Understanding Crypto

In this episode of Understanding Crypto, James Burtt and Paul Abercrombie discuss 16 real-world possibilities for NFTs. They look at a wide range of existing and potential uses, from fashion to decentralized financing to healthcare and education. "I think people see NFTs as a digital version of the Mona Lisa," James says, "but it's swiftly becoming the receipt you receive from Tesco's."

Fashion and Finance

The incorporation of NFTs into the fashion industry and DeFi organizations is an evolving practice in the real world. Many fashion brands such as Adidas, Balenciaga and Nike have released NFTs, creating a new trend in the fashion industry. Gucci has allowed customers to own their products in both the real world and the metaverse. Only Ralph Lauren's virtual presence in Roblox since 2021 rivals this achievement. The foresight to incorporate digital ownership into brand identification pays off in terms of revenue growth. Paul remarks, “90% of the new generation's wealth will be stored in digital assets, in NFTs.”

However, it appears that liquidating digitized assets is the preferred method for these users to obtain real-world funding. Though a few DeFi companies are already lending against NFTs, Paul and James predict that the tokenization of larger real-world assets will become a trend. According to James, “If you default on the payment, automatically without anybody getting involved, that digital asset is transferred to the lending platform.” Debt collection becomes easier and more efficient in this approach. "You could live in a world where a combination of NFTs and physical assets could work to underpin asset value," they both agree. [Listen from: 3:08] 

Social Media and Entertainment 

Paul feels that NFTs can be useful in a variety of social media and entertainment applications. Concert or event tickets, he argues, have the potential to become collectible NFTs and he sees the possibility for automated payment systems for workers. This eliminates the need for a middleman, allowing for more efficient revenue distribution. “Whenever a ticket is sold automatically [there is] - because of the smart contract - the distribution of revenue from that ticket,” Paul says. 

Another concept is digital identity where identity documents like passports and driver's licenses, are replaced with QR codes linked to NFTs. This technology has the potential to reduce inefficiency in government offices while also revolutionizing the public sector. 

In the social media space, NFTs can also be used to track influence and authenticate identity throughout various social media platforms. Presently, content creators are forced to spread their influence over multiple platforms. “[Influencers] could leverage that profile together, and you had an NFT and the algorithms can give you a score and say that's your influence and therefore we're going to pay you this rate of advertising,” he remarks. The intention is to provide accurate and specific information on every influencer who might want to approach a brand. 

Creating music around NFTs is another important application. While this is not a new notion, offering fans digitized incentive ownership through NFTs can drive communal involvement to new heights. “I think the way in which we buy music, the way we interact with music and the way royalties are distributed is going to change over the next 3-5 years,” Paul and James argue.  Smart settlements can also be used to automate royalty payments and equalization across the board. [Listen from 11:10]

Endless Possibilities for NFTs 

NFTs can be utilized in the healthcare sector to facilitate the transmission of medical files between geographical locations through blockchain technology. Paul also discusses further possibilities for blockchain-based supply chain management, which is currently being used by major corporations. He believes that NFTs, in the form of a blockchain-based delivery note, can be provided to clients as proof of digital trust. James says “I think people are seeing NFTs as a digital version of the Mona Lisa; however, it's very quickly becoming the receipt you get out of Tesco's ”. Paul agrees and explains that NFTs could also be used to store your educational records as well as your digital CV. “ It would speed up the hiring process and transform all of that stuff,” says James. 

Another intriguing potential is the use of NFTs as membership cards for physical and digital clubs, which would provide gatekeeping capabilities to clubs and creators in secondary markets. Paul also envisions an NFT-based loyalty program with transportable digitized assets linked to a point system that can be redeemed or exchanged between platforms. "Because there are so many different types of smart contracts and blockchains," Paul continues, "it's difficult to be portable across all of them." Despite this limitation, he predicts NFT technologies will have a promising future. Paul feels that the establishment of NFTs product warranties has potential, and that they should be used as proof of purchase, minted on the blockchain and stored in your digital wallet. They both agree that technology breakthroughs are required for some of these concepts to be realized. [Listen from 22:34]

Key Takeaways

• NFTsare likely to become as common as a receipt in the near future.
• NFTs can be used in a variety of existing and potential sectors, ranging from fashion to DeFi to healthcare and education.

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

In this episode of Understanding Crypto, Paul Abercrombie and James Burtt correct their initial oversimplification of the term Web3, by defining its six major components. James defines Web3 as the start of the internet's third era, which blends the decentralized ethos of the first era with the expanded modern functionality of the second era. They agree that the establishment of the blockchain, which powers major Web3 tools, is the real innovation.  “If blockchain hadn't taken the turn that it's taken and and come to the fore, you wouldn't have Decentralized Autonomous Organizations. You wouldn't have DeFi or NFTs” says Paul. He recommends that entrepreneurs should employ blockchain-based technologies to solve business problems.

Righting the Wrongs: Defining Web3 

James and Paul argue that the term Web3 has been oversimplified. "[Everything] gets bundled into the name web3, crypto, or metaverse," Paul laments. He identifies six important components of Web3: crypto, NFTS, Decentralized Financing (DeFi), Decentralized Autonomous Organizations (DAOs), blockchain, and the metaverse. Each component has its own audiences, capacities, and outputs, yet is still usually placed under the umbrella term of Web3. James attempts to demonstrate the differences between them; he cites physicist Garvin Wood's definition of Web3 as a decentralized version of the internet. He states that the major similarity is that cryptocurrencies, DeFi and NFTs are all made possible by blockchain. James comments, “Web 1.0 made you a consumer, Web 2.0 made you a consumer creator/ producer…Web3 gives people property rights, essentially the ability to own a piece of the internet”.  [Listen from 1:00]

Powered by Blockchain

Paul explains that Web 2.0's internet enables all of its advancements such as social media platforms. Similarly, blockchain is the unifying Web3 technology that enables all of these breakthroughs. The metaverse, characterized as a 3D reality, is an important blockchain-powered technology that has crossed the real-digital divide by providing real-world applications for governmental and entrepreneurial systems. Both James and Paul believe that blockchain is the genuine innovation. The creation of blockchain-based solutions for and by users helps make Web3. "You wouldn't have Decentralized Autonomous Organizations if blockchain hadn't taken the turn it has and come to the fore," Paul explains. "There would be no DeFi or NFTs." [Listen from 9:56]

Real World Application

New technology such as Web3 attracts early adopters, many of whom may not be aware of the technology’s true capabilities. "Early adopters may receive great rewards, but there is also a huge risk of being an early adopter," James warns. Paul agrees, remarking on the minimal number of Web3 developers who actually utilize blockchain on a monthly basis. Paul feels that tools such as cryptocurrencies and DAOs should be used to solve problems rather than to simply follow a trend. To illustrate this point he deconstructs the practical application of Web3 tools in his own company and showcases the solutions he's discovered for specific business oriented problems. He shows how their Winners’ Club community uses Web3 tools such as a DAO to manage governance. They have also released an NFT to generate funds, and a creator coin cryptocurrency which allows them to create their own monetary policy. “There's lots of ways that a business could use blockchain but that doesn't mean you need to become a blockchain,” says Paul.

Key Takeaways 

• Web3 marks the start of the internet's third era, which combines the first era's decentralized ethos with the second era's enhanced modern functionality.
• Businesses can use blockchain in a variety of ways, but they should only use Web3 tools that help them address business challenges.

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

CNBC Article: What is WEB3.0

In this episode of Understanding Crypto, James Burtt and Paul Abercrombie demystify the macroeconomic phenomenon of stagflation. It is caused by the convergence of high unemployment, inflation and a recession. They examine the cyclical nature of stagflation and point out parallels between the economic crisis of 1979 and today. They concentrate on the real-world consequences for cryptocurrency owners and entrepreneurs, and encourage listeners to learn more.

The Perfect Storm

Stagflation is "a perfect storm of fiscal activity or fiscal unraveling that occurs at the same moment," Paul says. He notes that high unemployment, negative economic growth, and inflation must all be present for stagflation to occur. The more governments attempt to address one of these issues, the worse the situation becomes. Though national policies are typically designed to prevent one of the three contributors from occurring, this restriction usually has a domino effect on the other two, causing stagflation. “Whilst governments and central banks try to combat inflation by raising interest rates for instance, it has a negative effect,” Paul explains. “It further creates a recession or creates more unemployment in certain areas.” He believes this is currently happening and it’s affecting the crypto market, leading the market to remain stagnant for the next year. The key distinction between inflation and stagflation is that inflation refers to a loss in buying power and stagnation refers to an economic contraction. In essence, Paul claims, there is no stagflation without inflation because both occur at the same time. The real-world implications of stagflation for both business owners and consumers include higher utility, mortgage, and gas expenses. [Listen from: 1:54]

Stagflation and Crypto

This is a new experience for the world of cryptocurrency and can produce negative or minimum growth. If governments choose to raise taxes to combat inflation, people may be forced to liquidate digital assets in order to cover real-world expenses. James clarifies that the 0.5% increase in federal taxes in the United States was one of the key drivers of the Crypto Crash, and any further increases could be disastrous. Paul shows the cyclical nature of this economic phenomenon: the Conservative government increased taxes by 17% in 1979 to battle inflation; current initiatives are following the same tactic. Nonetheless, Paul believes that “crypto itself is robust enough to take a crash and stay as it is.“ [Listen from: 11:09]

Cyclical Stagflation

Both periods - 1979 and today - witness the major variables that encourage stagflation, such as a global energy crisis and a war. Since employment is not at historic lows, the debate over whether we are in stagflation continues. At this juncture, there are both advantages and disadvantages for entrepreneurs, Paul and James point out. They can apply tactics in their companies to enhance income from this vantage point, but during a recession, firms may suffer as a result of the lack of consistent income. This, along with rising energy prices, which would have an impact on business expenses, might be disastrous for the modern entrepreneur. The proactive reaction to the current situation, on the other hand, that the 

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

Key Takeaways 

• Stagflation is caused by the convergence of high unemployment, inflation and a recession.
• Stagflation can have a negative effect on the crypto market.

Welcome to episode 21 of Understanding Crypto, the podcast where James Burtt and Paul Abercrombie demystify the world of Web 3.0 and cryptocurrency, as well as what it means for you and your business. In this episode James and Paul define and describe proof of attendance protocols (POAPs), and how they are changing the game in the crypto world.

What is a POAP?

A POAP is basically an NFT, Paul claims. “Creating an NFT is difficult,” he says, “you’ve got to have a degree in a foreign language to be able to work it out.” In addition, it requires lots of boxes - such as time and money - to be ticked off to create an NFT that isn’t even guaranteed to be successful. POAP is a big step towards making NFTs more accessible. Paul goes on to talk about how POAPs are reducing the transaction costs of creating NFTs. “It removes one barrier to entry… to some extent, but effectively allows you to, within a few clicks, upload an image and create an NFT as a badge, which is a collectible of you attending an event.” These collectibles would have real world uses, and where you would have had to jump through hoops to make them before, POAPs are changing the game.  [Listen from 1:57]

POAP Platform

It’s a strong marketing strategy for people to have your details, or own your NFT, because they now have a direct connection to you. You would then be able to AirDrop stuff in their wallets that has future value, and communicate with them in a way that you create additional value. The POAP platform is making even this easier, however, by erasing the need for creating a wallet - you can just give out a QR code in an event that people can scan, which takes them to the POAP ecosystem. Paul and James discuss the way POAP is paving a painless and uncomplicated path to bringing more people into crypto, and its various uses. [Listen from 5:26]

Paul describes how the POAP app works. Guests would receive the QR code that would download the POAP mobile app and give them a unique NFT they can claim and mint right there - furthermore, they would also be given gate access for that NFT. “A lot of gating systems are now recognizing POAPs, so this is essential,” Paul suggests. Secondary marketplaces are also doing this, so you can list your POAP there as well. [Listen from 9:22]

Waves of Change

POAP is a clever development, and though it won’t make you millions as an NFT launch would, it galvanizes certain elements of a community and unlocks that “next level of something” for certain people to take the step into the Web 3.0 world. “It further validates our point,” James adds, “that a lot of the big waves of change you're going to see are going to come from [a] hybrid [of Web 2.0 and Web 3.0].” It uses the blockchain at its simplest form so that it gives people a taste of what they’re getting into.  [Listen from 14:05]

Key Takeaways

• POAP is a big step towards making NFTs more accessible - by reducing the transaction costs of creating NFTs, it removes one barrier to entry into the crypto world to an extent.
• Many gating systems and secondary marketplaces are now recognizing POAPs, so it’s essential to take advantage of them.
• The big waves of change in the crypto world is going to come from a hybrid of Web 2.0 and Web 3.0.

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

In this episode of Understanding Crypto, Paul Abercrombie and James Burtt discuss the hidden side of decentralisation and its implications for real-world business owners. Paul predicts that Decentralised Finance (DeFi) organisations will evolve, transforming the typical Web3 business model into a hybridised institution with both decentralised and centralised mechanisms. They reveal an increasing trend among Web3 enterprises to create and use Decentralised Autonomous Organisations (DAOs) as a way to circumvent security constraints imposed by organisations such as the Securities and Exchange Commission (SEC). Paul questions the prevailing decentralised business model, focusing on Web3 firms' hidden money streams and business strategies. 

Progressive Decentralisation

Paul and James discuss the emergence of the decentralised web and how DeFi institutions are leading the way forward. The banking system's resistance to financial centralisation, according to Paul, is the driving force behind the development of Web3. "Blockchain exists as a result of people's attitudes regarding the banking industry and the necessity to try to build another store of value or a means of transferring wealth without utilising the bank," he comments. Bitcoin was the most successful attempt at financial decentralisation, bringing a degree of transparency to centralised money that had never been seen before. It's no wonder, then, that decentralised Blockchain technology provides the highest level of security, Paul and James point out. Decentralisation, on the other hand, brings a sluggish, fee-laden system. They both believe that the majority of DeFi institutions will evolve in a coordinated manner, with most Web3 institutions becoming centralised organisations with some decentralised governance. They feel that this will lead crypto down the path that it was meant to avoid in the first place. [Listen from 2:31]

Decentralisation through DAOs

Since DAOs are not owned by a single person, they are exempt from SEC or FCA requirements. As a result, Blockchain companies employing DAO mechanisms can continue to function outside of security regulations. Paul expresses his misgivings about this; he also mentions how convenient it is for huge crypto corporations to operate outside of governmental boundaries. Both Paul and James agree that the DAO mechanisms do not fit their Winner’s Club community since they have founding, executive, and voting teams. James examines the difficulties associated with the hierarchical flat management style while unmasking the hidden centralised procedures within some DAOs. "Yes, it's decentralised to some extent," he says, "but I guess there's still top level control of what's going through to that decision-making process." [Listen from 8:51]

Examining the Gaps

Paul raises concerns about the existing decentralised business model, which reflects the hidden revenue streams of Web3 and open source companies. He points out that one large social media platform's transparent subscription business model offered on Web 2.0 was rejected by the public, forcing the platform to transition into a data silo. This enables them to strategically use customers' data as a sort of remuneration for their service; "If you're not paying for the service, you're the service," he reminds listeners. The business security provided by the platform's partnership with centralised financial institutions in the actual world overshadows users' differing perspectives on this issue. "What's the business model that we're not seeing?" he asks, implying that there are revenue streams that aren't apparent. He contrasts the  exploitative practices of Web 2.0 with the current decentralised Web3 approach. Blockchain technology's free and open source nature makes it even more difficult for business owners and other app developers in the area to make money. To demonstrate this argument, Paul lists the free tools employed in the Winner’s Club platform's development while also raising questions surrounding the strategies these creators use to garner compensation for their work. James agrees, and expresses concern about the potential for future monetization of these tools and the resulting influence on the Web3 initiative. [Listen from 13:32]

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

State of Crypto Globally 

Welcome to episode 19 of Understanding Crypto, the podcast where James Burtt and Paul Abercrombie demystify the world of Web 3.0 and cryptocurrency, as well as what it means for you and your business. In this episode James and Paul go over the current market sentiment according to mainstream media, and juxtapose it with what's actually going on in the cryptocurrency world.  

A Decrease in Net Worth

The current sentiment across mass media when it comes to Bitcoin and cryptocurrency is that investors are losing their savings and that Bitcoin doesn't have the potential to last. James and Paul offer an alternative view. "If you've benefited from the upside [of investing in crypto] and those assets have gone up in value, … and they're now down, I can almost guarantee - unless somebody has spent £100,000 in crypto investments in the past four or five months - that they're pretty much probably where they were at the start," they tell listeners. There is a difference between holding all your money in crypto assets, and investing a portion of your net worth into crypto. In the event the market value falls, the outcome and effects of these two decisions will be different. [Listen from 3:28]

55% Increase

While the mainstream media pushes the idea that interest in crypto has decreased due to recent negative news of market crashes, currently in the crypto world, individuals are asking what's next. "It's 55% up on the previous month, and the graph also shows that combined traffic for new and returning users has passed 160,000 people, which is another all-time high," James says. What's happened in the crypto world has not in any way deterred users from wanting to carry on with what they're doing, but in fact has emboldened and spurred them on. When it comes to crypto, you have to know more about what's going on beneath the surface than simply what is being pushed within mainstream media. [Listen from 11:10.]

Regulation Within Decentralization

Paul asks, "In a world where there is decentralization in its truest form, how can one state dictate the rules and regulations around crypto?" There are two sides to this answer. First there is regulation to prevent retail investors from getting involved in sophisticated investment schemes, which could result in the loss of savings and assets. An individual would have to be classed and qualified as a sophisticated investor, that is someone with a high net worth. [Listen from 16:40]

"What crypto gave us the ability to do was to have somebody that wouldn't be classed as that sophisticated investor to invest a small amount of money and benefit from huge gains over a short period of time," Paul says. Sophisticated investors would view these current crashes as merely blips along the way, and short term issues. He adds that crypto itself cannot be regulated, only the activities around it. You can regulate people's entry and exit points into crypto and crypto-related business, but you can't regulate crypto itself. [Listen from 18:04]

Regulation and Stablecoins

The concern individuals have within the crypto world when it comes to regulation is that the big financial institutions around the world that don't want decentralization may accelerate regulations. They may advocate for more rigorous rules that may hinder the crypto industry. [Listen from 21:53]

James and Paul talk about stablecoins and point out that if you're going to class your coin as a stablecoin, you have to prove that it is an asset, and do so as if you were operating in a normal financial market. In terms of regulation, the quicker regulation comes, the quicker crypto can become mainstream. This is because it will quicker answer the questions larger investors, such as hedge funds, have that keeps them on the fence about investing in crypto. [Listen from 23:02]

James itemizes the five questions a prospective investor must ask themselves before they invest in cryptocurrency. These are:

1. Am I comfortable with the level of risk?
2. Do I understand the investment being offered to me?
3. Are my investments regulated?
4. Am I protected if my investment provider goes out of business?
5. Should I get financial advice?  [Listen from 26:04]

Key Takeaways

• There is a difference between holding all your money in crypto assets, and investing a portion of your net worth into crypto.
• When it comes to crypto, you have to know more about what's going on beneath the surface than simply what is being pushed within mainstream media.
• You can regulate people's entry and exit points into crypto and crypto-related business, but you can't regulate crypto itself.

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

In this episode of Understanding Crypto, Paul Abercrombie and James Burtt discuss practical techniques for incorporating web3 tools, tactics and platforms into real-world businesses. They discuss various ways this can be done; one of the most significant ways is understanding your target market's relationship with cryptocurrency. James comments, “Just think of crypto as a new digital toolbox… [Business owners should find] those tools that would fit your requirement and solve those problems that fit the needs or the wants and desires of your ideal customer base.”

Bringing Cryptocurrencies into the Mainstream

The drive by luxury firms to incorporate cryptocurrencies as a payment option heralds the mainstream inclusion of digital currency. This, according to Paul, is a progressive move that might offer a lesson to business owners interested in crypto. He feels that business owners should have a deep grasp of their target demographic's preferred payment methods. "You have to understand your customers," Paul remarks, "because if you look at the brands that are doing this, their customers are well versed, well educated, mainly, and perhaps have cryptocurrency holdings." Both James and Paul believe that crypto can help business owners expand their customer base. [Listen from:1:11]

Business Models 

Although luxury brands have the consumer power to make the switch to cryptocurrency payments, the average business owner may not be able to do so because of their clientele. Both James and Paul, however, recommend smaller-scaled solutions that may be incorporated into a typical company model. Paul demonstrates why NFTs and digital assets should be at the heart of membership business models. Creator coins and social tokens can also be used as rewards in community-based frameworks. They both agree that in the actual world, most companies are behind the curve because most of their knowledge comes from conventional media. Nonetheless, James feels that accepting cryptocurrency payments is a start in the right direction. Paul believes that the current gap can be closed through the implementation of crypto payment platforms such as Coinbase, Moonpay and Bitpay, which convert virtual cash to fiat currency. In the middle of the crypto revolution, every business needs a well-balanced mix of digital and real-world mechanisms to flourish. [Listen from 4:46]

Innovative Applications 

Through inventive applications, Web3 has the ability to tackle real-world issues. For anyone interested in working in and through the Web3 domain, James sees consultancy as a lucrative path. He feels that the increased interest in cryptocurrency  by luxury brands exposes a void for experienced players to fill. Paul on the other hand feels that identifying Web3 solutions for current challenges might be a critical first step toward innovations in the crypto space. “I see crypto or blockchain as solving the world's biggest problems if the right people get hold of it and develop a solution or platform to solve those problems,” he says. He believes that company owners in the physical and digital worlds should come up with new ways to employ the existing Web3 tools to solve problems in both arenas. He recommends NFTs as a platform for learning and investment, as well as the use of blockchain technology to revolutionise the construction industry. “Biometric machines on site that could talk to the Blockchain that would prove that person was there. It would be on the digital ledger so that payments are quicker,” Paul says.  Innovation would be expensive, but he believes funding could be sourced through DOAs, communities, and other Web3 platforms. [Listen from: 7:09]

Key Takeaways:

•  In the midst of the crypto revolution, every business needs a well-balanced mix of digital and real-world mechanisms to flourish.
• Accepting cryptocurrency payments is a start in the right direction.
• Identifying Web3 solutions for current challenges might be a critical first step toward innovations within the crypto space.

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

Coinbase

Moonpay

Bitpay

Balenciaga Article

Understanding Crypto is the podcast created to help you work out what is happening in the world of Web 3.0 and the impact this digital revolution could make to your brand, business and life.

In this show your hosts Paul Abercrombie and James Burtt will be discussing, distilling and massively simplifying subjects such as how blockchain works, what is metaverse real estate all about, what are you actually buying when you purchase an NFT, how do DOA's work, which direction is Bitcoin heading in, how to use a digital wallet, what steps you need to take to onramp from fiat currency into digital assets and lots, lots more.

Plus, via specific episodes of the podcast, Paul and James will actually pull back the iron curtain to share what on-chain projects they are involved with and document - in real time - the processes they grow and go through in order to make Web 3.0 as valuable for real-world realtime businesses and brands as possible.

In this episode of Understanding Crypto, Paul Abercrombie and James Burtt discuss crypto taxation methods around the world. Paul and James believe that this topic is relevant for the re-education of investors and potential investors amidst the fragile market. They highlight various strategies implemented by governments globally in an attempt to either incentivise or censor crypto use. James observes that though “crypto by its very nature is decentralized, every country is treating it very differently." Crypto-friendly countries are listed alongside countries with restrictive taxation practices. 

Crypto-Friendly Countries

James rates the top ten crypto friendly countries or tax havens; these include Germany, Belarus, Portugal, Singapore, and El Salvador. "You won't pay any tax if you're a crypto investor and you're earning an income from crypto related activities,” he says of these crypto-friendly countries. “You will not pay a penny in tax if you live in one of these countries." As expected, tax removal is a powerful incentive to stimulate blockchain innovation and expertise on a geopolitical level. On the other hand, countries such as France, the Netherlands, and Japan have the most restrictive taxation practices. [Listen from: 3:49]  

Taxable Income Types

Paul lists the major crypto-based taxable income types recognized by most countries. These are, he says, "Number one: getting paid in crypto; number two: mining crypto; number three: staking crypto; and number four: earning interest on crypto." James adds that cryptocurrency could be taxed in both the digital space and within the tangible fiat market. When you stake crypto on the Anchor platform, for example, you get staking rewards. “Although it's not classed as interest and it's not paid as interest, it's viewed as a type of income," he points out. As such, it becomes taxable. Taxation can also happen after the liquidation process. "The moment you liquefy those assets and bring them back into pounds and exit the crypto market, bringing fiat currency back into your UK bank account, you'll be paying tax," Paul tells listeners. In the UK, tax laws continue to evolve, as seen with HM Revenue and Customs' announcement that crypto would be treated as any other form of equity, and investors can offset crypto losses against future gains. This announcement is a glimmer of hope for crypto investors who are struggling in the aftermath of the crash. [Listen from: 8:54]

Tax Havens

Crypto taxation is viewed differently across the globe as sovereign countries employ a variety of strategies from restrictive to lenient. According to James and Paul, Germany ranks near the top of the list of crypto-friendly countries. Germany recognises cryptocurrencies as private money and not as capital assets. Consequently, crypto held for 12 months can be liquidated tax free. Staking is also encouraged through tax free incentives, but only after a 10 year hold. Similarly, Belarus has tax exemptions for both corporate and individual crypto-based investments until 2023. James says that in countries such as the Cayman Islands, El Salvador, and Portugal, you don't pay any tax. In some of these countries, crypto is not even considered an investment income, so crypto trading is also tax free. [Listen from: 14:00]

Key Takeaways

• Tax exemptions are a powerful incentive to stimulate blockchain innovation.
• Countries such as the Cayman Islands, El Salvador, and Portugal are tax havens for crypto investors.

Resources 

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

Koinly.io

In this episode of Understanding Crypto, Paul Abercrombie and James Burtt explore the intricacies of the UST/Luna crypto crash, highlighting the geopolitical and crypto-specific influences. They provide a systematic breakdown of the events leading up to UST devaluation and the subsequent death spiral. They explain why investors have started to sell off their crypto assets and why there is more anti-stablecoin sentiment and calls for regulation in the crypto market.

Geopolitical Influences

Paul gives a brief overview of the digital landscape before the crash, explaining the functions of the US Terra stable coin and its 25% devaluation. He highlights the major global geopolitical issues. "We are in a massive Covid hangover," Paul says while exploring the ways in which China’s zero-free policy has messed up global supply chains, subsequently increasing prices internationally. This, coupled with the World Bank’s decision to initiate economic stimulus measures in an attempt to rejuvenate the economy, has led to inflation. The current dip is a result of anti-inflationary measures which are rooted in the ideology that the only remedy to curb inflation is to raise interest rates. The Federal Reserve’s decision to increase the base rate by 0.5% was as predictable as investors' decision to "liquefy... sell... get rid of UST," Paul says. This, coupled with media forecasts of an impending recession, is making investors nervous, causing them to sell their crypto assets. [Listen from 4:09]

Luna and UST

In an attempt to demystify the crash, James provides a systematic breakdown of the events leading to the UST devaluation. He begins by exploring the relationship between Luna, a burn mint token which is the native currency of Terra and UST. The function of the burn mint token is to replace the traditional dollar in the digital marketplace. He points out that a token is generated as the mechanism for creating and liquidating crypto assets. As such, it becomes the governance token or major currency of a specific blockchain. "So it's a bit like our own creator coin that we have,” James points out. “Rally is the burn mint token of our Winner's Club token…In order to buy our currency, you've got to buy Rally. " Likewise, in Terra, cash is first exchanged for Luna burn mint tokens, which are in turn exchanged for USTs and vice versa. So when UST loses its peg, they create more Luna, similar to "printing money and inflation in the real world". [Listen from: 9:35]

Anchor

Both James and Paul agree that one of the major causes of the crash was the Luna Foundation Guard’s (LFG) decision to decrease Anchor’s (Terra’s high interest savings account) interest rate from 20% to 4%. This singular act caused the liquidation of over 2 billion USTs within two days. Consequently, "the liquidity pools are going to run out," Paul highlights, "which just kept the price tumbling out of control, both the prices of UST and Luna, because the same effect was happening everywhere." LFG’s injection of $1.5 billion worth of Bitcoin to provide liquidity in Luna and UST to prop up the market was a temporary fix but shortly after that came "the death spiral". The compounded effects of these decisions have caused "investors to start looking at crypto assets generally and starting to spark a sort of sell off across all digital assets, just because of market uncertainty." [Listen from 14:07]

The unstable "stablecoin"

The current crypto crash has strengthened the anti-stablecoin sentiment. Paul explores these concerns, stating that the UST "stable coin is controlled by a central entity which is the Luna Foundation Guard, not a decentralized organization". He questions, "Who's in charge of the liquidity?" Who provides the reserves? Is it backed by the dollar really? Is there a pool of dollar reserves? " Paul predicts that, "The result of this is going to be regulation big time in stablecoins and across other digital assets regulation around retail investors." Interestingly, though Web3's main tenet is decentralization, the current crash is a good argument for some measure of regulation, especially after the rapid rate of capitulation. As crypto asset owners, James and Paul both discuss the ways in which the crash has affected The Winners Club (TWC) coin on Rally. They tell listeners, “You just have to ride out, stay calm, keep calm and carry on". Current and potential investors should understand that crypto is here for the long term, despite frequent  fluctuations in the market. [Listen from 23:50]

Key Takeaways

• The crypto crash is because of geopolitical and crypto-specific influences.
• The current crash has given rise to anti-stablecoin sentiment.
• Crypto asset owners are encouraged to “ride out, keep calm and carry on.”

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

Decrypt Article 

Episode 15 - Building Community with Web 3.0

In this episode of Understanding Crypto, Paul Abercrombie and James Burtt announce the successful launch of their creator coin on the Rally network, which allows members of their Winner's Club to become stakeholders in the community. They explain that the creator coin is essentially a membership pass that allows users to own a piece of the community. When you buy these coins you become “raving super fans” because you now own a digital asset which is linked to the value of the community, and which can appreciate as the community’s value increases. 

Building The Winner’s Club

Reflecting on their own experiences, Paul and James highlight the highs and lows associated with community building and continuity. They reminisce on the initial days of Winner’s Club, when they created the social audio platform without really knowing what they were doing. 18 months later the platform, which targets small business owners and entrepreneurs, boasts an accumulated membership of 42,000. One of their major concerns was the pressure that comes with ownership and "having to make the decisions about the direction of the community based on what we think the community wants, based on what they tell us," James says. The introduction of the creator coin alleviates this pressure as they "can now put it to the community to help to govern and have governance over it, because they can now buy in and they can buy their seat at the table effectively."  [Listen from 6:36]

Web3 Tools: Fostering Greater Ownership 

One word [that] describes Web3 is community," Paul says. A major goal of Web3 tools is to unlock potential value within communities across the web. By comparing a traditional business to that of their growing digital community, Paul highlights the major flaws in their initial administrative structure, exposing the ways in which emotional investment could not translate to operational authority. In the Web 2.0 world, community means that you’re part of a target audience to be sold to. Conversely in web3, you own part of the community. “With this it's a genuine community, because there's nothing to sell anybody because they've already bought into the community,” James points out. True participation and ownership could finally occur through the layering of Decentralized Autonomous Organizations (DAO) over digitized communities. "You can unlock the membership to that DAO with the creator coin. So now you can say okay, you can participate in the community at one level … you have to hold x amount of creator coins and that unlocks your voting rights within the DAO," Paul remarks. They explain the benefits listeners could access when they buy into the Winners Club community, including access to the Discord server and premium mobile app, and exclusive content. [Listen from 9:27]

Innovative Strategies for Community-based Membership Programs

Using digital assets such as NFTs and creator coins to galvanize users around membership is a good strategy, Paul and James agree. Another important strategy is community events, and they have run several successful ones. Creators should ensure that their events are tied to a specific purpose associated with the growth of the community. Their purpose was to grow their brand, James tells listeners, “which is tangible, actionable, usable content for small business owners and entrepreneurs." Paul adds, "The definition of community should be about giving people a voice … allowing people to represent themselves in the way they want to represent themselves." They explain how using NFTs as tickets grows the community both from a community and marketing perspective. Build your community before launching an NFT, they advise listeners. The work they put in to build the Winners Club illustrates this principle, and is why they can now launch with confidence. Both James and Paul believe that their goal of creating "... an ecosystem that actually gives real value, gets real value and becomes really valuable as a result of it" is well on its way to materialization. [Listen from 17:57]

Key Takeaways

• Buying their creator coin gives you a real stake in the Winners Club.
• Build your community before launching an NFT.
• Community is about giving people a voice.

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

Rally.io