The Bitcoin Espresso ☕#13 — India Announcing 30% Crypto Tax, Biden Administration Crypto Strategy & NFT Intro
Welcome to this week’s The Bitcoin Espresso! Whether you’re interested in Bitcoin, have just bought your first fractions of Bitcoin, or want to dive deeper into the space — this newsletter is for you. Find out more about the motivation behind this newsletter in the introduction post. Want more news? Follow @thebitcoinespresso on Twitter to stay on top of things between newsletters.
Weekly Summary: Bitcoin’s price followed a slow uptrend for the last days, spawning discussions if it hit bottom before coming back down at the time of writing. India announced a crypto tax as well as a digital currency. Furthermore, the Biden administration is preparing a crypto strategy. Today’s coffee chat features a much-requested short intro to NFTs.
A quick tip: There’s an explanation of words and abbreviations in the Fundamentals Glossary at the bottom.
📰 Essential News
Crypto Tax and Digital Currency in India: Finance minister Nirmala Sitharaman recently announced a 30% tax on income from virtual digital assets. The wording of virtual digital assets is notable because it seems to target cryptocurrencies and NFTs (non-fungible tokens). India has a history of ‟banning″ cryptocurrencies, so a clear regulatory framework is a welcome sight. One could argue it was likely a prerequisite for their next step — a central bank digital currency (CDBC), the Digital Rupee, is planned for the next financial year.
Cryptocurrency Strategy prepared by Biden Administration: The Biden administration is reportedly preparing a government-wide strategy on digital assets. The drafted executive order is said to include details on economic, regulatory, and national security challenges posed by cryptocurrencies. It could be presented in the coming weeks.
Dodge & Grimace Coin: Cryptocurrencies don’t have to be a solemn topic all the time. Recently, Elon Musk’s stated that he would eat a happy meal on TV if McDonald’s would take payments in Dogecoin, a ‟meme coin″ created as a joke. The official McDonald’s account responded in jest that they would if Tesla were to accept Grimacecoin, a fake coin depicting one of their mascots. Burger King UK chimed in as well: ‟you’re telling me a doge made this coin″. It was all in good fun until versions of Grimacecoins popped up on exchanges and people were actually buying them. I personally endeavor to refrain from letting a little fun and banter inform my monetary decisions.
Elon Musk @elonmuskI will eat a happy meal on tv if @McDonalds accepts Dogecoin
🛋️Coffee Chat: Non-Fungible Tokens (NFTs)
Last week’s newsletter mentioned NFTs, causing some of you to ask me to go into more detail about the topic. The media is ripe with NFT news, but it’s not intuitive why someone would spend money on a picture of a cartoon animal on the internet. If you’re wondering why you’re reading about NFTs in this newsletter, check out why I consider Bitcoin an innovation that will cause disruptions across sectors. As usual, this is not meant to convince you of any particular opinion but to provide you with fundamentals to form your own.
Non-fungible Tokens, in their essence, are digital proofs of ownership of unique items. ‟Fungible″ means interchangeable. For example, any 1 Bitcoin is equal to any other 1 Bitcoin. Bitcoin is fungible. You can consider your favorite jacket, chair, or signed edition of your favorite book as examples of non-fungible items. Swapping them out for new ones just wouldn’t be the same. NFTs are digital representations of ownership of these unique, non-fungible items. They are a bit like the authenticity certificates you get with a fancy rug or artwork with the addition of proving your ownership.
In The Bitcoin Espresso #6, I described the double-spending problem and how Bitcoin solved it, preventing digital money from being easily copied and pasted. With NFTs, this solution has been applied to non-fungible items. Failing to understand this part is often a cause of confusion. You can make a screenshot of an NFT artwork or copy and paste its image, but that doesn’t mean you verifiably own it, much like taking a picture of the Mona Lisa doesn’t make you its owner. The decentralized verifiability of ownership is a crucial part of the idea. This is why Twitter or Reddit verifying NFT profile pictures is noteworthy. The concept only makes sense if NFTs are verified since it distinguishes the original from a copy. This isn’t happening often enough yet to be intuitive on the internet as we now know it, where everything is easily copied.
So what about those profile pictures and cartoon animals? I think they are a proof-of-concept of this new technology that has already shown great appeal and success. NFTs as digital artworks are the foundation to move to NFTs for concert tickets (verifiable permit to enter and digital proof that you’ve really been to that legendary AC⚡DC concert), legal documents, deeds to a car or house, and much more.
NFTs are still arguably rough around the edges, and some consider them overhyped. To me, they clearly show technological potential. If you do consider playing around with NFTs, please take your time to read more about them, as scams are common in the space. A good starting point is Ethereum’s article on the topic.
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💡 Fundamentals Glossary
Crypto … Common abbreviation of the whole cryptocurrency space, which goes beyond digital currencies and also spans across decentralized finance (DeFi), non-fungible tokens (NFTs), and many other innovations.
Cryptocurrency … A digital currency that uses cryptography to prevent counterfeiting and fraudulent transactions. There are other cryptocurrencies besides Bitcoin.
The Double-Spending Problem ... Double-spending means successfully spending money more than once. Imagine taking a $5 bill and paying with that single bill twice for a total value of $10.
NFT (Non-Fungible Token) … digital proofs of ownership of unique items.
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