Gm Fintech Architects —

Today we are diving into the following topics:

Summary: This week we look at Apple’s update to their terms of service, enforcing the 30% revenue share on NFT transactions, and limiting those transactions to the Apple in-app payment rails. For all intents and purposes, this is a strong statement of their market power and walled garden approach. We explore the implications, look at the fight Apple has won against both Epic (in a legal sense) and Facebook (in the advertising sense), and propose that regulated status may actually provide the way out, by turning digital assets into brokerage financial assets.
Topics: payments, metaverse, NFTs, crypto, big tech, power
Tags: Apple, Meta, Google, Epic Games, SEC, OpenSea, Fidelity

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Long Take

The Apple Kernel

While we here at the Blueprint debate the future of economic development and geopolitics, a smooth $2.4 trillion behemoth quietly walks on making profound financial decisions that effect 1 billion people.

No, it’s not the Chinese Communist Party ghosting its prior President. No, it’s not their CBDC, or the Indian Aadhaar system, or the Brazilian Pix payment system.

Are Apple Seeds Good for You or Poisonous?

iPhone Installed Base (Above Avalon) — Source

It is instead our friends at Apple, with their iPhone users, living and breathing the iOS app ecosystem. Unlike the advertising robots of Google and Meta, Apple has the hardware advantage — it holds your default attention 100% of the time. Or perhaps, metaphorically, you hold the attention of its hivemind of 3.5 million applications.

We love writing about Apple (👑 link here), because it is so clearly a step above every bank and tech company out there, save for maybe Amazon.

What’s a better payment rail, Apple or Visa? Hint — does Apple care if they use Visa, or Plaid, or open banking, or crypto?

What’s a better banking account, Apple (with embedded Goldman Sachs) or Bank of America? Hint — Bank of America is a mere 1 of 3.5 million applications on the iOS, while Apple defaults are defaults.

But we digress.

The App Store just released an update to their guidelines that are rippling through the ecosystem:

The first revision prevents applications from using tokens — whether those tokens are fungible or non-fungible — to unlock functionality. The second revision calls out NFTs and allows NFT sales, as long as it uses the “in-app purchase” rail, and then excludes the ability to use other rails. What this implies in practice is that Apple is defending the wall in “walled garden”, where the wall requires developers to pay 30% of revenue to Apple for using their platform.

Not so great for the OpenSeas out there. More like ClosedSea!

OpenSea releases a mobile app, but you can't buy or sell NFTs on it — Source

This revenue share has been increasingly important to Apple. While direct retail revenue (i.e., selling the iPhone) is still king, other hardware sales have been decreasing in relative importance — from about 45% in 2012 to maybe 25% in 2022. In turn, Services revenue has grown from about 5% to 25%. That’s the green part in the charts below.

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Long Take: Can anyone fight Apple's monopoly…

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