Charles Hoskinson - Business Development Delegate

[Gentso1]

BM you mentioned in mumble weeks ago plans to dissolve I3, Is that still the plan?

It would make it that much harder for any regulator body if their was no company to attack.

[kisa]

However, it should be possible to defend that bitUSD isn't CFD-like in the US where the value is measured in USD.

Really? How?

CFD investor receives profit or suffers a loss (measured in USD) if the value of the "CFD underlying asset" (e.g. Gold) moves as quoted in USD.

bitUSD issuer or holder is by its very design expected not to receive profit or suffer a loss as measured in USD. Here, profit or loss as measured in USD results out of deviations from parity, which is the opposite to"tracking" underlying asset value, as in case of CFD.

So the liability, if any, should be for bitUSD deviation from parity with USD, and not for offering a speculative security... Would the SEC care? Potentially yes, if they consider that holders or issuers of bitUSD are subject to risk of USD losses. Certainly, SEC is looking to ensure that CFD providers track value of underlying assets closely enough...One could argue that BTS collateralization and bitUSD rules reduce such risk. But perhaps legally most important point is that bitUSD is designed to experiences NO changes in its USD value

Disclosure: This is not legal analysis, just back-of-the-envelope logic.

[toast]

However, it should be possible to defend that bitUSD isn't CFD-like in the US where the value is measured in USD.

Really? How?

[kisa]

BitUSD as currency

The argument isn't is it a currency, which is clearly not. The argument is if it is a true CfD subject to CFTC regulation. Those that take place in facilitating the markets would be the people exposed to liability namely delegates.

logically, bitEUR or bitGOLD could be considered CFD-like in the US. Similarly, bitUSD resembles a CFD if viewed out of Europe. However, it should be possible to defend that bitUSD isn't CFD-like in the US where the value is measured in USD. If so, then bitUSD delegates should be in the US, bitEUR delegates in Europe, and bitGOLD ... hmmm ... somewhere underground...

[charleshoskinson]

BitUSD as currency

The argument isn't is it a currency, which is clearly not. The argument is if it is a true CfD subject to CFTC regulation. Those that take place in facilitating the markets would be the people exposed to liability namely delegates.

[clayop]

If governments regard BitUSD as currency and want to summon its issuer, who will be responsible for this? Delegates who publish price USD feed or people who short BitUSD?

[charleshoskinson]

Delegates may publish a feed, but that is just free speech and they are not required to publish a feed.   

Is there a mechanism for non-delegates to publish feeds?

[bytemaster]

This doesn't seem to be factually correct. Aren't delegates also responsible for price feeds? Won't bitusd fail to work properly without them?

Delegates may publish a feed, but that is just free speech and they are not required to publish a feed.   

Delegates are not guaranteed any more than miners in a pool are guaranteed.

In our case the "miner" is the the BTS holder and the delegate is the pool.   BTS holders cannot be replaced any more than miners can, but they can switch pools.

[charleshoskinson]

Now comes the question of BitShares which could just as easily be Sparkle (or any number of alts).   In my opinion Delegates are legally identical to miners or mining pool operators.   They are mere employees serving a term and can be replaced at will by those who hold the BTS. 

Miners cannot be replaced. No one in bitcoin can vote out a miner. It's true we can switch from mining pool to pool; however, a miner can't be fired. Second, miners aren't paid a predictable salary from the network. They are performing incentivized action. But there are no guarantees of returns.

All of that said, I firmly believe the BTS community and other delegates will support any individual delegate which comes under attack out of the interest of defending the network and ensuring the network can retain high quality public delegates.

Then why not have a reserved indemnity fund? It turns belief into reality.

Their role is limited to processing transactions just like Bitcoin.

This doesn't seem to be factually correct. Aren't delegates also responsible for price feeds? Won't bitusd fail to work properly without them?

The other parties (DOJ, IRS) care about fraud and taxes.   Fraud requires intent and actual harm and considering everyone who gave has received equal or greater value as a result it is kind of hard to argue fraud.  Taxes are being done in full compliance with IRS codes with expectation of an audit.  In this case Invictus is in the hot seat and given the extent to which we have gone to comply with the law, the corporation should shield Stan and I from liability.   

One can certainly argue that calling something a donation to avoid securities regulation is fraudulent especially if there is evidence that the founders believed so. At the very least, it invites a fishing expedition from the relevant authorities.

As far as that lunch goes... bring extra salt.   

Don't worry you'll get a surprise invitation while visiting family. We'll order for you. And you're buying of course.

[bytemaster]

There is no evidence I've seen that the SEC views it like that but it is definitely within the range of possibility if they really were determined to make something of it. I don't think the SEC would start doing more than a fine because Burnside, Vorhees, and others all got a fine after a settlement. If you cooperate with the SEC then you get a fine so far.

The SEC has a set of tests from the Howey test to the Hawaii Market Center test to judge whether something falls under the jurisdiction of the security exchange act of 1933 via the investment contract section. Generally speaking, vocabulary doesn't matter nor marketing material rather the substance of the transaction from which parties financially benefited, expectation of return, the medium upon which funds were solicited and the nature of the enterprise. It's a complex topic and generally is resolved by either a formal legal opinion (a more likely than not letter) or a no action letter directly from the SEC.

The SEC cannot arrest people, nor can it pursue criminal conduct. This is done typically either at the state level or via the DOJ. Usually actions are multi-agency with the IRS and SEC examining one plank and state law enforcement examining another. Also they tend to bundle enforcement together with emerging industries. A great example would be the crackdown on online gambling back in the early 2000s. There is also the ability to pursue international enforcement via treaty. The SEC can reach into over 80 countries if there was provable American participation in the event in question. How enforcement could be done would be for the SEC to issue a ruling on ICOs and apply it retroactively giving them the mandate to pursue anyone within some window (up to ten years, usually five or so). Most will be given the option to settle for a fine and some restrictions. Others will become the poster child of the enforcement action.

In terms of personal liability for running a delegate, if the person was connected to invictus during or before the AGS event, then it could invite additional scrutiny from the relevant bodies. The bigger issue is if a bitasset is considered a derivative under US law and subject to CFTC regulation. Bitshares cannot work without delegates under the current design therefore the CFTC can argue that its under their jurisdiction and pursue enforcement against the delegates for operating the network. The same could be said about mining perhaps; however, bitcoin does not permit complex financial derivatives or arbitrary code to be run. Also miners are not elected nor are paid a salary for providing a host of network services beyond block validation.

I think the community should strongly consider a delegate indemnity fund to cover legal costs associated with operating a delegate. It's an added layer of security and support for the role. 

However, we don't know why he left so it might not be a matter of being able to "let go of the past".  Unfortunately none of us will ever know because BM is a damned vault with these reasons.  Charles just wants to eat lunch with you when you ask--though don't get me wrong, I'm sure a couple brewskies with him would be a good time!

Let's have lunch.

There are many issues at play here:  AGS is one issue and the only people on the hot seat here are Stan & I as far as I can tell.  The funds have been spent the results have been produced and if it was deemed a security for a period of time (between when funds were received and when product delivered) it would no longer be a security because there is nothing to deliver.   It would be like a company issuing a corporate bond without SEC approval and then paying off that bond within the same year.   SEC can only pursue civil matters and cannot dole out criminal punishment. 

The other parties (DOJ, IRS) care about fraud and taxes.   Fraud requires intent and actual harm and considering everyone who gave has received equal or greater value as a result it is kind of hard to argue fraud.  Taxes are being done in full compliance with IRS codes with expectation of an audit.  In this case Invictus is in the hot seat and given the extent to which we have gone to comply with the law, the corporation should shield Stan and I from liability.   

Now comes the question of BitShares which could just as easily be Sparkle (or any number of alts).   In my opinion Delegates are legally identical to miners or mining pool operators.   They are mere employees serving a term and can be replaced at will by those who hold the BTS.   They have no individual power to stop or stop the network though collectively they do have have the power to stop the network.   Their role is limited to processing transactions just like Bitcoin.  They decide whether or not the transaction is valid, but the public who views the transaction ledger ultimately interprets the result.   It would be a stretch to claim the delegates are executing market orders.... they merely include bids, asks, transfers, cancels operations into the public record.  Any implied result or outcome or change in ownership is not their job.   

All of that said, I firmly believe the BTS community and other delegates will support any individual delegate which comes under attack out of the interest of defending the network and ensuring the network can retain high quality public delegates.

As far as that lunch goes... bring extra salt.   

[charleshoskinson]

And as the "architect" of the largest ICO in history, Charles, in your estimation, does Ethereum's bake sale pass the sniff test?

Yes, ethereum received a more likely than not letter on whether the sale of ether passes the Howey test. I left prior to the final draft; however, the drafts I saw indicated that ether is not a security. This makes implicit sense considering that ether is required to operate the network. It's infrastructure as a service with a tremendous potential for cost savings. Ultimately, however, the SEC can argue whatever it wants. But we worked and had discussions with a lot of people including a former commissioner of the SEC to try to structure things in a way that made our business goals align with the regulatory reality. Even a no action letter doesn't provide complete protection. It's just the nature of current US Securities law.   

[donkeypong]

And as the "architect" of the largest ICO in history, Charles, in your estimation, does Ethereum's bake sale pass the sniff test?

[charleshoskinson]

There is no evidence I've seen that the SEC views it like that but it is definitely within the range of possibility if they really were determined to make something of it. I don't think the SEC would start doing more than a fine because Burnside, Vorhees, and others all got a fine after a settlement. If you cooperate with the SEC then you get a fine so far.

The SEC has a set of tests from the Howey test to the Hawaii Market Center test to judge whether something falls under the jurisdiction of the security exchange act of 1933 via the investment contract section. Generally speaking, vocabulary doesn't matter nor marketing material rather the substance of the transaction from which parties financially benefited, expectation of return, the medium upon which funds were solicited and the nature of the enterprise. It's a complex topic and generally is resolved by either a formal legal opinion (a more likely than not letter) or a no action letter directly from the SEC.

The SEC cannot arrest people, nor can it pursue criminal conduct. This is done typically either at the state level or via the DOJ. Usually actions are multi-agency with the IRS and SEC examining one plank and state law enforcement examining another. Also they tend to bundle enforcement together with emerging industries. A great example would be the crackdown on online gambling back in the early 2000s. There is also the ability to pursue international enforcement via treaty. The SEC can reach into over 80 countries if there was provable American participation in the event in question. How enforcement could be done would be for the SEC to issue a ruling on ICOs and apply it retroactively giving them the mandate to pursue anyone within some window (up to ten years, usually five or so). Most will be given the option to settle for a fine and some restrictions. Others will become the poster child of the enforcement action.

In terms of personal liability for running a delegate, if the person was connected to invictus during or before the AGS event, then it could invite additional scrutiny from the relevant bodies. The bigger issue is if a bitasset is considered a derivative under US law and subject to CFTC regulation. Bitshares cannot work without delegates under the current design therefore the CFTC can argue that its under their jurisdiction and pursue enforcement against the delegates for operating the network. The same could be said about mining perhaps; however, bitcoin does not permit complex financial derivatives or arbitrary code to be run. Also miners are not elected nor are paid a salary for providing a host of network services beyond block validation.

I think the community should strongly consider a delegate indemnity fund to cover legal costs associated with operating a delegate. It's an added layer of security and support for the role. 

However, we don't know why he left so it might not be a matter of being able to "let go of the past".  Unfortunately none of us will ever know because BM is a damned vault with these reasons.  Charles just wants to eat lunch with you when you ask--though don't get me wrong, I'm sure a couple brewskies with him would be a good time!

Let's have lunch.

Why call it an ICO? That language seems like it would attract additional scrutiny. Why not call it a crowd sale or pre-mine?

I actually call these events DCCMs to avoid this very issue: https://docs.google.com/document/d/1xG1hkPbk0uuavjPc_gt_eWxEUbWM1SlsxNmhGdRIUtg/edit

I think you have a point about being under scrutiny. I just don't know why we as a community choose to use language which would bring scrutiny.

People are practical and have to communicate complex concepts to others. It doesn't help much to add a layer of legal obfuscation as a CYA. I suppose it is necessary, however.

[fuzzy]

Succinctly, I don't have any intentions to run a delegate for three reasons. First, the board of Invictus made a decision without debate or my input back in October of last year that my services were no longer required. I really don't think I can have an effective working relationship with the people who made that decision moving forward. I'd be happy to collaborate where it makes sense and I always promote good technology if it's open source, high quality and solves real problems.

Relationships are like blockchains, to avoid forks one must upgrade or downgrade, then rescan.

edit: It would obviously be great for this initiative if the olive branch were extended to you

As bitshares the technology gets further disintermediated from I3 the company, then I'd be happy to become more involved.

Looking forward to the day you do.

Hey Global.  We are all adults here...why not just post under your real alias?  You harm your cause posing as a nublet.

I seek to tap the collective consciousness, better to clear everyone's minds when doing so.

As many have brought up in this thread, any proposal would need to be vetted and voted on by the community.  I think this is the most important thing.  Anything less than excellence would not be accepted.

Tapping the collective consciousness requires that "consciousness" have clarity regarding your motives, affiliations and associated biases.  Posting like this harms your ability to "clear others' minds".

[Globally Distributed]

Succinctly, I don't have any intentions to run a delegate for three reasons. First, the board of Invictus made a decision without debate or my input back in October of last year that my services were no longer required. I really don't think I can have an effective working relationship with the people who made that decision moving forward. I'd be happy to collaborate where it makes sense and I always promote good technology if it's open source, high quality and solves real problems.

Relationships are like blockchains, to avoid forks one must upgrade or downgrade, then rescan.

edit: It would obviously be great for this initiative if the olive branch were extended to you
edit: Perhaps it should not matter.

As bitshares the technology gets further disintermediated from I3 the company, then I'd be happy to become more involved.

Looking forward to the day you do.

Hey Global.  We are all adults here...why not just post under your real alias?  You harm your cause posing as a nublet.

I seek to tap the collective consciousness, better to clear everyone's minds when doing so.

As many have brought up in this thread, any proposal would need to be vetted and voted on by the community.  I think this is the most important thing.  Anything less than excellence would not be accepted.