John Knopf, who has been nominated for an Emmy, said on December 13 that he had sold his Bored Ape Yacht Club (BAYC) NFT.
The statement would have been meaningless if he hadn’t received 347 ETH for the piece. Knopf claimed that he bought the astronaut laser eyes ape number 9452 for 0.08 ETH on the day it was minted.
The big sale fetched him about $1.39 million in profit at current ETH rates. “I am at a loss for words right now,” an emotional Knopf stated in response to the sale. “I’m crying uncontrollably. Thank you for dramatically altering my life and the lives of everyone in the community, BoredApeYC!!!”
Some responders pointed out that if he were headquartered in the United States, he would face a high tax burden, with the government potentially taking up to 35% of his earnings.
A Million-Dollar Error
Deepak Thapliyal, CEO of Chain Protocol, provided a synopsis of the transaction, noting that he “decided to “ape” in and buy my very own, but given it was my first NFT, I wanted to get the proper one.”
He put 655 ETH in his wallet in anticipation of paying the entire asking price for the Astro-ape. However, suspicions were raised about the transaction as the seller received 230 ETH in addition to the offer price.
“I had to shift 230 ETH from my original mobile wallet to another wallet after placing my original bet. I thought I had properly pushed the copy button for the address I was sending.”
He then attempted to contact Knopf to explain the error and agree on a price for the NFT.
“I told him my experience and how I envisioned his ape. He promptly informed me that he had no intention of keeping my money and that it will be returned to me.”
After the two agreed on the 347 ETH price tag for the item, Knopf refunded the 230 ETH (about $920,000).
In the field of NFT sales, mistakes are common. A mutant ape NFT sold for 17 USDC instead of 17 ETH in late August.
The Week’s Best-Selling NFTs
According to the Nonfungible analytics platform, cumulative NFT sales have reached $275 million in the last seven days. CryptoPunks, which has sold $50 million in the last week, has become the most popular NFT collection.
The Bored Ape Yacht Club comes in second with $41 million in weekly sales.
In the Largest-ever NFT Drop, WAX will Distribute Ten Million Free NFTs
WAX will give out free NFTs to commemorate its success with a variety of companies on board and rising play-to-earn games.
Despite the recent NFT market surge, WAX has received little attention. Solana and Flow have both had considerable accomplishments in the field, but Ethereum has high-dollar, headline-grabbing sales and most of the overall trading volume.
Despite the lack of publicity, WAX has quietly racked up impressive numbers. It now has the greatest smart contract transaction volume of any network, with DappRadar having recently reported about 18 million daily transactions. In addition, major brands such as Funko, Mattel, AMC, and Sony Pictures have used it for NFT drops.
WAX—short for Worldwide Asset eXchange—has also recently passed the 10-million-to-11-million-total-wallet-accounts-on-the-platform-mark and will celebrate by airdropping a total of 10 million free NFT collectibles to those wallets. It’s the most significant single NFT drop to date, and the first 10 million WAX wallet holders will get it for free.
The free NFTs are distributed across ten different digital pins, commemorating a different period in WAX’s history. The 10 million NFTs jointly mark the platform’s success up to this moment, from its mainnet launch in 2019 to its carbon-neutral accreditation, and even its recent cooperation with AMC and Sony Pictures for “Spider-Man: No Way Home.”
WAX CEO and co-founder William Quigley told Decrypt that the company planned to commemorate the wallet’s one-year anniversary with a large-scale drop that would be unfeasible on other major platforms. While the airdrop represents WAX’s history, he also wants it to demonstrate to companies that they can use its platform to execute initiatives involving millions of NFTs.
“Most individuals familiar with NFTs recognize that minting Ethereum NFTs is slow and expensive,” he explained. “So we reasoned: Well, no one has ever attempted to make 10 million NFTs. We’ve only done about 2.5 million Topps MLB baseball cards, but even that much outnumber anything done by other chains.”
According to Quigley, WAX had roughly 500,000 registered members at the end of 2020, so the current 10 million record implies a 20-fold growth in users in just over a year. Furthermore, according to data from DappRadar, the larger NFT market surged considerably in 2021, going from over $100 million in trade volume in 2020 to $23 billion last year.
He said that minting 10 million NFTs on Ethereum’s mainnet would be too expensive and that the “chain would have collapsed” due to the network’s low transaction throughput. He also chastised competitor chains: Solana experienced extended downtime in September. In addition, Ethereum sidechain scaling solution Polygon recently suffered rising costs due to a now-defunct play-to-earn game called Sunflower Farmers.
On DappRadar’s list of the most popular decentralized applications (dapps) by user count, WAX offers several play-to-earn games and other applications. While increased demand can put WAX to the test, Quigley says the blockchain platform has stayed online and functional.
“We’ve made it through, although it’s been quite difficult at times. WAX is still standing, “he stated. “You’ve got chains like Solana and Polygon whose entire raison d’être is their ability to scale. And [Polygon] couldn’t even handle one of the most popular learn-to-play games. There isn’t one. And there are many of them.”
WAX plans ahead
According to Quigley, WAX’s growing reputation as a destination for brands—which includes Reebok, Mattel, Capcom, and Atari—is partly due to the platform’s scalability and inexpensive pricing. But it’s also because of his team’s experience working with brands, including his previous role as Chief Financial Officer of Disney’s licensing division.
“When we communicate to brands about intellectual property management, we speak their language,” Quigley said. “We can safeguard their brands, and a lot of it boils down to trust.”
He expects interest in WAX’s “vIRL” NFT format, which stands for “Virtual in Real Life,” to rise in the future. It’s essentially an NFT digital twin that can be redeemed for a physical version of the product, and companies like Funko and Mattel have already used it in projects.
It’s excellent for high-demand products like shoes and streetwear, according to Quigley, because it eliminates some of the expenses and environmental effects of shipping things through many parties before they reach the end-user.
He also anticipates increased crypto gaming activity on WAX, especially as the nascent play-to-earn genre matures and expands into more affluent, more appealing game experiences. He understands why AAA game companies have been chastised for launching in-game NFT products and believes that such items have yet to add value to games.
“A lot of gamers dislike NFTs because they see them as money grabs,” he stated. “When it comes to AAA titles, I’d say that’s not far off.”
In the end, he believes that conventional, big video game publishers will lose out in the play-to-earn market. Instead, indie developers will create games with NFTs at their core, considering how the technology benefits users and experiences.
He anticipates rapid and significant evolution, much as he did with mobile and browser-based games.
“Indie game creators who embrace this technology will start building games that progress from primitive–almost like DeFi mechanics rather than games—to full-fledged video games,” Quigley added. “It’s very much a work-to-earn situation right now—there isn’t a lot of playing. Finally, however, we will be able to play-to-earn.”
Mercedes-Benz Collaborates with NFT Artists to Commemorate the G-Class Series
Mercedes-Benz has enlisted the help of five NFT artists to create their unique interpretations of the G-Class.
According to a tweet from Mercedes, the luxury automaker has teamed up with Art2People to produce a unique Mercedes-Benz NFT collection based on its G-Class car line.
Five NFT artists were commissioned to create G-Class-inspired works in various media, each unique design.
Music, fashion, graphic design, architecture, creative marketing, luxury design, and real estate are participating artists. Charlotte Taylor, Anthony Authie, Roger Kilimanjaro, Baugasm, and Antoni Tudisco from Germany are among the artists. The NFTs will be launched on Sunday by Nifty Gateway and Mercedes.
Mercedes isn’t the first major manufacturer to experiment with NFTs. McLaren announced its aim to use NFTs to produce virtual copies of its renowned F1 cars in June 2021. In addition, Coca-Cola created a one-of-a-kind NFT campaign to collect money for Special Olympics International in July 2021.
Mercedes-Benz isn’t the first company to experiment with blockchain technology. The automaker has launched a trial with blockchain company Circulor to ensure that cobalt emissions are traced throughout the supply chain.
Participants in the NFT Market in the United States may Face Harsh Tax Penalties
As the NFT market grew in 2021, so did the tax questions for the next tax season.
The Internal Revenue Service (IRS) wants a piece of the NFT loot. There is uncertainty over how NFT holders should be taxed, although tax experts estimate that taxes could be as high as 37%. According to James Creech, a tax attorney in San Francisco, “you don’t get to report earnings or losses because the IRS has failed to provide guidance that satisfies your expectations.”
According to Chainalysis, the NFT business would see $44 billion in transactions in 2021. Some artists made large profits, with one American artist selling an NFT for $69 million-plus royalties. This raises some concerns about how they ought to be taxed. Although the taxation of NFTs is not apparent at the moment, that does not mean they should not be declared on your tax return.
Those who failed to declare quarterly earnings from NFTs may be in for a rude awakening when penalties are imposed the next tax season. NFT owners can sell their NFTs on NFT marketplaces like Opensea or Rarible, and they may be liable to income tax of up to 37 percent when they do so. In addition, if NFTs use another cryptocurrency to purchase the NFT, they will owe capital gains taxes to the IRS.
Experts on taxation weigh in
NFT taxes are estimated to be worth billions of dollars, according to Arthur Teller, CEO of TokenTax. However, aside from the 37 percent income tax, the tax requirements are murky. For example, should they be taxed at the same rate as capital gains on art collectibles, currently 28 percent? Moreover, in light of Joe Biden’s proposed tax infrastructure package, the Treasury Department provides no detailed guidance on how NFTs will be taxed. According to Jarod Koopman, a director of the criminal investigation at the IRS, as a result, tax evasion may become a distinct possibility.
The IRS has issued general crypto tax guidelines
Notice 2014-21, 2014-16IRB938, Rev. Rul 2019-24, 2019-44 IRB1004, and ILM 20214020; the IRS explains how bitcoins are taxed. It should be noted that none of these include any mention of NFT. Section 61 of the Internal Revenue Code (IRC) may necessitate the inclusion of creator income on the revenues of NFT sales and royalties. In contrast, Section 197 may allow amortization to buyers who use the NFT for business purposes. Buyers from other countries will be subject to local taxes. At the same time, if the copyright owners are citizens of the United States, they may be required to pay state and federal taxes on any royalties received.
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