Thread by @PokoFund

With the speculation around #TheMerge turning #ether into a #security, it's important to understand:
- what the conditions for ruling sth a 'security' are; and
- what this will mean for miners, DeFi protocols, and DAOs.

🧵👇

Context: #Ethereum is moving from a proof-of-work to a proof-of-stake system, where ppl need to invest/stake in capital to validate new blocks. Anchored in the Howey Test, professor @AdamLevitin argued that this transition will likely turn ether into a security.

Howey Test validates whether a sales/transaction is considered a security and should fall under its law. Its validator components include:
1. Investment of money
2. In a common enterprise
3. With an expectation of profits
4. Solely from the efforts of the promoter/a third party

Based on those principles, these are the elements that fall correspondingly to the fields above:
1. Individuals stake money
2. In Ethereum (common enterprise)
3. Profits expectation is through staking rewards
4. Primarily from the efforts of other Ethereum participants

However, this assumption is undermined by the former SEC regulator William Hinman, doubting that ETH would be branded a security on such basis. He made a remark in 2018 saying that Ethereum had become sufficiently decentralized to unlikely be considered an investment contract.

@TimBeiko is on the same boat as Hinman, only from a different lens. The most important point he pointed out was that the hashing in PoS is far less computationally intense than PoW hashing for Ethereum 2.0 to be considered 'efforts of others.'

If believing in prof. Levitin's argument, miners could either go with #TheMerge or start a new project. Either way requires a hard fork anyways. Small DeFi projects can continue to operate without much worry about being chased after down the road by the SEC.

#DeFi protocols are almost always being governed by some form of DAO. We mentioned this in an article for the @wef: weforum.org/agenda/2022/06…

Poko has been directly working with the Kazakh government to create a new jurisdiction that is flexible for changes to accommodate #DAO legalization and web3 growth.

Our mention in @banklessDAO 's @OGLawPanda tweet:

https://twitter.com/OGLawPanda/status/1557564788091371520?s=20&t=qrFSwdFrL2IBfDySh6F5ww

If you are interested in talking with us and see how we could help materialize your DAO in the safest and most affordable way possible... Let's start talking: flatfbx5wzx.typeform.com/to/tjD0fGYd