Despite being “risky”, this lawyer believes Web3 has legs

You work with a lot of companies interested in the Web3 space – what are the things they are most keen on doing?

If we look at the more traditional companies, they ask questions about what they should do if they want to accept crypto as payments. If we think encryption is going to be a thing, most large organizations will have to decide whether or not to accept encryption, and that comes with quite a few issues. They are also looking into buying cryptocurrencies as part of the company’s treasury diversification strategy.

Abrahams says his unexpectedly large companies are “farm bets” on Bitcoin.attributed to him:AP

We’ve also seen a rise in venture capital investing in or buying Web3 companies. These deals are complex in terms of both the economics of tokens and their suitability with existing laws. Coding in general has become big. This includes coding physical assets such as properties, but also NFTs that are becoming popular with marketers as a new channel for customers.

The most amazing area in regards to the staff. I think I did one of the first employee token options schemes in Australia. Different from employee share options plans, ETOPs are where employees get crypto tokens instead of shares. We see it as very popular with employees because once the token jacket sells, unlike shares it can be illiquid.

I can imagine there is quite a bit of risk for companies when they consider doing these things, especially with the current lack of regulation?

The underlying technology is strong and the opportunities are interesting. There are ways to adopt Web3 technologies that do not involve punishment.

Norton Rose Fulbright Attorney Nick Abrahams

We can enter tokens according to existing laws, and it would be helpful to have some more specific laws. But we can do that now.

In terms of risk, tokens are an extraordinary proposition – an entirely new asset class. Therefore, you have to think in advance about all the different circumstances under which you might want to use it.

Then the important thing for me is that Web3 is completely different from regular software. With a regular program, you edit it, and if it has errors in it, those errors will be fixed over time. With Web3, the token must be 100% correct on release because it is very difficult to change it after the tokens are released. So from a technical point of view, it’s a level of complexity and a precision requirement that we haven’t had before.

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Do you think there are potentially significant risks in major companies – especially financial institutions – getting involved in cryptocurrency? With inherent volatility and a lack of regulation, can we see situations where companies are taking massive hits to profits, or their balance sheets as they delve deeper into cryptocurrencies?

There is a risk, but I don’t think any big company would go into this in a reckless way. In the last year, you had crypto markets of about $2 trillion and those markets have obviously gone down significantly, but the question I ask most of the institutions I talk to is: Do you think digital assets will still be a thing in five years?

Because either you say all that value created will evaporate, or you say no, I think it will stay. I’m a believer in digital assets, but I don’t think the path will be linear. There will be a huge amount of fluctuations, there will be fraud, there will be technological failures – it is very risky.

But the underlying technology is powerful, and the opportunities are interesting. And there are ways to embrace Web3 technologies that don’t include kicks, as if it’s great to see ANZ making a stablecoin, and JP Morgan having its own stablecoin two years ago, so you have to believe that stablecoins are part of the payments landscape of the future.

Unless they are called tera.

[laughs] I think even crypto hawks would have agreed that algorithmic stablecoins were on edge. It was elegant mathematics with incorrect assumptions.

The collapse of the stablecoin Terra led to a sharp drop in cryptocurrency prices last month.

The collapse of the stablecoin Terra led to a sharp drop in cryptocurrency prices last month.attributed to him:Bloomberg

I think we’ll see big organizations really focus on more utility-based use cases and kind of experiment around the edges. I don’t think anyone is betting on bitcoin or boring monkeys right now.

Even though I was talking to a fund manager on a Web3 fund the other day and asked him how the fund works, he said, “Okay, our Ether isn’t very good, but our monkeys are doing really well.”

Oh no.

They have a very broad mandate!

In this respect, from a legal perspective, when we look at things like NFTs, is it dry and dry in terms of ownership and intellectual property? Are there still questions to be answered?

yes. It’s not just vanilla, each NFT comes with its own characteristics – some buy the intellectual property, some just get a line of code that points to an image on the URL, so there has to be an evaluation of what is being served. The NFT market has only been around for a couple of years now, so we’re still trying to figure out what a “standard” NFT really looks like.

I’m not sure if I’ll buy a monkey, but I think NFT Games is where the development of future digital assets and metaverse business models are.

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