Our previous article in this series looked at the legal framework surrounding blockchain technology. This article will look at practical uses for the technology. Blockchain technology has implications for many business owners, even those not interested in the speculative trading element in cryptocurrency which is akin to trading in the stock market. In addition to acting as a cash replacement, cryptocurrencies have many other applications, or use cases; some of the most recent uses include non-fungible tokens, tokenization, and wallet transfers.
A recent trend in blockchain technology is the creation, sale, and trade of non-fungible tokens, or NFTs. NFTs can take several forms, but the most common are digital collectibles. NFT collectibles can be released in a single issuance representing an individual piece of digital art, such as Beeple’s “Everydays — The First Five Thousand Days” which recently sold for $69 million.[1] Another popular NFT collectible is the National Basketball Association’s recently released NBA Top Shot.[2] The product is a 21st century version of sports trading cards that are digital images of players along with individual player game highlights (or “moments”) that can be purchased separately or in sets. Additionally, NFTs are used to back physical goods, serving as both an ownership title and a certificate of authenticity. Similar to physical collectibles, ownership of an NFT generally does not confer any intellectual property rights upon the owner, only the ownership of the digital collectible itself.
Entrepreneurial business owners looking to capitalize on blockchain technology may wish to research tokenization, the process by which NFTs and other tokens are created. Tokenization permits blockchain users to break down an asset into standardized units, and to sell said units as digital assets redeemable for some product or commodity, such as a share in a company, ownership in a piece of real estate, or participation in an investment fund.[3] These tokens can then be traded on a secondary market. One of the best examples of this can be found on the Bitcoin SV (BSV) network. Rather than trading cryptocurrency to cryptocurrency or exchanging cryptocurrency for fiat money, users trade tokenized assets for BSV. BSV tokenization is in its infancy, but entrepreneurs are already creating, trading, and profiting on various tokenized assets such as time[4], tacos[5], NFTs[6], and even social media posts.[7] Regulation aside, it is easy to see how this seemingly niche technology can one day be used for crowdsourced capital generation or demand-based pricing for goods and services traded on an exchange.[8] Combining tokenized assets with smart contract functionality, the possibilities are potentially limitless.[9] In one example, the nation of Tuvalu, with its population of 13,000, is seeking to use the BSV platform for its national digital currency as well as other governmental recordkeeping.[10]
Some businesses may wish to avoid all the intricacies of the cryptocurrency world by avoiding it completely. Others, however, may wish to understand the technology by creating the necessary accounts and performing wallet-to-wallet transfers, to gain insight into the world of blockchain technology. Some businesses set up wallets to prepare for potential ransomware attacks, in which hackers usually demand payment in cryptocurrency, such as in the recent ransomware attack on the Colonial Pipeline. Setting up and funding a wallet can take days, which can be difficult if a business’s network is taken offline by ransomware. Wallet systems currently lack some of the user-error safeguards offered in the fiat banking system[11], so understanding the technology is a must. Having these systems in place before a ransomware attack can prevent an already bad situation from snowballing into a longer-term loss of productivity, if a business has made the decision to pay ransom.
The cryptocurrency market is still in its technological and regulatory infancy, and with regulators slow to tailor innovation-friendly rules that address this nascent technology only time will tell how large an impact cryptocurrency will have on businesses. Vandeventer Black will continue to track developments in this swiftly changing industry and businesses should contact us if they have any questions about cryptocurrencies.[12]
[1] Chloe Weiner, Beeple JPG File Sells For $69 Million, Setting Crypto Art Record, NPR (Mar. 11, 2021, 2:48pm), https://www.npr.org/2021/03/11/976141522/beeple-jpg-file-sells-for-69-million-setting-crypto-art-record.
[2] NBA Top Shot, https://nbatopshot.com/ (last visited May 26, 2021).
[3] Patrick Laurent et al, The tokenization of assets is disrupting the financial industry. Are you ready?, Deloitte, https://www2.deloitte.com/content/dam/Deloitte/lu/Documents/technology/lu-token-assets-securities-tomorrow.pdf.
[4] Patrick Thompson, LIU: Bitcoin’s first time-backed token, Coingeek, (May 19, 2021) https://coingeek.com/liu-bitcoins-first-time-backed-token/.
[5] TACO/BSV Exchange, RelayX, https://relayx.com/market/EAT (last visited May 25, 2021).
[6] Giving RelayX Tickers More Utility, Medium (April 13, 2021) https://relayx.medium.com/giving-relayx-tickers-more-utility-a339af56eefe.; see also MoneyButton, https://www.moneybutton.com/ (digital marketplace with NFTs) (last visited May 27, 2021).
[7] Social Media on Blockchain, Bitcoin Association, https://bitcoinassociation.net/enterprises/use-case/social-media-on-blockchain/; see also, e.g., Twetch, https://twetch.app (a Twitter competitor); and Streamanity, https://streamanity.com/ (a YouTube competitor) (all last visited May 27, 2021).
[8] Other projects include pre-paid debit cards that convert BSV to fiat on-demand, and pricing aggregators that allow users to search consumer goods for sale on other sites and see real-time conversion rates. See RelayX Card, https://relayx.com/card; and Trading Card Game Online Exchange, https://tcgox.app (all last visited May 28, 2021).
[9] Technology development, still in its early stages, often comes by way of hackathon competitions. See, e.g., Bitcoin SV Hackathon, bsvhackathon.net, https://bsvhackathon.net/hackathon/upcoming/october-2021; RUN2k21, RUN, https://run.network/hackathon/; and HandCash Hackathon, Handcash, https://hackathon.handcash.dev/ (all last visited May 26, 2021). However, there are some large companies offering enterprise solutions in the space as well. See generally Taal, https://www.taal.com/ (last visited May 26, 2021).
[10] Koroi Hawkins, Tuvalu chases digital immortality on a blockchain, RNZ, (March 14, 2021, 9:43pm) https://www.rnz.co.nz/international/pacific-news/438341/tuvalu-chases-digital-immortality-on-a-blockchain; see also Ed Drake, Central Bank of Norway weighs up Bitcoin SV among €˜open blockchain’ for CBDC, Coingeek (May 3, 3021) https://coingeek.com/central-bank-of-norway-weighs-up-bitcoin-sv-among-open-blockchain-for-cbdc/ (citing report wherein Central Bank of Norway considered BSV for Central Bank Digital Currency (CBDC)).
[11] For example, if you accidentally send money to the wrong address, there is no one with the ability to reverse the transaction aside from the owner of the address that received the funds. While this might seem improbable, it’s quite easy to do when addresses generally look something like this: “13LGR1QjYkdi4adZV1Go6cQTxFYjquhS1y”.
[12] Link to full Disclaimer: Information on Vandeventer Black’s website is for informational purposes only; the information is general and may not reflect the current state of law. Contents are provided “as-is.” Information on this website should not be considered professional legal or financial advice and should not be acted on without consulting a qualified lawyer or other professional in the appropriate jurisdiction.
