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Navigating the NFT minefield: It should be made easy for first-time buyers

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Navigating the NFT minefield: It should be made easy for first-time buyers

Whether it’s baseball players or shiny Pokemon cards, collectibles have been a cultural mainstay in human behavior since the Renaissance. Memorabilia from famous films or items of clothing worn by a celebrity can be auctioned and sold for eye-watering amounts. Take the prototype Batmobile from the 1960s Batman TV show, it was sold for $4.2 million. With collectibles, the concept itself is simple: An item has value based on its scarcity. The less of it there is, the more it’s worth.

It is this concept that is the driving principle behind the explosive growth of nonfungible tokens (NFTs). Largely bought and sold on the Ethereum blockchain, NFTs are essentially collectibles that have been digitized. Whether it’s the insanely popular and limited CryptoPunk avatars or Jack Dorsey’s first-ever tweet, NFTs are big money and those who managed to nab a rare NFT will always have proof of ownership, as this data lives in the blockchain.

Related: Art reimagined: NFTs are changing the collectibles market

But, just how easy is it to grab yourself an NFT?

Gas doesn’t come cheap

In the same way that Bitcoin (BTC) and Ether (ETH) are acquired, NFTs can only be obtained through mining. For seasoned buyers and sellers in the crypto space, the process of mining and paying gas fees — a sum someone must pay to process their crypto transactions — is nothing new. For first-time buyers dipping their toes into the NFT waters, however, the mining process could feel like a nasty bite from a shark.

Although it’s not a common practice, a few NFT launches utilize a bonding curve to determine the price of an NFT. This is how liquidity is created in the NFT market. In layman’s terms, this means that the price of an NFT asset is determined by only a finite amount of block space. With an ever-increasing demand on blockchains like Ethereum, network fees have the tendency to skyrocket.

Related: Ethereum fees are skyrocketing — But traders have alternatives

If you’re a miner, you have the liberty to select transactions that come with a high fee, so miners are lining their pockets at the expense of the buyer. Now, this state of affairs is normal for crypto natives. For someone new to crypto, however, the whole mining fiasco can be confusing, unacceptable and deeply unjust, which isn’t a completely unreasonable viewpoint to have if you’re a novice in the market.

So, how can this imbalance of power be readjusted so new buyers of NFTs do not have to suffer from high gas fees?

Save a place in the queue

When we launched its shrug NFT, digitizing an infamous emoji that had become a popular culture meme, it was acutely aware of the aforementioned issues. Ultimately, we needed to find a way to lessen the activity on the chain, thus reducing the gas fees, when hundreds of people are trying to mine an NFT. Early NFT platforms have been struggling with processing streams of transactions, which for buyers can lead to a cumbersome experience and higher gas fees that they need to fork out to just get their transaction approved.

Related: The NFT marketplace: How to buy and sell nonfungible tokens

The answer to these lingering problems lies in the implementation of a queue system. Some NFT platforms have built infrastructure that can increase the speed of blockchain transactions, which leads to better user experiences. Creating a protocol where buyers have to wait in line to mint their NFT while also giving a window of time in which to do it will solve the major discrepancies in the entire minting process, which currently puts buyers at a disadvantage.

A queue system creates a fairer marketplace, as it minimizes the possibility of customers competing for the same NFT and losing their gas fees. As NFTs continue to explode in popularity and grip the mainstream’s imagination (and our wallets), it is important that NFT platforms make their blockchain-hosted marketplaces a fairer and more inviting place for buyers looking for the latest digital collectible.

The dominance of whales in the market

Despite the hype and eye-watering amounts of money circulating through the NFT space, the “average” price of an NFT sold on SuperRare is 2.15 Ether, or around $5,800, according to rankings on OpenSea. This begs the question: Who exactly is buying the NFTs? Are first-time buyers potentially being pushed out by a small group of buyers with deep crypto pockets?

Even implementing a queuing system does not change the fact that the market is largely dominated by crypto whales. As the name implies, a crypto whale refers to individuals or entities that hold large amounts of Bitcoin or other cryptocurrencies. This is a problem in the wider crypto space, as it means people who hold enough Bitcoin have the potential to manipulate currency valuations.

Specifically with NFTs, most of the people purchasing these nonfungible tokens are crypto whales. For example, only 2.3% of sellers on the Rarible marketplace are making up 50% of NFT sales. This is further amplified on OpenSea, arguably one of the biggest NFT marketplaces, where only 1.9% of its sellers make up half of the NFT sales. Essentially, what is happening is that whales are buying up projects early and end up wielding too much influence on the reseller market, practically pricing out first-time buyers.

As a result, people who don’t live and breathe crypto aren’t engaging in the market as much perhaps because there simply isn’t any room for them to do so.

To lessen the dominance of crypto whales, more needs to be done to educate the mainstream audience on how to purchase NFTs so that it doesn’t remain the preserve of these dominant holders. We still have 197 of our shrug NFTs remaining. Our hope is that we can attract new users into the NFT space who could use the experience of buying their first NFT as a jumping-off point into the wider NFT marketplace.

There is so much potential for NFTs to finally bring the world of crypto fully into the mainstream, as it essentially takes a concept that many people understand in the physical world and digitizes the whole driving force behind it. At the heart of it, collectibles are meant to be a fun and lucrative activity for those who choose to partake in it. NFTs should not be any different.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Simon Yu is the CEO and co-founder of StormX. He has been in the blockchain space since 2015 and has been an avid speaker and early builder of the industry. Simon has been featured in Forbes, Reader’s Digest, Nasdaq, Business Insider and more.

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Record Crypto Inflows of $1.47B Last Week Boosted by Bitcoin ETFs

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Record Crypto Inflows of $1.47B Last Week Boosted by Bitcoin ETFs

Cryptocurrency investment products and funds saw record inflows from investors last week, according to the latest CoinShares data.

During the tenth straight week of crypto inflows last week, digital asset investment products saw inflows amounting to $1.47 billion, a new record by a significant margin. According to the weekly report from CoinShares, this is more than double the previous record of $640 million set earlier this year in February. Over the course of the week, total assets under management peaked at a new record of $79.2 billion, but finished the week at $76.7 billion. Year-to-date inflows now amount to $8 billion, far exceeding that of $6.7 billion in 2020.

The majority of inflows went to Bitcoin, amounting to $1.45 billion, while Ethereum saw outflows for a third consecutive week totaling $1.4 million. Altcoins Solana, Cardano and Binance also saw significant inflows at $8.1 million, $5.3 million and $1.8 million respectively.

Boosted by Bitcoin ETF approval

CoinShares attributes the outsized demand to the Securities and Exchange Commission (SEC) approving the first Bitcoin-based exchange traded funds (ETFs). This enabled the listing of two such Bitcoin investment products, whose inflows totaled $1.24 billion. This also contributed to Bitcoin achieving a new all-time high of over $67,000 last week.

“Bitcoin hitting new all-time highs shows both how far we’ve come and the capacity bitcoin has to upend the financial system and create a global economy, linking the developed and emerging markets like never before,” said co-founder and CEO of Paxful Ray Youssef. “While this recent price rally can be attributed to movements like the approval of the first bitcoin ETF for institutional investors, we can’t ignore the impact of significant development and adoption in emerging markets.”

After its debut, the ProShares Bitcoin-futures-based ETF became the second-highest traded fund in history, attracting a staggering 24 million shares. It proved so successful that it was already approaching the limit on the number of futures contracts permitted by the Chicago Mercantile Exchange. However, following this act proved difficult as Valkyrie’s Bitcoin futures-based ETF opened at $25, but only fell from there.

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All the information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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South Korean pension fund to invest in Bitcoin ETF: Report

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South Korean pension fund to invest in Bitcoin ETF: Report

KTCU plans to invest in Bitcoin ETF products after consultation with domestic asset managers,” an executive reportedly said.

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South Korean pension fund to invest in Bitcoin ETF: Report

South Korea’s public pension fund, the Korean Teachers’ Credit Union (KTCU), is reportedly looking to gain exposure to Bitcoin (BTC) via a crypto exchange-traded fund (ETF).

KTCU, one of the largest institutional investors in South Korea, is considering investing in a pure Bitcoin ETF or Bitcoin-linked ETFs in the first half of 2022, local news agency The Korea Economic Daily reported Monday.

According to the report, KTCU is considering investing in several Bitcoin ETF products, including those by South Korean asset management firm Mirae Asset Global Investments. The company launched two ETFs tracking the value of Bitcoin futures via its Canadian subsidiary, Horizons ETFs, in April 2021.

“As there are some well-made cryptocurrency-linked ETF products by asset managers such as Korea’s Mirae Asset Global Investments, we plan to invest in the ETF products after consultation with domestic asset managers,” an executive at KTCU reportedly said.

The official also mentioned potential investment in a Bitcoin ETF by Mirae Asset’s subsidiary, Global X ETFs, which filed for a Bitcoin ETF with the United States Securities and Exchange Commission in July.

According to the report, KTCU is the second-largest institutional investor in South Korea, with $40.2 billion in assets under management. The pension fund has allocated 40% of its investments in alternative assets, 10% domestic and 9% international stocks. KTCU has yet to determine the size and other details of its potential Bitcoin ETF investment.

Related: Why now? SEC took eight years to authorize a Bitcoin ETF in the US

The news comes amid global pension funds getting increasingly interested in gaining exposure to cryptocurrencies like Bitcoin and major companies in the industry. Last week, the Houston Firefighters’ Relief and Retirement Fund reportedly purchased $25 million in Bitcoin and Ether (ETH). Canada’s Ontario Teachers’ Pension Plan Board participated in a $420-million funding round for major crypto exchange FTX, the firm announced on Thursday.

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Dubai regulator announces new regulations for investment tokens

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Dubai regulator announces new regulations for investment tokens

The UAE continues to be one of the friendliest jurisdictions worldwide for the digital asset industry.

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Dubai regulator announces new regulations for investment tokens

The Dubai Financial Services Authority (DFSA) has established a regulatory framework for investment tokens as part of its efforts to stimulate the digital financial and technological environment while also meeting market players’ demands and requirements.

The DFSA is an independent regulatory body in Dubai that is in charge of monitoring and regulating financial services companies wanting to operate in the city. It also licenses and regulates its products and services.

According to a report by Emirati news agency WAM, the DFSA’s regulatory framework defines investment tokens as either “a Security Token or Derivative Token.”

The report notes that the creation of a new regulatory structure is the first step in the DFSA’s Digital Assets Regime, which reflects the suggestions made in Consultation Paper 138 published in March 2021. The consultation paper sought public input on the DFSA’s plans for regulating security Tokens. 

As reported by Cointelegraph in March, the financial regulator in Dubai called on members of the public to submit comments on its proposed rules for cryptocurrencies considered to be security tokens.

The investment token framework is designed to safeguard investors and provide legal certainty for market operators. 

Related: UAE regulators approve crypto trading in Dubai free zone

It specifies the sort of investment tokens that are permitted and which may be listed on a Digital Asset Exchange in the Dubai International Financial Centre, as well as other pertinent information.

The DFSA is also working on plans for unlisted securities not covered by the investment tokens regulatory framework. These are anticipated to include cryptocurrencies, utility tokens and certain stablecoins. The DFSA is expected to publish a follow-up consultation paper in the fourth quarter of this year.

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