Updated Dec 1, 2022 - Technology

Coinbase halts NFT wallet function in fight with Apple

Illustration of the Apple logo made out of a repeating hundred dollar bill pattern.

Illustration: Aïda Amer/Axios

Coinbase has killed a non-fungible token (NFT) function on its mobile wallet because Apple demanded a cut, even though the cryptocurrency platform wasn't getting a cut either.

Driving the news: The company nixed a "Send NFT" function in its Coinbase Wallet, because it costs money (ether) to send an NFT.

  • Meanwhile, the iPhone maker — which has come under fire for the stiff cut it charges larger app makers — has claimed that "gas" fees required to send NFTs should be paid within the app, according to Coinbase.

Why it matters: Many large firms (and not a few informed users) in Silicon Valley are mad about the 30% Apple takes from any transaction that takes place on a large developer's iOS app.

  • Spotify and Epic Games have been fighting it a long time, and Elon Musk has joined that fight now that he's running Twitter.
  • Even the French are upset with the Cupertino-based giant.

What they're saying: "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 Wallet posted in a Twitter thread.

Context: Apple controls the most lucrative app marketplace in the world. Coinbase has, at times, been one of its most popular apps.

Zoom in: To send an NFT (to do literally anything on a blockchain) costs the sender a little money. Every time a user takes any action that goes into Ethereum or related blockchains, the user needs to pay the many computers that are going to run that computation.

  • This is called "gas" but is actually paid in the coin of the blockchain realm (when it's on Ethereum, gas is paid in ether).
  • Still, Coinbase gets none of this when a Wallet user hits "send NFT." It goes entirely to the blockchains' validators. It's just how Ethereum works.
  • Nevertheless, money is changing hands through one of its apps, so Apple believes it deserves a cut.

Catch up fast: In October, updates to the Apple app store guidelines gave a firm "no" to selling NFTs without cutting Apple in.

Thus far, Apple has not objected to functionality that only concerns using tokens. Digital goods seem to be the key issue.

  • To some, Apple appears to be trying to protect its lucrative market for digital goods, particularly in games. NFTs are feared to be an end-run around in-app purchase functionality for those goods.
  • "They are willing to hurt customers and the industry just to enforce that line," a source familiar with the matter told Axios.

Coinbase has appealed Apple's decision, saying that it's not technically feasible to implement in-app purchases for sending NFTs within Coinbase Wallet, given the nature of blockchains.

  • But the appeal was denied, and has since been escalated to an appeal of the guidelines themselves.

Flashback: For a long time, Apple has had a hard time wrapping its head around blockchains and NFTs.

  • Back in 2018, it booted the Coinbase Wallet when it tried to let users look at their NFTs for a video game that was under development at the time.
  • In 2015, it removed a game that earned bitcoin.
  • Coinbase itself had a tough time with the iOS store early on.

Quick take: If we had to bet, we'd say that Apple does not even have an Ethereum address to send their cut to, even if Coinbase found a way to pay them part of the gas fees.

Apple and Coinbase did not immediately reply to Axios' request for comment.

Go deeper