Dow wants to own it collectively. It's a little easier to imagine that when the Dow has an entity type, right, if it's a corporation or a nonprofit or something, because then, you know, our laws are pretty clear around that. It can go and register. So then how would you do it if you're not trying to do that? Maybe the Dow appoint somebody that is sort of their like IP portfolio owner and that person then can register the copyright and kind of be sort of,

of that's their role in the Dow. Perhaps that's one way it could work. Yeah, I mean, we're working on a contract for mint. So, for example, the Dow would say this is the contract where if anyone wants to mint a derivative's project, they need to come to this contract and mint it. And it's going to come with a bunch of terms that honestly they don't have any jurisdiction right now.

It's the Dow being behind those terms. I'm saying, like, we are the entity that's going to assure those terms are enforced. And if the DAO is malicious, then it's cooked. Yeah, NFTs are also kind of like a brand, though. So when you think about like BoardApe Yacht Club, for example, I saw earlier Yuga Labs owns the trademark. So what does that mean?

Because like they've licensed from a copyright perspective, each Board Ape Yacht Club owner has commercial rights, but they're not the trademark holder. So there's actually, I think, a lot of trust right now happening between the original creators of NFTs and the broader communities, which start to look like DALs that might own them. I was going to ask about, I mean, when you have these different groups, and like if there's a conflict, then if it's a Dow,

who can someone go, is it just the jurisdiction or the court of their jurisdiction? Is that where they go to? Or how is all this decided? Like if there's a controversy over the IP that the Dow, owns, like they want to sue somebody for IP infringement, maybe? I mean, it really could be anything, because also I have a question for, like, the trademark is that, would that be, like, according to the U.S. trademark? I guess I'm assured each of these things even start in a particular jurisdiction, right? Yeah, so you can get trademark protection in multiple jurisdictions,

so you just would go in, and in each country, and you would get the trademark protection there. And then similarly for copyright, I think that there's some ways to get kind of like multiple countries at once with your registrations, but yeah, you would just go to each jurisdiction and do it that way, and some jurisdictions might. I think the difference in protections is some jurisdictions, when you are the creator of something that's copyrightable, you automatically have the copyright. There might be additional protections added if you register. Like in the U.S., for example, if you then register with the copyright office, it's easier to defend your copyright in court. So, yeah, I think it would be a market-by-market analysis. Yeah, I mean, when I'm

getting at is these are global things, they're global marketplaces, and then kind of, yeah, when there's a conflict, then it's just like, where is this decided? Because up until then you can't say, well, we'll work it out with the DAO or whatever, but then when they can't,

then where do they go? I think there's an interesting question about how do different jurisdictions come up with better anchors that allow for more of these questions to be answered ahead of time, more recognition of DAO's corporations or whatever the appropriate structure is in the appropriate jurisdiction.

But then you have more fallbacks to existing tools that have already been built and thought up through like case law. And then there's something to like hook into where like there's less ambiguity. I think whenever there's ambiguity, then there will just be, as you said, there will be inevitably some conflict and then it will just have to be sorted out in the courts and people make a case. But we can create clarity, which can make it easier for folks to feel comfortable like moving assets into the space and like operating. Yeah, and like for areas where there would be kind of a standard real world contract regarding that relationship, but then maybe the NFT has like something conflicting.

Like that's also interesting. Like how do you square laws maybe that have already been established? But then the NFT or the DAO or whatever wants to create something new and they're trying to do something new. And then someone could bring a claim saying, oh, well, you. you know, traditionally, this is how this has been resolved. Do you feel like then the courts will just revert to what's been done? Or we're seeing this happen in the crypto space broadly, where it's this question, like, do we need new regulations or do the old regulations apply?

I think to some degree we need new. Like, we were talking about the use case of, like, imagine you have a Dow that owns an NFT and that's on Ethereum. And then during the ETH to upgrade, we get two forks. We get like the proof of stake fork, and then the miners maintain the proof of work fork. Now you have two separate DAOs that exist that have both ownership over their version of the NFTs,

but they both point to the same physical asset potentially. And so there's a question of which is the real owner? And then it's a court going to decide that one of these chains is the more legitimate version of Ethereum. I don't think anyone has an answer to that question. But yeah, it's an important one. Oh, could you try and solve that up front, though, by sort of specifying what happens in the case of a fork? Like, if it's an NFT that you're licensing out to other people and you say, oh, if in case of a fork, you know, this is the true version.

Well, I guess what would you be trying to protect from the other? Well, so you could imagine different forks having different, like, potential problems. So, like, let's say you would have written your contract to say, or like physical contract that's like the proof of work chain. and you couldn't have guessed that Ethereum was going to split to do a proof of stake chain, then are you going to be on potentially the less supported chain, and then does that lose the actual authority? I think some of this speaks to as the space evolves, we also need to have things that can evolve with it.

So when you're creating this DAO and the structure, how do you have a process that's upgradable that can take in new information that may not exist at the time when you created it? I mean, my feeling is that the DAO should be focused on making new rules about what's possible now that was not possible before. All the basic stuff about copyrights, on royalties, on licensing. Well, I personally think that 95% of it should just be compliant with the current code. The challenge is the cross-jurisdiction. I think DAO's should have some policy or some thoughts about, like, how.

how things are going to apply across jurisdiction. So example, a DAO is minting NFTs that are co-created by 10 artists. They are from 10 different jurisdictions. And the DAO should do their best so everyone is compliant in each of their jurisdiction. And then the DAO is probably going to build new experiences that regardless, like this is new uncharted territory. should just do their best to define their own rules there. But I think 95% of the basics should still be respected. But if a doubt doesn't care about that,

then it's everyone's choice to go interact with that doubt, to be honest. Yeah, for things like forks, what we have seen is that to centralize, sorry, not just centralized exchanges will post notices saying, you know, this fork is happening, here's how we're going to handle it, we're going to go with this chain or that chain. And so you could see a similar thing with Dow's where they say, oh, hey, this is going to happen if there's a second chain. This is what we're going to do. And in that point, people would have time to, like, sell their NFTE or whatever if they didn't want to participate.

One other thing is that, like earlier when we did our little pre-panel call, we talked about kind of different types of standard licensing or whatever that could be embedded in, into NFTs. And I wondered, like, do you see any movements to that? Like, Diana, when you said that right now, you know, a good solution is just to link out, then are those creators just creating their own? And so it's not certain things. It's just like there's a bunch of different unique ones. Or are we seeing that communities are kind of coalescing around certain models that they would like to follow as standard. Yeah, I haven't seen people adopt it just yet. I think it is a good short-term solution before we have, you know, more standards around NFT licensing. But we can also leverage existing standards. Like Creative Commons is quite good and helpful if you're a creator that

wants to sort of let a thousand remixes bloom. That's a great license for you to consider. But yeah, it's not standardized yet. Like if I could imagine a world where you have, when you go to Mint and NFT, there's like an interface that provides you with a drop-down of like five licenses with like a quick TLDR on what each one is. I think that would be awesome. but we're just not there yet. There is a basic standard. I blank on the number. I'm going to try, I think it's 278-1.

But it's covering very, very narrow types of transactions. It's only sell transactions on all the marketplaces have been ignoring them. I mean, we're working on this. I don't want to be prescriptive about the solution, but what I know for sure is that the solution needs to be NFT-centric, not marketplace-centric, because your NFT should be able to go anywhere in the space. across chains, and it's not one marketplace that's going to ensure that those royalties are paid. It's a logic that's going to be an F.T-centric or asset-centric.

So let's also talk, you know, since we are here for this, you know, effort to help restore some of the works here at this castle, I was also wondering, you know, when you have kind of this combination of NFTs and maybe like a financial effort, Does that just mean that financial regulations will apply? Or does it change the nature of the artwork itself too? Because it kind of goes back to what Sean was saying earlier. It's like, you know, if I buy a painting from an artist that I like, generally I'm just buying it because I like the artwork.

But suddenly if it's like, oh, I could potentially earn more from reselling. Because I guess the thing is, you know, you would have that same thought, with an artwork, but since you don't kind of constantly see the market price somewhere, maybe it's a more abstract thought, whereas obviously with NFTs, the financial aspect of it is more front and center. So are we just expecting that a lot of these will be treated, you know, as financial objects? No, it's a great question. And I kick around, too, the idea of traditional art and, you know, art houses, auction houses, I think, or art houses, I should say, in exhibiting and

exhibitions and galleries, you typically do not see the price of the art next to the piece itself, because it's about the artist, it's about the story, it's about the context surrounding that. And then so when I think about applying securities laws to traditional art in some way, if NFTs were to become, if it were to become applicable there, with security's laws comes, of course, the investor protections, clarity, transparency, and honesty around it. And I think so much about stories around art as well. And in terms of how, like, proving the accuracy of that story and also what the artist is saying. It'd be interesting to see the onus it puts on the artists for investor protections

if it were to be considered as security. And then how does that impact how art is received or viewed or interpreted would be interesting. I think a little bit about like, so NFTs, again, just being broad category of things, just because people are speculating on them and making money, does that necessarily mean that they are security or anything else? Like, Beanie Babies were never really considered securities. And so I guess, like, there's that question as well. And especially part of the reason this discussion even happens is because the prices tend to be quite high.

But, like, that's partially an artifact of, like, what are the tools that we have today? And so, yeah, especially with Ethereum having high gas prices and stuff like that, the types of NFTs people are willing to tend to be art pieces. But, like, if NFTs turn out to be, like, game assets and, like, popes and all these other, like, lower-cost things, where, like, yeah, you might just get them for free, like, or even, like, at low cost, like, 10 cents for an NFT. Then, like, if we come up with bad rules and, like, definitions of, like, what could financial security laws or whatever apply,

like, it's going to introduce a ton of complexity for a bunch of use cases that are totally adjacent. Yeah, well, so what if it's something like, we're going to fractalize shares in the Mona Lisa, and then you can buy a share, and then this is how, you know, museums start funding some of their projects, then what would you say? I think that might be slightly different,

and I guess it depends, again, our very, like, loose definition with Howie of, like, you have to meet this, like, three-part subjective test. And so there's a question of, like, how is that sort of, like, represented to you as, like, a buyer? I think this is where some of the complexity will come in.

If you are buying purely as a donation and, like, the only person who can receive it back is, like, the museum. Maybe that's, like, a different thing. And the reason that you're doing it is just to be a donor of, and support the museum and get your name on like a plaque. If like the goal is that you're planning on like, I don't know,

if it was like being treated as a security with like some promise of future profits or something else, that might be different. I think the weird edge case I think we were talking about with a ton earlier was what happens, or we were just talking about like music and like you buy an NFT, like a fractional NFT of your favorite rapper's first album. Is it a security because you're expecting him to create good future work? unclear. I personally would say no, but I think it's definitely a fuzzy thing, and that's partially just because of how we define a security is a bit of a fuzzy thing.

There's also the community aspect that comes to it as well, right? So if you were to buy a fraction of the Mona Lisa, I would ask, you know, is there a common forum for all those fraction owners to collaborate and talk about, you know, the history behind it or any sort of latest news around it, right? Like, how does it bring them together? Because when I think of a security, when I think of a share, like, you know, I own stock in Apple, I don't really care if other people do and I don't have a way of seeing who else owns stock and Apple. It's not really something transparent to me

that I go out and I'm talking with them or communicating with them. Something about fractions of NFT, especially being a digital thing. I mean, with traditional art collectors, right, they typically, you like to buy the piece, you also like to display it, you like to show what you own. When it's physical and you own fractions of something physical, you can't really do that in a way that is as meaningful as maybe something digital.

When it's a digital medium and you can show like, hey, I own this thing and everybody shows it it's a digital medium, digital native, and it has different properties than something physical does. And there's also that community aspect as well of just, you know, being, having that sense of camaraderie with people like in the sense of an album, right? Owning that, partaking that music, really identifying with it and the values that come with it and just wanting to be a part of that club. I think there's also like, I mean, security, I believe is like for a securitized interest.

So like, if you were buying the thing, what is your securitized interest? and so in the event where it's something where it's like you're a part of a community and like it's not like you actually own a part of the Mona Lisa, you own like this representation that society is agreeing like gives you some social like link to the Mona Lisa. It's like a slightly different thing as well. And so then does that go to what you were saying about community that like if it's more community based then it's less of a security?

Is that what the conclusion is or? No conclusions. It's a good. It would definitely if you look at the. how we test, it would definitely be less likely to be considered one. Again, it's all based on facts and circumstances of every time something is created and how it's treated. And so you'd have to look at the individual facts and circumstances of this particular instance. It seems like what we're saying with the community part is like the efforts of others prong of the Howey test, right? So an

investment of money with an expectation of profit based on the efforts of others, you have to meet all three. And if you knock out, is it, if everyone is contributing to the value of this NFC or this portfolio, does that knock out the efforts of others prong? But that's a really tricky test. Like there was a court case where I believe there was a company that was breeding chinchillas. And even though like part of the way you got your return was that you like contributed to raising the chinchillas, it was still determined to be an overall security scheme. So even when you're participating in what creates the profit at the end of the day, there can still be situations where it ends up being a security. That said, I don't necessarily think that just

because you're raising money with an NFT, it's a security. I mean, there's crowdfunding campaigns that are securities, but there's also crowdfunding campaigns that aren't securities. So I think it goes back to Lewis's point of like, how do you structure what you're trying to do so that it aligns with the legal regime you want to fit in. You might want your NFT to be a security actually, because there's a whole world of, you know, securities that you might want to play into, and you see that having a clear chain of title in Providence might be beneficial. Yeah. And to actually add to that point, too, I mean, with the Howie test, it's right, the, well, originally was this led to expect profits solely derived from the efforts of others. And that was from 1946, I think. And then in 1973,

it was actually reinterpreted that solely derived from the efforts of others is actually, shouldn't be taken literally. And it's more of like a mostly derived from the efforts of others. But the thing that precedes that is the expectations of profits, right? So when you talk about community, if everyone's saying, hey, we're going to make this thing more valuable, that's one thing, right? But if everyone's just, hey, I'm really happy I own this thing, and I'm like, for a crypto punk, for example, right? Larva Labs, the ones who own the copyrights to crypto punks are not going around and saying, hey, we are going to do X, Y, and Z, therefore crypto puns will accrue in value, and therefore you should buy a crypto punk. They're not doing

that. They simply exist. There's 10,000 of them, and that's it, right? And so the market dynamics are as exposure and visibility increases for Cryptopunks, they may go up in value, but that's due to the market dynamics that are beyond the efforts of others or promises of profit, in which case it wouldn't be considered a security. Similar with art, right, over time, what is value, but the degree of importance we give to things, right? And that value may not be realized right now where we are, but over time it may be realized, in which case it may accrue in value. But there's no expectation of profit there or efforts of others related to that other than awareness. I know the unsolicited advice, but I think like compared to the fungible space here,

we're dealing with art, creation, there is a lot of emotion involved, there is much more than just like the financial value. And hence, there is so much room to avoid any, like, trouble with the SEC, frankly. Like, just sell an experience, if you monetize the experience. I think there are so many room for maneuver to make things not a security. That my advice for the builders is just like build an experience that's safe. And we really have this room to do it here in the NFT space, that we don't in the fungible space.

That's really interesting because obviously we're seeing people with tokens kind of wanting to push it. And I mean, obviously their lawyers are saying like avoid, avoid. But, you know, we have even former regulators that leave government and say, there just needs to be new regulations. This is a new technology. The old rules don't apply. obviously the regulators do not agree with. But it's just fascinating because I would say a lot of people do want to push the envelope

and they think, well, it shouldn't be a security or it shouldn't be, you know, those regulations shouldn't apply. And so they want to push the envelope. But we'll see if somebody actually tries to take it to court. Anyway, okay, well, we're out of time. This has been a fabulous discussion. Thank you so much. There's a new cryptocurrency made for mobile that you can earn by downloading the Nodal Cash app.

It's free, easy to use, and there's no hard. hardware to buy. The Nodal Cash app allows you to earn crypto whether you're on the go, stuck in traffic, or even while you're sleeping. Nodal Cash is the crypto you earn 24-7. Go to nodal.io-unconfirmed to get started today. That's NOD-L-E.comfirmed. Thanks for tuning in to this week's news recap. Ethereum hits an all-time high as supply goes negative. Ethereum set an all-time high price for ETH at $4,674.90 on Wednesday, according to Coin Gecko. That's a bit over 10 times its price just a year ago. Coinciding with the skyrocketing price is a new trend concerning Ethereum's monetary

policy. In August, Ethereum's issuance was changed due to the implementation of Ethereum Proposal 1559 during the London Hard Fork, which instituted a policy of burning ETH whenever network demand increases over a certain threshold. According to the block, this change in issuance, or the network's monetary policy, has resulted in more ETH being burned than issued over the past week. Since October 26th, Ethereum's net issuance is approximately negative 12,000 ETH, or $54 million. Ethereum is becoming a deflationary asset, making ETH more and more scarce with each day of negative issuance. Also this week, CME announced plans to launch micro-ether futures, sized at one-tenth of an

ether, on December 6th, adding an additional avenue for institutions to gain exposure to the price of ETH. The president's working group finally unveils its report on stable coins. On November 1st, the president's working group published its much-anticipated report on stable coins, while admitting that stablecoins could, if well-designed and appropriately regulated, offer faster, more inclusive, and more efficient payment options, the PWG spent much of the report outlining their risks. These include the loss of PEG due to stablecoin runs, payment system risks associated with blockchains,

the systemic risk of a single stablecoin issue or failing, money laundering, and terrorist financing. To address the risks, The PWG called for Congress to implement legislation and appropriate federal oversight, specifically regarding stablecoins. Notably, the PWG suggested stablecoin issuers be limited to insured depository institutions. If Congress feels to act, the PWG said it would ask the Financial Stability Oversight Council, or FSOC, to designate stablecoins as a systemically important activity, which would permit federal agencies to establish risk management criteria concerning stable. coin backing. In the interim, the PWG urged regulators, such as the Securities and Exchange

Commission, or SEC, the Commodity Futures Trading Commission, or CFDC, the Financial Crimes Enforcement Network, or FinC, and the Consumer Financial Protection Bureau, or CFPB, to leverage their existing authority while Congress works to develop proper measures to regulate the asset class. In related news, Michael Sue, the acting controller of the currency, announced that the crypto sprint between the Office of the Controller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corporation has concluded and that the results will be communicated shortly. Sue hinted that the CryptoSprint would help build a framework for regulating crypto banking activities. Get ready for an ENS token. The Ethereum Name Service, the protocol

behind .eath domain names, announced plans to launch a governance token this week, transforming the organization into a Dow. It first asked community members to step forward as governance delegates in charge of the Dow, and then released the tokenomics of ENS. Users he registered and held an ENS domain before October 31st may claim ENS tokens starting November 8th. 50% of ENS tokens will be reserved for a community treasury, 25% will go to a community air drop, and 25% will be reserved for core contributors.

However, on Wednesday, Nick Johnson, the lead developer of ENS, informed the community that the airdrop hit an obstacle in the form of air drop farming, despite the company writing a lengthy ethics policy for the core team about keeping air drop information quiet. It seems information about the ENS token drop leaked, allowing certain addresses to purchase and register a multitude of DOT East domains ahead of the announcement, adversely affecting the distribution of tokens. said Johnson, quote, we kept it need to know, but you'd be surprised how many people need to know ahead of the announcement. All it would take is one person chatting to a less scrupulous friend about vague details to give them a hint that this is worth trying. Johnson said that ENS will be manually blacklisting 784 addresses from the token air drop in light of the farming. 6050I. It's out of our hands now. From the looks of it, the infrastructure bill, along with its provision 6050I, which requires parties to report social security numbers on trading partners for transactions over $10,000, amongst other information, will be passed in the House today, November 5th. The provision, which Coin Center describes as unworkable and unconstitutional, would make not reporting on such an event a criminal felony, according to Abe Sutherland, in his appearance on Unchained in

October. Jake Trevinsky, a lawyer and strategic advisor at Variant Fund, tweeted, It's out of our hands now regarding actions to stop the bill from passing. He added, importantly, nothing will happen right away. The crypto provisions don't go into effect until 2024 for fiscal year 2023 reporting. We can try to get them repealed or amended before then. Brian Brooks now CEO of Bitfury. Former Binance U.S. CEO and former acting head of the OCC, Brian Brooks, has been hired as the new CEO of Bitfury, a Bitcoin mining company. Brooks is replacing Valeri Vivalov, who will stay on as chief vision officer, as the company makes its way to a public listing, which it plans to do in less than 12 months.

Brooks previously left Binance U.S. after four months on the job, citing differences in strategic direction. Digital Currency Group raises $700 million at a $10 billion valuation. Digital Currency Group, the company behind Grayscale, Genesis, Coin Desk and others, Disclosure, Coin Desk is a previous sponsor of my shows, closed a $700 million round this week at a valuation of $10 billion, as reported by the Wall Street Journal. The round was led by SoftBank Group's Vision Fund, 2, and Latin America Fund. GIC, Ribbic Capital, and Alphabet Inc. also participated. According to Dev Metrics, it was the fourth largest raise in crypto.

Speaking of DCG, the block reported the company is looking to hire a team of financial advisors for a wealth management subsidiary centered around crypto millionaires, citing sources familiar with the situation. Additionally, it appears the SEC is taking a closer look at Grayscale's application to convert its flagship product, the Grayscale Bitcoin Trust, or GBT, into an ETF. In a November 2nd notice, the SEC said it was soliciting public feedback on the proposal. The Squid Game token was a scam. Squid, a Binance smart chain token based on the Netflix show Squid Game, saw its price rise over $2,000 per token before crashing to nearly zero after developers withdrew millions of dollars worth of crypto from the protocol and deleted all social media in an apparent rug pool. As Emin Gunsir of Ava put it on Twitter, 99.99% drop on the Squid Game token.

I mean, what did you guys expect? There's nothing behind this coin except it stole its name from a popular show. According to Barron's, an address was able to turn its nefariously acquired Squid into $3 million in B&B. Finance announced that it had frozen and blacklisted wallets associated with the developers of Squid. However, since the developers used Tornado, a coin mixer, it is unclear if the blacklist will stop the devs from cashing in. Consensus shareholders to begin legal action against Joe Lubin and Consensus Board. A group of more than 15 shareholders in Ethereum Software Company Consensus AG intend to begin legal proceedings against its board of directors, one of whom is Ethereum co-founder

Joseph Lubin over the formation of Consensus Software Inc, or CSI, whose investors include J.P. Morgan, Mastercard, and UBS. Their complaint centers around the transfer of intellectual property from the overall property from the original Swiss firm to the new one, a Delaware incorporated entity established in June 2020. They contend that the valuation used for the transfer of assets was for tax purposes at a fraction of the market price and not for M&A. They also say it was made without independent oversight, as would be required under Swiss law. The legal action comes as consensus is coming out of a few years of multiple rounds of layoffs and the restructuring that created CSI.

And, just as it was said to be in talks to raise $250 million, and seeking a valuation of $3 billion. Calling out Metamask and Infura specifically, shareholder and former consensus employee, Arthur Falls, said in a press release, no Ethereum stakeholder would ever agree to part with these two products, products they were instrumental in building, for a combined value of $19 million. A consensus spokesperson said in a statement, we believe that these shareholders are confused on a number of key factual points. Two congressmen advocate for spot Bitcoin ETF to SEC. Congressman Tom Emmer and Darren Soto sent a bipartisan letter to SEC chair Gary Gensler,

urging approval of a spot Bitcoin ETF, saying, since the SEC no longer has concerns with Bitcoin futures ETFs, given trading has begun for these products, then it presumably has changed its view about the underlying spot Bitcoin market, because Bitcoin futures are, by definition. a derivative of the underlying Bitcoin spot market. Time for fun bits. The Bitcoin White Paper is a teenager.

Halloween 2021 was the 13th anniversary of the publication of the Bitcoin White Paper. Pended by the anonymous Satoshi Nakamoto, Bitcoin, a peer-to-peer electronic cash system, lay the foundation for a new financial system. I've been working on a new electronic cash system that's fully peer-to-peer with no trusted third party, wrote Satoshi in the original email containing the white paper. He, she, they described the various properties of what is now a multi-trillion dollar asset class. Double spending is prevented with a peer-to-peer network. No mint or other trusted parties. Participants can be anonymous. New coins are made from hash-cash style proof of work.

The proof of work for new coin generation also powers the network to prevent double spending. Time for a second, fun bits. Quentin Tarrant, NFTs no longer a secret. Quentin Tarantino, the famous film director, is minting six uncut and never-before-seen scenes from Pulp Fiction as NFTs on OpenC. Tarantino is using Secret Network to publish the NFTs. As discussed on this week's unchanged, the Privacy-focused Network allows for metadata to be private, meaning only the token holder will have access to the scenes. Tarantino will publish the seventh NFT at a formal auction house. Thanks for tuning in.

To learn more about NF Castle and The Lopkowitz Family's Quest, be sure to check out the links in the show notes. Unconfirmed is produced by me, Laura Shin, with help from Anthony Yoon, Mark Murdoch, and Daniel Ness. Thanks for listening.