Hollywood has an NFT summer
Doja Cat is releasing three NFT “drops” this week. Holders can win VIP concert packages and other prizes [Image by David LaChapelle]
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
El Salvador makes crypto history. What BTC becoming legal tender means for the country.
What’s next for Ethereum? As second-biggest crypto scales, other smart-contract networks aim to compete.
Hollywood’s NFT summer. The blockbuster numbers at the intersection of the entertainment industry and crypto.
El Salvador becomes first nation to adopt bitcoin as official currency
Just three months ago, El Salvador president Nayib Bukele appeared on video at a Bitcoin conference in Miami to announce an ambitious plan: to make his country the first in the world to recognize bitcoin as legal tender. On Tuesday, El Salvador officially adopted the cryptocurrency — which means it can now be used to buy and sell goods and services (including this McDonald's breakfast) and to pay taxes. While the global crypto community has celebrated the legislation, many Salvadorans remain skeptical about the potential crypto has to improve their lives. Meanwhile, Bukele, who has whittled away at some of the country’s democratic institutions, remains a divisive figure abroad. Let’s look at the law and what it could mean for the future of crypto adoption.
Bitcoin joins the U.S. dollar as an official currency in El Salvador. The law states that every technologically capable business must accept bitcoin. The official bitcoin wallet, called Chivo, allows people to send, receive, and spend via a mobile app; citizens who download it receive $30 worth of bitcoin. The government is also installing hundreds of bitcoin ATMs across the country, has established a $150 million trust to help facilitate currency conversions, and has purchased 550 BTC (about $25 million as of Wednesday) for the central bank’s balance sheet.
The first day was volatile — a rout in the crypto markets saw BTC fall by as much as 17%, to $43,050. By late morning, technical issues were resolved and residents began tweeting about having successfully made purchases with bitcoin at chain restaurants. Many businesses won’t be transacting in crypto any time soon, however: About half of Salvadorans don’t have access to the internet, often due to data plans costs and unreliable WiFi infrastructure.
Most Salvadorans are skeptical of BTC’s legal status. Two-thirds of respondents to a recent poll by José Simeón Cañas Central American University in El Salvador said the law should be repealed and 70% said they’d rather use the dollar. The country is one of the poorest in the Western Hemisphere, and bitcoin’s volatility is a key reason for the skepticism, even though the government has emphasized that people will still be able to use dollars as they wish.
Still, Bukele’s projections for BTC in El Salvador are optimistic. The polarizing leader expects to boost BTC users from about 50,000 to around four million, while offering Salvadorans — 70% of whom don’t have a bank account — access to financial services. Bukele also claims the law could save Salvadorans $400 million a year in remittance fees. Remittances — money sent back home by family abroad — make up nearly a quarter of the country’s $27 billion economy.
Why it matters… El Salvador’s bitcoin law could be a framework for other developing economies looking to incorporate BTC’s’s cheap cross-border transactions and help create new economic opportunities. On the same day El Salvador’s law took effect, lawmakers in Panama introduced a bill that would allow bitcoin and ETH to be accepted as payment methods. And recently, sub-Saharan Africa overtook North America in peer-to-peer bitcoin transaction volume, highlighting the value many residents of developing economies see in crypto.
ETH … Or?
Ethereum transaction fees soar. What are the solutions?
As the Ethereum economy — a complex universe of DeFi protocols, NFT markets, and other smart-contract apps — has boomed, prices for “gas” (fees users pay to make transactions) are also nearing all-time highs. As a result, interest is growing in theoretically faster and cheaper “ETH killers” like Solana and Cardano. At the same time, developers are working to increase capacity and lower fees on the main Ethereum network — both via “layer 2” scaling solutions like Polygon and Arbitrum (which give users an opportunity for cheaper transactions that ultimately settle on the main Ethereum blockchain) and by the continued rollout of ETH2. So what’s the latest?
ETH flirted with all-time highs above $4,000 before dropping nearly 25% on a volatile Monday morning. ETH had been rallying after a significant upgrade called EIP-1559 went live in August. One result of the upgrade? Some ETH is “burned” with every transaction, permanently removing it from supply.
When network traffic spikes, more ETH may be burned than is issued. This happened for the first time this week, driven in part by a surge of interest in NFTs. At current rates, the total supply of ETH could actually decrease over time — potentially boosting prices if demand continues to surge.
As of Wednesday, over 240,000 ETH had been burned at a value of nearly $850 million. The biggest NFT marketplace, OpenSea, is currently in the lead for burning the most ETH after record activity in August — with monthly transaction volumes topping $3 billion.
ETH fees are spiking right now, but solutions are on the horizon. A beta version of Arbitrum, a layer 2 scaling solution that can handle many more ETH transactions at lower costs, went live recently. Major DeFi projects including Uniswap and Aave have integrated the project. Polygon, another layer 2 solution, has nearly 60 million unique active addresses.
Newer smart-contract compatible platforms like Cardano and Solana have seen price surges in recent months — with a compelling promise of lower fees and faster transactions. Solana already runs many DeFi and NFT applications and has a total value locked (the amount of money deposited in protocols) of more than $7 billion. Cardano, on the other hand, has yet to enable smart contracts on its main network and recently experienced technical difficulties during testing.
Why it matters… As crypto potentially scales to billions of users, a variety of technological approaches will be required to make transactions fast, easy, and affordable. We’re already seeing some strong contenders: both layer 2 solutions and alternative blockchains such as Solana. Which will ultimately serve the greatest number of users? Only time will tell.
Numbers to Know
Breaking down Hollywood’s NFT gold rush
One of the biggest crypto storylines of the year has been the boom in NFTs — and their unique ability to connect artists with fans and create communities out of collectors. Unsurprisingly, the entertainment industry sees a major opportunity in NFTs. How major? Here are some key stats from Hollywood’s hot NFT summer:
Total transaction volume for pixel-art NFT collection CryptoPunks, which may be en route to movie or TV stardom. Larva Labs (developer of CryptoPunks, Meebits, and Autoglyphs) recently signed a deal with United Talent Agency “for representation across film, TV, video games, publishing, and licensing.”
Initial amount of funding Fox Corporation has put into its NFT studio, Blockchain Creative Labs — which is producing a new show called Krapopolis with Rick and Morty creator Dan Harmon. (Fox reportedly spent another $100 million on a blockchain platform that will power Blockchain Creative Labs.)
Number of limited-edition collectibles rap star Doja Cat will be selling through her debut drop on the NFT platform OneOf — which runs on the Tezos network and claims to be more environmentally-friendly than Ethereum-based platforms. Holders get a chance to win VIP tickets and other prizes. Stars on OneOf’s roster include Quincy Jones, John Legend, Charlie Puth, and Whitney Houston’s estate.
Number of minutes it took for all 10,420 of Mila Kunis’ Stoner Cats NFTs to sell out, earning about $8.4 million. Holders will get to watch an animated show about pothead felines starring Kunis, Chris Rock, Seth McFarland, and *lifts eyebrow* Ethereum co-creator Vitalik Buterin.
What is Bitcoin’s maximum supply?
There is no maximum supply
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