Riding The Wave News Summary #63
Crypto Is Coming to Esports: The Games and Economics of Tomorrow, What Happens to Celsius Creditors if Crypto Prices Recover?, & more
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Crypto Is Coming to Esports: The Games and Economics of Tomorrow
Community-initiated ‘Bitcoin Stackchain’ exceeds $160K in one week
74% of public agencies feel under-equipped for crypto investigations: Report
Tweets
Crypto Is Coming to Esports: The Games and Economics of Tomorrow
Video games are big business. In 2022, they had sales of $200 billion globally. Esports tournaments, with skilled pro gamers battling it out for big prizes, rocketed to $2 billion in total payouts. Even watching games has become a booming business as Twitch said it racked up 770 billion minutes watched in 2022 alone with five months still to go before year's end.
But one dangerous idea is poised to change competitive gaming even faster than new immersive AR/VR hardware: crypto.
It's already happening.
To understand why, you just have to understand a little about why games and crypto have always shared a remarkably similar trajectory.
Crypto and gaming have a natural affinity. Both were both born as rebellious outsiders from the computer revolution. Both are controversial and have fierce opponents.
While video games have largely shed their controversial image, crypto is still a target of hatred, fear, uncertainty and doubt. The difference between them is mostly time. Crypto is a much younger industry. Its lifetime is short, dating back barely a dozen years with the release of Bitcoin in 2009. Video games go back to the 1970s and early 1980s, with prototypes even going back to the 1950s and 1960s. As the technology matured, it powered up companies like Sony (SNE), which took in over $25 billion in 2020 from its perennial console powerhouse, PlayStation, and the software services that surround it. A 50-plus year timeframe saw the games industry grow into the mega-business that it is today.
it's easy to forget just how controversial games were at various points in their history. Critics screamed that video games made kids fat and lazy while destroying their social skills. Worst of all they were linked to violence. Like the Satanic Panic of the 1980s revisited in the fourth season of the show “Stranger Things,” politicians of the 1990s and crusading lawyers turned on games with a vengeance. In 1997, now-disbarred attorney Jack Thompson went on the warpath, targeting video game makers with massive lawsuits.
Over time, the tide turned. Throughout most of the 2000s, an increasing number of leading figures, like the Surgeon General, said there was no link to video games causing violence, instead the main factors were a shift in home life and mental instability.
All of that is a remarkable turnaround. If it sounds familiar, that's because the history of politics is often the history of people in power reacting with fear and loathing to new technology, which happened with everything from telephones to steam engines to the telegraph, radio, TV and VHS videotapes.
Eventually, several chains that are dedicated to gaming will become dominant, with easy ways for video games companies to pay into the pool while generating a larger swath of rewards to give away in-game, which will move games beyond siloed one-off, single game currencies that nobody wants. Just as nobody wants to buy celery in the grocery store with celery coin and then switch to bread coin to buy a ciabatta roll, nobody will want World of Warcraft coin when you've got a general purpose coin that easily works across DOTA 2, WOWIII, Diablo, Counter Strike and anything else coming down the pike.
At first, I thought it was a bit strange that the author was taking the comparison between Crypto and Esports so far, but via the article, I saw their point on how they can synergize, although I dont think they will be as intertwined as they think. I also think that their point regarding tokens across different games could happen, but not without heavy fighting by the current industry as they enjoy being able to lock in sales with their company-specific in-game currency.
Another shift I could see is new game development companies coming into existence as the current major companies have gradually alienated a large part of their fan base.
What Happens to Celsius Creditors if Crypto Prices Recover?
Suppose bitcoin’s (BTC) price doubles over the coming months. Would the hundreds of thousands of customers whose cryptocurrency assets are frozen within stricken lending platform Celsius Network come out ahead, or just break even?
This is uncharted territory for a U.S. bankruptcy court.
The option to take recoveries in crypto sounds like it could be a boon for Celsius account holders, but much depends on what that means in practice, said Daniel Besikof, a partner at law firm Loeb & Loeb.
“The general rule is that creditors in bankruptcy have claims, denominated in [U.S. dollars], measured as of the date of the bankruptcy filing. It will be interesting to see how that rule is applied in this unique setting,” said Besikof in an interview.
Imagine a hypothetical account holder who has $1 million worth of bitcoin on the bankruptcy petition date of his or her exchange, Besikof suggested. In this example, if bitcoin goes down, recoveries on the claim will also likely go down. But if bitcoin doubles, would that creditor have a claim that’s now worth $2 million? Could he or she recover more than $1 million?
The courts will have to decide, Besikof said.
“I could see exchanges arguing that the account holder’s recovery is capped at $1 million, even if the exchange is flush with cash and crypto assets from the price increases,” he said. “That argument would create a potential windfall for the equity holders, but would be highly detrimental to account holders. This concern could be alleviated if the plan provided for the return of some or all of the customer’s crypto.”
A ruling on the legal status of property of the crypto assets – approximately 200,000 BTC held by the Mt. Gox bankruptcy estate that kept appreciating in value until it eventually overtook the total legal claim value of all creditors – might have been useful. But the court punted on the issue by switching to civil rehabilitation, a type of proceeding in Japan that bears some similarity to U.S. Chapter 11 restructuring, where a debtor retains the power to continue to manage its business.
The terms attached to Celsius’ custody wallets, which were purely for storage and did not pay interest, seem to suggest the firm should give that property back to those customers, but those assets only make up 4% of the outstanding pie (about $180 million at today’s prices). The rest of the assets are locked up in Celsius’ high-yield Earn program. According to the firm’s terms and conditions, customers who elect to use this service will “grant Celsius all rights and title to such digital assets, for Celsius to use in its sole discretion while using the Earn Service.”
However, those terms of service aren’t the endpoint in a case like this; they’re more like the starting point, noted Braziel. “There are tons of contractual terms that are totally unenforceable in bankruptcy court, let alone any court of law,” he said. “And if the firm wasn’t following the rules within a given jurisdiction where something was offered, then the terms of service aren’t even applicable.”
Given how long bankruptcy can take, I wouldn’t be surprised to see this happen. I do think both sides of this case (company & investor) would push for the value in crypto to be returned as otherwise, I dont want to imagine the backlash the company would face. If they did that to their customers, they would be blacklisting them from crypto, which in my mind, is a worse outcome than losing their company.
Community-initiated ‘Bitcoin Stackchain’ exceeds $160K in one week
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