🏛 Crypto Stakers’ IRS Tax Refund Marks Milestone for PoS Validators
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NEWS There may be good news ahead for those looking to earn new tokens by providing security to major blockchains that operate using proof-of-stake.
REFUND Joshua and Jessica Jarrett on Dec. 20 received a letter from the Department of Justice saying that the Internal Revenue Service (IRS) had approved a full refund of their 2019 taxes against the tokens they earned through staking in the Tezos network, plus statutory interest. This is all according to a packet from the Proof of Stake Alliance (POSA) on the case attained by The Defiant.
FIGHT The resolution marks an important milestone for the nascent staking industry’s fight to have staking rewards classified as property and not taxable income. The industry has reached an estimated $18B in size, according to Staked, a major provider of staking services, which was acquired by the crypto exchange Kraken in Dec. 2021.
STAKING In Notice 2014-21, the IRS said, “A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency measured in U.S. dollars, as of the date that the virtual currency was received.” Supporters of the Jarretts argue that cryptocurrency earned via staking is not the same and should not be taxed until it is sold or traded.
EXPLOIT Wormhole, a protocol which lets users bridge assets between Solana and other blockchains, has been exploited to the tune of over $320M. News of the exploit was first shared on Twitter by samczsun, a research partner at crypto investment firm Paradigm.
ASSETS That would make it DeFi’s second largest exploit ever, according to rekt’s leaderboard, which ranks crypto exploits by the total value of assets lost. Wormhole has confirmed the exploit on their Twitter account.
SOLANA According to Twitter user Robot Dad, the attacker minted 120K ETH on Solana through a bug in Wormhole. Kelvin Fitcher, a software engineer at Optimism, the Layer 2 scaling solution, confirmed the number, pointing to a minting transaction on Solana.
NEWS So far, NFTs have thrived mostly on Ethereum. A new release shows that may be changing. On Jan. 31, 0x, a four-year-old protocol that facilitates token trades, rolled out a swap feature for NFTs compatible with any chain compatible with Ethereum Virtual Machine (EVM).
EXPAND This may help NFT marketplaces, as well as general NFT developers, expand to other blockchains and change the landscape for the unique digital tokens, which Ethereum currently dominates.
EVM The EVM is, in essence, a set of rules that determines a smart contract’s code. Blockchain’s like Avalanche, Fantom, and Optimism, also a Layer 2, are EVM compatible, meaning they stand to benefit from 0x’s new standard, which will be released as part of the protocol’s v4, pending a vote in February.
NFTs 0x is a protocol generally known for facilitating trades of fungible ERC-20 tokens, but the project has actually been involved with ERC-721 tokens, more commonly known as NFTs, since 2018.
Gamers vs. NFTs
DEAL The gaming community’s opposition to NFTs cranked to full boil this week when Team17, the British development studio famed for Blasphemous, accepted and then cancelled a deal to launch NFT collectibles a few days ago.
REVOLT On Jan. 31, Team17 announced it would work with Reality Gaming Group (RGG) to launch an NFT project dubbed MetaWorms in celebration of its acclaimed video games series, Worms. That sparked revolt from Team17’s developers, some of whom had “voiced their disapproval” prior to the announcement, according to a report in Eurogamer. Others reportedly didn’t know of the plans before they were announced.
COMMUNITY There was more dissent from Team17’s development partners and the gaming community itself. Three days later, Team17 cancelled its MetaWorms NFT project. The company’s fans cheered the move.
BEAR Just a month into the new year, the crypto market is confronting a riddle: Why are NFTs soaring while digital assets plunge into bear territory?
FLOOR PRICE NFTs and tokens have definitely decoupled. Monthly volume on OpenSea, the leading NFT marketplace, hit an all-time high of nearly $5B this week and the floor price of leading collection Bored Ape Yacht Club (BAYC) jumped 50% in January, according to CoinGecko. NFT sales continue to make gaudy headlines — on Jan. 31, a BAYC NFT sold for $2.7M.
SKEPTICS Meanwhile, Terra’s LUNA token, a one-time DeFi darling, has shed half its value in the last 30 days. The crypto market as a whole lost a quarter of its capitalization in January. So what’s going on? Are NFTs, as skeptics argue, a bubble that’s just lagging the crypto market’s swoon? Or, as enthusiasts contend, are NFTs a new pop culture staple supported by sustainable demand?
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🧑💻 ✍️ Stories in The Defiant are written by Brady Dale, Owen Fernau, Samuel Haig, DeFiDad, and yyctrader, and edited by Edward Robinson, yyctrader, and Camila Russo. Videos are produced by Robin Schmidt, Alp Gasimov and Daniel Flynn. Podcast is led by Camila, edited by Alp.
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