 | 08.11.21 |
All eyes are on Washington D.C. as controversial crypto legislation remains part of the infrastructure bill as it moves from the Senate to the House of Representatives. [Joe Daniel Price via Getty Images]
Greetings from Coinbase Bytes,
In a saga that more closely resembled a pay-per-view boxing match than typical C-SPAN programming, the Senate just went several rounds over a crypto provision attached to its $1 trillion infrastructure bill. In this week's Bytes we're doing a play-by-play review and sharing some of the crypto community's observations about the industry's big week in Washington. Also this week: how to buy NFTs, and what happened after Ethereum's big upgrade.
- Washington wrestles with crypto
- How to buy an NFT
- The results of Ethereum's upgrade
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Price changes are for the past week, ending on Aug 11, 2021 at 12:09 PM UTC
 | CRYPTO GOES TO WASHINGTON |
How crypto got wrapped up in the Senate's $1T infrastructure bill — and what's next
After months of negotiations, the Senate voted yesterday to approve the Biden Administration's $1 trillion infrastructure plan — which aims at fixing aging roads and bridges, funding ambitious broadband initiatives, and much more. Last week, a last-minute crypto-tax provision was tacked onto the bill, rallying the crypto community to amend what they saw as an innovation-killing, overly broad mandate.The resulting saga included competing bipartisan amendments and nail-biting votes. Let's see how it unfolded.
- The controversy began with confusion about the word "broker." The tax provision sought to raise $28 billion by imposing the IRS-reporting rules that apply to U.S. crypto exchanges (like Coinbase) on a broad range of crypto "brokers," which the provision defined as anyone who "effectuates transfers of digital assets."
- In a Twitter thread last week, Coinbase CEO Brian Armstrong acknowledged the importance of tax reporting but explained the provision's shortcomings: "This means almost anyone in the crypto ecosystem (miners, validators, smart contracts, open source developers) could be treated as a 'broker' with massive reporting obligations … This makes no sense."
- Senators Cynthia Lummis (R-Wyo.), Ron Wyden (D-Ore.), and Pat Toomey (R-Penn.) proposed an amendment to narrow the term "broker" last Wednesday. Many rallied behind the amendment, which exempted protocol developers, validators, and software and hardware wallet makers from the original tax reporting obligations.
- Senators Rob Portman (R-Ohio) and Mark Warner (D-Va.) and Kyrsten Sinema (D-Ariz.) responded Thursday with a competing amendment that appeared to favor some crypto protocols (like proof of work) over others (like proof of stake). Though many criticized the amendment for "picking winners and losers," the White House endorsed it.
- Crypto users flooded senate offices with calls and emails as crypto industry advocates in D.C. from groups like the Blockchain Association met with lawmakers. "This has definitely been a wake-up call to crypto," said Blockchain Association executive director Kristin Smith. "But on the flip side, I think Washington is starting to see that crypto is more of a force than anybody ever anticipated."
- On Monday, all six senators proposed a last-minute compromise amendment in partnership with the Treasury. The amendment seemed poised to pass, in a major victory for bipartisan cooperation in our polarized political era.
- But the compromise failed to garner the unanimous consent required by procedural rules. A single GOP senator, Alabama's Richard Shelby, tanked the amendment by demanding it be packaged with $50 billion in additional military spending. In a tweet later that day, Lummis thanked her cosponsors "for fighting with me for the innovators that make our country great. The fight isn't over. It always takes work to convince skeptics of the merits of new technology."
Why it matters… Regardless of the bill's outcome as it moves onto the House of Representatives, the debate has been revelatory. Crypto users emerged as a powerful grassroots political constituency. The crypto industry and a bipartisan group of senators collectively grappled with complicated tech concepts, signalling a growing understanding of the stakes. "Shutting off this growth engine would be the equivalent of stopping e-commerce in 1995 because people were afraid of credit card fraud," noted entrepreneur Mark Cuban. "Or regulating the creation of websites because some people initially thought they were complicated and didn't understand what they would ever amount to."
| I WANT MY NFT |
NFTs are booming. Here's how to buy one.
From CryptoPunks and pet rocks to Katy Perry and Spider-Man, the NFT boom shows no sign of slowing down. In the last seven days, around $300 million has flowed into NFT markets, according to Nonfungible.com. Which is a lot when you consider that most people have no idea how to actually buy one. Even though NFT markets aren't exactly Amazon when it comes to ease of use, buying your first digital collectible isn't hard — it just requires a little guidance. Here's how it works.
- You'll need a crypto wallet and some ETH to get started. Buy some ETH from an exchange like Coinbase and send it to Coinbase Wallet (which is separate from the main Coinbase app; you can download it via Apple's App Store or Google Play).
- Follow the simple instructions to set up your wallet – which is a place you can keep crypto, a way to send or receive it, and your portal to the growing universe of crypto apps. (You can also download this Chrome extension to connect Coinbase Wallet to a web browser if you'd rather browse NFTs via a computer)
- There are lots of NFT markets, from Rarible to Mintable. For this tutorial we'll focus on OpenSea — which is the biggest of them all, and works a lot like a decentralized eBay. To connect your wallet to OpenSea, go to OpenSea.io, click on the icon in the top right, and select "My Profile" — you'll be prompted (and given instructions) to connect your wallet.
- Get browsing! Prices range from essentially free (for this Calvin Coolidge trading card) to hundreds of thousands of dollars or more (for a rare, popular item or a delusional artist's new "masterpiece," so do your research!) Some items are sold via auction, while others can be snagged immediately via a "buy now" button.
- Even if the NFT is free or cheap, you'll still have to pay fees to make the transaction happen. Most of the digital collectibles on OpenSea use the Ethereum blockchain, and the network charges a "gas" fee for transactions like NFT sales. Gas prices rise and fall depending on how busy the network is.
- Choose an NFT you like and make sure you have extra ETH to cover fees. Say you went for one of these Crypto Bumblebees for .01 ETH — maybe you like "cute and fabulous bumblebees" or you hope the sleepy bee market will one day go ape. Regardless, once you buy it, you can access the NFT via your crypto wallet until you decide to sell it.
Why it matters… NFTs make the sale of rare, unique digital assets possible for the first time — and can be programmed with all sorts of useful features (allowing creators to participate in secondary market sales, for instance). They've also offered early adopters some eye-popping returns. But most people aren't going to jump through hoops just to buy a digital collectible. As one of Rarible's founders noted recently, even megabrands like Coca Cola haven't figured out how to make NFTs relevant to mass audiences. "It's still not for the consumer," he said. "Big businesses that have intellectual property need to figure out what [will speak] to their audience."
| FEEL THE BURN |
How Ethereum's big upgrade is going so far
Last week, Ethereum underwent its biggest protocol upgrade in years. One shift, called EIP-1559, changes the cryptocurrency's basic economics by "burning" the ETH used to pay transaction fees, which will reduce ETH's total supply over time.
So far? It's been smooth sailing. In the days since the August 5 upgrade, over 23,000 ETH has been removed from the supply. ETH's price has also spiked past the $3,000 mark last seen in May. The rally has even led some to speculate again about the prospect of "the flippening," in which Ethereum's market cap would one day eclipse Bitcoin's.
| TAKES |
Dogecoin-themed hot dogs sell for big money, AMC to accept bitcoin for movie tickets
- And the wiener is… Someone bought a single pack of dogecoin-themed hot dogs on eBay for $15,001.00 during an Oscar Mayer charity auction. "The #DogeArmy sent our Hot Doge Wieners TO THE MOON," the company tweeted.
- That's the ticket… Movie theater chain (and memestock benefactor) AMC will begin accepting bitcoin for tickets and concessions. "I've had to learn more in the past six months about blockchain and cryptocurrency than I learned ... in the entire decade before that," said AMC's CEO.
- Peace on earth… After the Senate blocked Monday's crypto amendment, Twitter and Square CEO Jack Dorsey tweeted "#Bitcoin will unite a deeply divided country. (and eventually: world)"
SEC clearly now… Meanwhile, SEC Chair Gary Gensler reaffirmed the need for clarity in crypto regulation. "While I'm neutral on the technology, even intrigued... I'm not neutral about investor protection," he told Bloomberg last week. "It's only with bringing things inside — and sort of clearly within our public policy goals—that a technology has a chance of broader adoption."
| TOKEN TRIVIA |
What is proof of stake?
| A | A way to verify data to shared from another computer |
| B | A consensus mechanism used by cryptocurrencies like Cardano to verify new transactions, add them to the blockchain, and create new tokens |
| C | Identification cards for vampire hunters |
| D | The process by which networks of mining computers generate new bitcoin |
Find the answer at the end of the email.
| NOW TRADING ON COINBASE |
| FET |  |  |
FET is an Ethereum token that powers Fetch.ai, a decentralized machine learning platform for applications such as asset trading, gig economy work, and energy grid optimization.
| ACH |  | |
ACH is an Ethereum token that powers Alchemy Pay, a platform that enables payments using a wide variety of fiat and cryptocurrencies.
| PLA |  | |
PLA is an Ethereum token that powers PlayDapp, a blockchain gaming platform and non-fungible token (NFT) marketplace.
| FARM |  | |
FARM is an Ethereum token that powers Harvest Finance, a yield optimizer that moves funds around the decentralized finance (DeFi) ecosystem in an effort to generate yields.
Trivia answer
| B | A consensus mechanism used by cryptocurrencies like Cardano to verify new transactions, add them to the blockchain, and create new tokens |
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