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This week’s featured collector is NelbRodrigues

NelbRodrigues is a Fine Art Photographer, born in Brazil and based in Italy. Nelb’s Lazy profile features a few of their recent photographs. Check it out at lazy.com/nelbrodrigues

Nouns DAO’s NFT Governance Experiment: A Treasury-Draining Fork

Nouns DAO, a notable NFT community project, has recently completed a “fork” that allowed some holders of the NFT to redeem assets from the community’s treasury. Nouns DAO is a decentralized autonomous organization (DAO) that raises funds by auctioning a unique NFT once a day. The revenue from these daily auctions contributes to its treasury, which is then allocated based on community decisions for various projects and endeavors.

As a mechanism to manage dissent within the community over how the treasury was being spent, the DAO introduced a “fork” – a move hailed as a progressive step towards decentralized governance. However, the introduction of this fork proved a double-edged sword. While it was designed to protect from potential threats like a 51% attack, it inadvertently attracted savvy arbitrage traders who manipulated the fork system for profit. These traders, having accumulated Nouns NFTs below their “book value,” utilized the “rage quit” mechanism, ultimately draining over half of Nouns DAO’s $50 million treasury. This incident underscores the complexities of decentralized community management.

While the fork in Nouns DAO resulted in financial loss for the project’s treasury and was seen by some as a shortcoming of decentralized governance, the incident serves as a pivotal learning experience for the NFT community. The events highlighted the tension between two primary factions within the DAO: those focused on promoting the NFT brand through high-visibility expenditures, and those with a more conservative financial approach. Additionally, the rise of arbitrageurs, who saw the fork as a financial opportunity, added another layer of complexity. Despite the challenges, many within the Nouns community remain committed to the vision of the DAO and see this event as a chance to refine and improve the DAO’s governance structure.

For a detailed analysis of the Nouns DAO fork, check out this article in Coindesk.

Bitcoin Ordinals Controversy: Rodarmor’s Proposed Renumbering Sparks Backlash

Casey Rodarmor, creator of the Bitcoin Ordinals protocol, which has produced numerous “NFTs on Bitcoin,” is considering retracting a key promise made to Bitcoiners about the immutability of ordinal numbers, suggesting they be renumbered and potentially changed in the future. Ordinal numbers have been a vital aspect of the collectibles’ appeal, with many collectors valuing specific ordinal numbers for their significance. For instance, OnChainMonkey Genesis chose Ordinal #20219 to mark the month and year of its creation, and many ordinals embed their unique number in the name. Rodarmor claims that preserving the rank and order of these ordinals complicates his work on new versions of the protocol, and making the inscription numbers “unstable” would facilitate new software features. However, the proposed change has been met with skepticism and backlash, especially from those who have invested heavily in specific ordinal numbers. Developer Raphjaph has suggested an alternative that wouldn’t alter existing numbers, but only the future generation method. Although a vote has been proposed regarding the changes, Rodarmor, who has significant control over the ORD protocol, could potentially overlook its outcome.

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This week’s poll: Should NFT projects allow “rage quitting” and distribution of the treasury?

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This week’s featured collector is Gomezluisj

Gomezluisj is collects Ethereum and Solana NFTs. They have quite a well chosen NFTs. Check out their full collection at lazy.com/gomezluisj

SEC Targets Stoner Cats NFTs in $1M Settlement; Dissenting Commissioners Advocate for Clearer NFT Guidelines, Citing Star Wars Collectibles

This week, the U.S. Securities and Exchange Commission (SEC) took aim at the creators of the Stoner Cats NFTs, in the agency’s second NFT enforcement action. The NFTs, sold to fund an animated series about house cats that become sentient after consuming medical marijuana, fetched approximately $8.2 million. The Stoner Cats creators also had aspirations to establish a DAO (decentralized autonomous organization) with Stoner Cats NFT holders, promising annual collaboration on new animation projects for three years. However, the SEC labeled the Stoner Cats NFT sale as an unregistered public offering, resulting in a $1 million settlement by the creators.

Two SEC commissioners, Hester Peirce and Mark Uyeda, voiced their dissent regarding the Commission’s actions against the NFT project. Their primary argument hinges on the comparison of NFTs to physical collectibles, stressing that the financial component does not necessarily transform NFTs into securities. They underscored the need for clear guidelines for artists and creators who wish to leverage NFTs to support their creative pursuits and build robust fan communities.

Drawing parallels to the 1970s Star Wars collectibles phenomenon, the dissenting commissioners highlighted the similarities between then-popular Star Wars “Early Bird Certificate Packages” and the Stoner Cats NFTs. Both offered fans a sense of belonging, exclusive content, and a tangible or digital collectible.

Cautioning against stifling creativity and innovation by imposing securities laws on NFTs, the Commissioners suggested that the SEC’s actions would deter content creators from harnessing the power of social networks and digital platforms for content creation and distribution. They wrote:

“The Stoner Cats NFT purchasers received what they paid for — a still image of a character from the series, access to all six episodes of the Stoner Cat series, and the excitement of being part of a popular phenomenon. The Commission’s application of the securities laws here makes little sense and discourages content creators from exploring ways to harness social networks to create and distribute content. More generally, it contributes to the legal ambiguity facing artists, writers, musicians, filmmakers, and others seeking to build a loyal, engaged following.”

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This week’s featured collector is Matthiasfgdm

Matthiasfgdm is collects VeeFriends and Gift Goats on Ethereum. Check out their full collection at lazy.com/matthiasfgdm

Tutorial: Create a Camera that Mints NFTs

Here’s an fun DIY project for NFT creators: a camera that automatically mints NFTs.

The Blockchain Camera, designed by tinkerer Human Controller, is a prototype camera that captures a photo and instantly mints an NFT, acting as a seal of authenticity. The camera runs on a Raspberry Pi 4 Model B and a Raspberry Pi Camera V2. Power it up with a USB battery bank, and you’re ready to mint! Simply frame your shot, click the “Mint now” button, and finalize your NFT on the blockchain. Dive into this tutorial and embark on a journey to create your very own NFT Camera. Let us know how it goes!

Full tutorial: https://hackaday.io/project/192538-blockchain-camera

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This week’s poll: When is the last time you bought an NFT?

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This week’s featured collector is Gjturnbull

Gjturnbull is a self described “NFT junkie” whose focus is on Ethereum NFTs. They’ve collected a few unique art pieces along with various generative pfps. Worth a look at lazy.com/gjturnbull

Unraveling the Impact of Three Recent Court Cases on NFT Collectors and Crypto Enthusiasts

This week, the legal battle over NFTs and cryptocurrencies reached a new peak with three court cases in the US with big significance for the classification and regulation of digital assets. In this post, we will unpack the implication of these court cases for NFT collectors and crypto enthusiasts.

1. The SEC’s First NFT-Related Enforcement Action

In a landmark case, the SEC fined LA-based entertainment company Impact Theory $6.1 million for allegedly selling NFTs as unregistered securities. The SEC claims that the NFTs, called Founder’s Keys, were sold under the premise of future profit generation for investors, therefore constituting an investment contract and, hence, a security.

While this move was taken based on the argument that the NFTs were being sold as investment contracts, two Commissioners at the SEC wrote a dissent. The dissenters argued that the limited statements from the company and purchasers don’t constitute an investment contract, likening the situation to selling collectibles with the potential of increasing in resale value. The dissent emphasized that the primary remedy for such registration breaches, a rescission offer, had already been executed by the company. They critiqued the Commission for not providing clarity earlier regarding the rising NFT market and underscored the challenge of categorizing NFTs.

Despite this enforcement action, it may not affect the broader NFT market significantly as many questions regarding securities registration for crypto and NFTs remain unresolved.

2. Clarification of Cryptocurrency as a Commodity: Uniswap Case

A New York court dismissed a case against Uniswap, a decentralized crypto exchange, and called ETH a commodity. The lawsuit argued that Uniswap violated securities laws by failing to register and allowed scam tokens to be traded. However, the judge stated that true defendants in this case were the issuers of these scam tokens, not Uniswap, and challenged the notion of ETH being a security.

3. Grayscale Ruling: Further Mainstreaming of Crypto

Perhaps the biggest win for the broader crypto ecosystem is the the U.S. Court of Appeals siding with Grayscale against the SEC. The judges criticized the SEC’s inconsistent treatment of similar products when it rejected Grayscale’s Bitcoin Trust ETF conversion. The judges also challenged the SEC’s persistent denial of bitcoin ETPs despite approving bitcoin futures ETPs. This court case moves Bitcoin one step closer to being an asset that is easily traded on the stock market by anyone in the US.

These three court cases suggest that even during a time when the mainstream is focused elsewhere, the crypto ecosystem continues to march forward toward a seismic shift in the legal understanding of NFT and crypto assets. While these cases don’t provide definitive interpretation, they signal a changing regulatory landscape with some signs of a positive future for NFTs and crypto.

This week’s poll: Will the SEC’s action against Impact Theory change your behavior with NFTs?

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This week’s featured collector is GTBundyPhotos

GTBundyPhotos is an NFT collector and San Francisco-based photographer specializing in travel, landscape, and corporate imagery with a focus on trains, planes, balloons, majestic arches, the dance of the sun and moon, mesmerizing skies, and the fiery spirit of volcanoes. Check out their photography at lazy.com/gtbundyphotos

The Aftershocks of OpenSea’s Royalty Reversal: Rarible Steps Up, Yuga Fights Back

In a follow-up to last week’s newsletter on OpenSea’s surprising decision to make creator royalties optional, the ripple effects continue to shape the NFT landscape.

While OpenSea’s move has drawn significant backlash from the community, with notable figures like the creators of the Bored Apes Yacht Club voicing vehement dissent, another prominent marketplace has stepped forward to position itself as the antithesis of OpenSea’s no-royalty approach.

Following OpenSea’s announcement, Rarible took a decisive stance in favor of maintaining NFT creator royalties. This commitment resulted in an immediate uptick in Rarible’s trading volume, evidence of support in the NFT community for royalties. Conversely, OpenSea experienced a dip in its trading volume.

“This space is about redefining the paradigm in which creativity is valued and compensated,” wrote the co-founder of Rarible. “We cannot continue to standby as that promise is taken away.”

The sentiment was echoed by the CEO of Yuga Labs: “For as much as NFTs have been about users truly owning their digital assets, they’ve also been about empowering creators. Yuga believes in protecting creator royalties so creators are properly compensated for their work.”

While the fallout from OpenSea’s decision is still unfolding, the NFT ecosystem continues its rapid evolution. The commitment to royalties remains a hot-button issue that is dividing the NFT community into creators, collectors and traders. However, if the past history of web3 is any indication, it is always possible that a new innovation or way of interacting with NFTs will arise that shifts the dynamics of the debate.

This week’s poll: Are you a creator, collector or trader?

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This week’s featured collector is cryptogallerist

Cryptogallerist is interested in business, innovation and leadership. Their NFT collection focuses on Ethereum and they are big fans of StretchedOut, Donut Nomads, and Celestial. Check out their collection at lazy.com/cryptogallerist

OpenSea Shifts Stance on Royalties: A Strategic Blunder?

The ongoing tug-of-war over NFT royalties seems to have reached a pivotal moment. This week, OpenSea, one of the most well-known NFT marketplaces, announced it would no longer enforce royalties.

In November 2022, OpenSea introduced the Operator Filter, a tool aimed at allowing creators to restrict the sale of their collections to NFT marketplaces that protected creator fees in secondary sales. However, OpenSea has now officially reversed course: starting August 31, 2023, creator fees on OpenSea will become optional, and the Operator Filter will be discontinued. Although OpenSea will still enforce creator’s preferred fees for certain collections until February 29, 2024, from then on, the fees will be optional. OpenSea believes that this shift better aligns with the principles of choice and ownership central to the decentralized world. Moreover, OpenSea argues that creator fees are just one of the many revenue streams available to creators in the evolving web3 landscape.

The reaction to OpenSea’s decision has been strong. An NFT artist responded with palpable disappointment: “This is the worst thing that I could read this year. After 6 months of hard work in 2 days I will launch my free NFT collection. Everyone could mint for free and I will just enjoy a bit of royalties. And now? No more royalties enforcement.. waste of time and money.”

Mark Cuban, an early investor in OpenSea and founder of Lazy.com, expressed his dissent vocally on social media. He remarked, “Not collecting and paying royalties on NFT sales is a HUGE mistake by OpenSea. It diminished trust in the platform and hurts the industry. The optional royalty approach kills future applications that go far beyond collectibles. Which is where the most money will be.”

Although there’s a cohort in favor of OpenSea’s decision, the predominant sentiment leans toward disapproval.

With the erasure of royalties, the onus now squarely falls on NFT artisans to devise alternative monetization strategies – and the clock is ticking.

This week’s poll: Do you agree with OpenSea’s decision to abandon royalties?

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