Apple’s New Coinbase NFT Shakedown Would Literally Tax Ethereum Trades And Transfers On iOS – Forbes
(Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)
Updated Dec 2 with additional details from a source at Apple
Coinbase tweeted this morning that Apple blocked the release of its latest crypto wallet app, asking for a cut of gas fees when people transfer NFTs to each other. Coinbase had to disable its NFT transfer feature before Apple would let the company update its popular self-custodial wallet.
“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,” Coinbase said via its Coinbase Wallet Twitter account. “This is akin to Apple trying to take a cut of fees for every email that gets sent over open Internet protocols.”
For once, that’s not PR hyperbole.
It’s actually that serious.
While Apple charges a 15-30% commission on digital products purchased in iPhone apps, gas fees are not in-app purchases. Rather, gas fees are something like electricity. Just like you pay the electric company to keep your lights on, you pay gas fees for the privilege of changing records on the Ethereum blockchain.
They’re essentially a small tax on transactions to keep the network running.
“Gas is essential to the Ethereum network,” says the Ethereum developer website. “It is the fuel that allows it to operate, in the same way that a car needs gasoline to run.”
While Apple’s most concerned about NFTs here, the reality is that sending crypto via your Coinbase Wallet — full disclosure, I use Coinbase Wallet personally — generally requires the payment of gas fees. So does exchanging crypto, if for example you want to trade some of one cryptocurrency for another cryptocurrency. Which means that Apple, based on this app update blockade, wants a tax on cryptocurrency trades on iOS apps.
Because, as CoinDesk puts it, gas fees are something all users must pay in order to perform any function on the Ethereum blockchain.
Repeat: any function.
“For anyone who understands how NFTs and blockchains work, this is clearly not possible,” Coinbase said. “Apple’s proprietary In-App Purchase system does not support crypto so we couldn’t comply even if we tried.”
I asked Apple about this issue and a representative replied on background, suggesting that Coinbase is not following App Store review guidelines, which have recently been updated to support some NFT transactions, and directing my attention to guideline 3.1.1 for more information.
Guideline 3.1.1 says, in part:
“Apps may use in-app purchase to sell and sell services related to non-fungible tokens (NFTs), such as minting, listing, and transferring. Apps may allow users to view their own NFTs, provided that NFT ownership does not unlock features or functionality within the app. Apps may allow users to browse NFT collections owned by others, provided that the apps may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.”
The obvious problem?
Apple’s App Store guidelines around NFTs do not enable person-to-person transactions. In the Coinbase Wallet situation, people are transferring NFTs to each other, perhaps for free, most likely at a certain cost. Apple says apps can let people browse other people’s NFTs, but buying them requires in-app purchases. That’s like making me send money to Amazon when buying a lawnmower from a neighbor, hoping that after Amazon’s cut, most of the rest might go to the neighbor.
Traditional in-app purchases unlock capability, offer shortcuts, supply power-ups, or deliver digital products or services for use and effectiveness inside the app. An NFT, however, “lives” outside of the app, even if it’s displayed in the app. And buying it changes public records that are also outside of the app.
It’s just completely different, and the rules that Apple has around NFTs are designed for an old-world centralized scenario that just doesn’t have to be the case anymore.
Ultimately, buying an NFT — though it’s digital property — is more like buying a physical product from Best Buy than buying an in-app purchase: an NFT has an external existence in a way that the typical in-app purchase never will. And Apple, unfortunately, has not really reckoned with that reality.
This is just the latest example of Apple attempting to control all the commerce on mobile apps for its iPhone and iPad products.
Most likely, this is simply a mistake from a low-level employee on the Apple app review team who does not understand crypto or NFTs, and Coinbase understands that, adding “we hope this is an oversight on Apple’s behalf and an inflection point for further conversations with the ecosystem … Apple, we’re here and want to help.”
Commenters find that most likely, including Oleg Fomenko, the co-founder of Sweat Economy, which offers the Sweatcoin app and the Sweat Wallet.
“I think you should go back and explain this again. It is likely that they misunderstood gas fees for buying NFTs,” he replied. “We have gone through 28 days of ‘to and fro’ and ultimately it boiled down to us explaining that users can not buy NFTs in Sweat Wallet.”
While in place, however, the ban makes it impossible for people who own crypto and NFTs in their personal Coinbase Wallets on iOS to transfer their NFTs. And it threatens the ability to send NFTs or cryptocurrency in any app on iOS, or to exchange one cryptocurrency for another, as least when gas fees apply. It also makes it challenging for companies to innovate in the space when the brakes on invention are held up by people analyzing their apps for opportunities for Apple to make more money.
In related news, Meta CEO Mark Zuckerberg said this kind of control over the mobile ecosystem not sustainable.
“I do think Apple has sort of singled themselves out as the only company that is trying to control, unilaterally, what apps get on the device, and I don’t think that’s a sustainable or a good place to be,” Zuckerberg said at The New York Times’ Dealbook conference (via Axios).
Apple says they will continue to work with Coinbase to try to explore options.
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