GM! Today is December 2, 2022. It's almost the new year already. Time really flies when you're having fun.
Apple is making things difficult for Coinbase. This week, Apple effectively forced the Coinbase Wallet app to remove its NFT transfer function by blocking their latest update from the Apple App Store.
The Mint will discuss the background of this story, the situation, and whether Apple has any merit in doing this.
Intro on Coinbase Wallet
Coinbase Wallet is a self-custody wallet that allows you to store crypto and NFTs on your mobile device. Self-custody essentially means that the private key that gives you access to your assets is kept by the user and not on a centralized exchange (custodial wallet).
Each wallet has a public and private key. Your public key allows people to find you and transfer assets to you. Your private key is the pin to your account.
As we've seen with the FTX collapse, custodial wallets carry a certain security risk since you're entrusting the firm with the keys to your assets.
This is a completely different conversation altogether, but we think it's important that you understand some of the basics of the app before we get into the situation.
As we stated earlier, a crypto wallet allows you to buy, sell, store, and trade assets with others. Any transaction that a user partakes in requires them to pay a "gas" fee. Buying crypto? You'll have to pay for gas. Buying an NFT? Gas. Sending your NFT to someone else? Gas. A gas fee is how the people that validate transactions get paid. The busier the network is, the higher the gas fee is.
Just think of it like an Uber. You have to pay the driver to use the service, and the busier the network is, the more you'll have to pay for that driver.
Now that you understand that, we can get into the situation.
Some key things:
Apple collects a percentage of all in-app purchases from apps sold on their store.
They recently updated their in-app purchases policy to include NFTs. ↓
"Apps may use in-app purchase to sell and sell services related to non-fungible tokens (NFTs), such as minting, listing, and transferring"
So essentially, Apple is trying to take a cut of NFT transactions.
Why This is Completely Unrealistic
Coinbase was very confused after this news was announced.
Apple’s claim is that the gas fees required to send NFTs need to be paid through their In-App Purchase system, so that they can collect 30% of the gas fee. For anyone who understands how NFTs and blockchains work, this is clearly not possible. Apple’s proprietary In-App Purchase system does not support crypto so we couldn’t comply even if we tried. This is akin to Apple trying to take a cut of fees for every email that gets sent over open Internet protocols.
Apple either 1) doesn't understand how the blockchain works or 2) wants to enforce power over a large crypto company like Coinbase. Judging from Apple's past behavior, we're leaning toward #2.
What we know for certain is that Apple can't collect portions of the gas fees as these fees are constantly changing. The App store would need a much more advanced collection system to even do what they're proposing. Additionally, the fees don't go to the users or the blockchain. They go to the network validators and are an essential part of the crypto infrastructure, so they simply can't be collected in the first place.
Apple doesn't really have a realistic way to profit off of this, so we expect them to retract their new policy in the coming weeks.
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That concludes this week's version of The Mint! Thanks for reading, and make sure to share your freshly-minted knowledge with your friends and coworkers.