The Cryptocurrency Thread 2

[target2019]

It is against the rules to post a link to long youtube videos so I will just include the title...

Line Goes Up – The Problem With NFTs

This video not only tears into the 'nonsense' of NFTs but all crypto in general. It does it in a methodical way with plenty of genuine info along the way. Obviously it comes from a particular point of view that is extremely negative about crypto but presents in a solid and thoughtful way.

It is a good reality check for anyone who owns Crypto as a way to double check their confidence in what they are doing and answers many of the questions that come up here. Also surprising to see such a long video having 4 million views.

After researching the author, and watching the video, I'm of the opinion that the video primary purpose was to create content easily transmissible through the internet, and secondary is to collect clicks and associated fees. If you read his bio, you can see that is his profession.

He uses the techniques of content creators to keep you peeled. That's entertainment. He's very good at his craft.

 

[KCGeezer]

Really dumb question. With a house sold as an NFT do you get physical possession of the house or just get to look at pictures of it? They quote the price in dollars so it’s not connected to crypto at all and it’s just a different legal avenue for a traditional sale? You’d still have to transfer the deed, pay taxes, etc right?

https://www.yahoo.com/news/florida-home-sold-novel-crypto-171148667.html

 

[captain3d]

My understanding is that an NFT can be written to include any contract options you want to address. It is really a blockchain container. What you put inside the container is a different matter.


In this case they are saying property rights are included.

 

[Badger]

I have always been told to never invest in something you know nothing about. It was difficult enough to invest in the stock market but received enough guidance to get me started although a little bumpy at times.
I really don't understand cryptocurrency and have always viewed it to be more like a crap shoot. Now it doesn't make any difference since I'm way past the investing/accumulation phase and have no need. Maybe that is a good thing. YMMV



Cheers!

 

[captain3d]

I think the phrase means you are supposed to learn something before investing. It is not an endorsement for being uneducated.

I personally do not know much about NFTs and tend to view them as skeptically as most non crypto people view Bitcoin.

The basic idea is that any contract could be defined inside the container of a blockchain NFT and because of that can be tokenised. Maybe it is a single token for solo ownership. Maybe it is multi tokens for shared ownership. Like shares in a company. In theory a company could sell ‘shares’ via NFT tokens rather than the traditional markets. Regulations would need to change of course.

But today NFTs are mostly attached to utter nonsense art or social media projects.

 

[MichaelB]

Really dumb question. With a house sold as an NFT do you get physical possession of the house or just get to look at pictures of it? They quote the price in dollars so it’s not connected to crypto at all and it’s just a different legal avenue for a traditional sale? You’d still have to transfer the deed, pay taxes, etc right?

https://www.yahoo.com/news/florida-home-sold-novel-crypto-171148667.html

If the municipal county clerk requires a deed to transfer and take title, I’d make sure to have one. What matters is not what the NFT states, it's what the local regulations recognize and require.

 

[NW-Bound]

If the municipal county clerk requires a deed to transfer and take title, I’d make sure to have one. What matters is not what the NFT states, it's what the local regulations recognize and require.

+1

I wonder if the NFT seller says the token is all the buyer gets and does not release the deed, what recourse does the buyer have but to take him to court?

I would not take unnecessary risks like this. Why buy a bag of potential problems? Life is complicated enough without this nebulous thing.

 

[Gumby]

It does sound a bit like inventing solutions to problems that don't exist. Real estate transactions are relatively straightforward for honest people.

 

[MichaelB]

+1

I wonder if the NFT seller says the token is all the buyer gets and does not release the deed, what recourse does the buyer have but to take him to court?

I would not take unnecessary risks like this. Why buy a bag of potential problems? Life is complicated enough without this nebulous thing.

The best argument I’ve seen so far in support of NFTs is they allow the seller to stipulate conditions that can remain in effect for the life of the NFT. For example, retaining rights to a portion of all future profits or specific uses (mineral rights for land sale?). That would make NFTs very useful for sellers of goods, not so much for consumers.

It’s not at all clear how this would be communicated, but if it is anything like how Ts & Cs or privacy rights are done today, it would be a wholesale disaster for most people.

Deeds and title transfers are a laborious process today, but underneath the bureaucracy are numerous protections. Doing away with all these protections enables financial predatory behavior.

 

[NW-Bound]

It does sound a bit like inventing solutions to problems that don't exist. Real estate transactions are relatively straightforward for honest people.

In the YouTube linked upstream, it is described how a lot of these new fangled things were invented to make money. And for the people who invented them, not for the naive buyers. What else does one expect?

 

[NW-Bound]

Because the buyer of an NFT can stay anonymous, it's extremely easy for the seller of an NFT to sell to himself to show the hot demand for his product.

He only needs to open another digital wallet and does not even have to employ a shill. So nice and convenient, is it not? No accomplice to share in the loot. Just beautiful.

 

[Gumby]

We require publicly recorded deeds, mortgages, mechanics' liens and other encumbrances against property for two main reasons: 1) so that we can adjudicate the seniority of conflicting claims to the same property and 2) so that we can prevent fraud against lenders. So, if I want to mortgage my house to obtain a loan, the lender will check to see that there are no senior claims against the property. Secret contract provisions hidden inside NFT's (and never publicly filed) prevent the system from working. I can't see any lender granting a mortgage loan under these conditions. Hidden ownership also makes it more difficult to collect property taxes.

The current system works well, and I can't see any honest person needing an NFT to transfer real property.

 

[MichaelB]

Much of the attraction of these digital efforts, such as NFT and crypto assets, are the ease and speed of transacting. The advocates make it sound like new technology replacing the obsolete and outdated.

The reality is different. What they are replacing is a regulated process with one that is not regulated. Of course that speeds the time to transact. No checks and balances or protections from financial predators, exploitation and criminals.

Here’s a good example, given to us by Adam Levitin, professor at Georgetown School of Law, and specialist in financial regulation and bankruptcy law. His blog has a post titled “ What Happens If a Cryptocurrency Exchange Files for Bankruptcy?” (here) In this post he explains that custodial crypto accounts are not like custodial stock accounts or mutual funds. Assets are not segregated and in case of failure, the account holder may not have any remedy at all, and may not even have ownership of the crypto assets.

So what happens to a customer if an exchange files for bankruptcy? I think it ends very badly for the customers, as explained below the break. I do not think customers understand the legal nature of the custodial relationships, and exchanges have no incentive to make the legal treatment clear to customers. In fact, the exchanges are lulling the consumers with language claiming that the consumer "owns" the coins, when in fact the legal treatment is quite likely to be different in bankruptcy. In bankruptcy, it is likely to be treated as a debtor-creditor relationship, not a custodial (bailment) relationship. That means that customers are taking on real credit risk with the exchanges, which is a particular problem because of the opacity of the exchanges and their lack of regulation.

 

[Running_Man]

Much of the attraction of these digital efforts, such as NFT and crypto assets, are the ease and speed of transacting. The advocates make it sound like new technology replacing the obsolete and outdated.

The reality is different. What they are replacing is a regulated process with one that is not regulated. Of course that speeds the time to transact. No checks and balances or protections from financial predators, exploitation and criminals.

Here’s a good example, given to us by Adam Levitin, professor at Georgetown School of Law, and specialist in financial regulation and bankruptcy law. His blog has a post titled “ What Happens If a Cryptocurrency Exchange Files for Bankruptcy?” (here) In this post he explains that custodial crypto accounts are not like custodial stock accounts or mutual funds. Assets are not segregated and in case of failure, the account holder may not have any remedy at all, and may not even have ownership of the crypto assets.

If you have any real wealth it should be stored in a cold wallet personally and not with an exchange. Only crypto held at an exchange is at risk.

Secondly the house sale was not a house sale. The house was owned by a company the NFT is transferring ownership of the company in a clearly defined transaction, the only asset of the company being the house. Now verifying the house is deeded to the company should not be that hard and the deed does not need refiling. There is of course tax implications with taking a house via a corporate ownership with taxes, but that is another matter, could even be advantageous for tax consequences.

I don't know of much the government does to prevent swindling on homes, how did home purchasers do in 2008 with all those protections? How were the banks protected from mortgage lenders actively recruiting no income purchasers of homes with all the protections?
Here with all of the protections is a story of real estate schemes of selling homes they didn't own to HUNDREDS of people.
https://abc7.com/real-estate-scam-f...-torrance-ca-bianca-gonzalez-walnut/10495610/

So yes people commit fraud, whether they will via NFT or present system they will commit fraud. You are on your own in preventing fraud, whether by NFT or banking system. And that lotto your cousin won in Canada is most likely a fraud.

All stocks are going to eventually move to NFT transactions precisely because the transactions are not hidden from public eyes.

 

[oldie]

Really dumb question. With a house sold as an NFT do you get physical possession of the house or just get to look at pictures of it?

Neither. You got a possession of a kind of fancy URL where it would be said "KCGeezer owns this house".Of course this would have zero legal meaning and is non-enforceable (the beauty of "unregulated").


You can create an equivalent of this NFT by printing "I own that house" on a piece of paper and putting it on your wall. It would be exactly as unique, as desirable and equivalently useless.

 

[oldie]

Much of the attraction of these digital efforts, such as NFT and crypto assets, are the ease and speed of transacting.

Did the "speed of transacting" changed? Back a few years ago when Bitcoins were used to pay for goods one had to wait 10+ minutes for transaction to be confirmed by another party.


Credit card transactions, on the other hand, are processed within seconds.

 

[KCGeezer]

Neither. You got a possession of a kind of fancy URL where it would be said "KCGeezer owns this house".Of course this would have zero legal meaning and is non-enforceable (the beauty of "unregulated").


You can create an equivalent of this NFT by printing "I own that house" on a piece of paper and putting it on your wall. It would be exactly as unique, as desirable and equivalently useless.

I did see the clarification that the sale is actually for the company, not the house directly. But….


A contract for the sale of a company that has a house as an asset would still need to be documented. I guess it could be documented via an entry on a blockchain but I assume there are existing methods of documentation listing the assets and liabilities of the company. I’d guess bankers and such would be more familiar with the ‘old way of doing things’.

 

[oldie]

That’s what I was thinking too.

And you're right.


What the crypto folks seem to miss that it is the existence and power of regulation which creates property values. If your house could legally become someone else's property if they simply show up with guns and kick you out - this is still happening in some parts of the world such as Russia-occupied territories - the value of such house would be very, very low.

 

[Running_Man]

I did see the clarification that the sale is actually for the company, not the house directly. But….


A contract for the sale of a company that has a house as an asset would still need to be documented. I guess it could be documented via an entry on a blockchain but I assume there are existing methods of documentation listing the assets and liabilities of the company. I’d guess bankers and such would be more familiar with the ‘old way of doing things’.

Not true, the sale of the shares of a company lead to a taxable event on the part of the former owners. The Fed Tax ID and all registrations of a wholly owned corporation would only need a filing for the new officers of the corporation in the state the corporation was doing business. A $15 filing fee in Florida that takes about 2 minutes online. Also the bankers, if there was a banking account attached to the company would need to note the change in officers in their filings, but if there is no debt or bank accounts for the company no filing would be needed.

 

[KCGeezer]

So why do you need a contract on a blockchain? What’s the benefit?

 

[Running_Man]

https://www.bloomberg.com/news/articles/2022-02-07/kpmg-canada-adds-bitcoin-ethereum-to-corporate-balance-sheet?utm_source=twitter&utm_campaign=socialflow-organic&cmpid=socialflow-twitter-business&utm_medium=social&utm_content=business

So now Big Eight Accounting firms are buying Crypto Bitcoin and Euthereum for their own balance sheets. Hope their auditors warn them of all those terrible risks.

 

[Running_Man]

Sequioa legally https://www.cnbc.com/2021/10/26/sequoia-changes-fund-structure-to-hold-public-companies-and-back-crypto.htmlchanged their capital structure (they bought a few well known startups back in the day like Apple, Google and Zoom so they can hold bitcoin and used that structure to buy Polygon operations for 450 million dollars, which isn't a stock they own but the platform to advance the Polygon network. Token behind this is MATIC and Euthereum. Of course in 2021 KMPG was their auditor so they are getting good accounting advice on how to properly account for risks.

https://www.cnbc.com/2022/02/07/sequoia-leads-450-million-investment-in-polygon-blockchain.html

 

[jim584672]

Cartman talking about that Matt Damon commercial...

 

[MichaelB]

RunningMan, a couple of comments.

We cannot draw any meaningful conclusion from the report KPMG Canada is buying Bitcoin and Ethereum. It’s just a news item. Another news item is Facebook abandoning its effort to produce a stablecoin. Should we conclude that means stablecoins are no longer viable? I think not.

Regarding financial regulation and the Great Financial Crisis of ‘08, if you are saying the regulatory system is imperfect then we agree. If you are saying there was fraud in housing transactions and this proves the regulatory system is inadequate, we are in complete disagreement. If anything, the GFC shows that our financial regulatory system worked but needs to be strengthened, and this view was affirmed by Fed Chairman Greenspan.

Unfettered and unregulated capital flows are a dangerous and substantial threat to our governance and standard of living. Why some favor this is a mystery and I think most people don’t appreciate just how damaging it can be.

 

[Gumby]

As far as I recall, in the housing boom and bust there was not large scale fraud in the conveyance of the property and the filing of the necessary and proper paperwork. That was almost always done in compliance with the law. The fraud was fraud in the inducement -- dishonesty in the loan application process by borrowers and brokers -- combined with an almost complete lack of any meaningful underwriting standards by lenders, dishonesty in the ratings of the resultant mortgage backed securities, and a heedless chase for yield without regard to risk by investors. In my view, none of these problems can be remedied by an NFT.