26 / (continuing thread)

https://twitter.com/lex_node/status/1790550776391110909

29/ Rebuttable Presumptions - This flexible judicial test could be applied with some rebuttable presumptions--for example, that if some person or affiliated group owns more than 20% of tokens or controls more than 50% of validating nodes, the system is presumptively centralized.

1/ **Thread** 🚨 We need to get back to decentralization and autonomy in crypto law and policy arguments. I'm against ETH and XRP being regulated the same. One is equity in a decentralized autonomous system (Ethereum), the other is a shadow-equity-style bet on one corporation (Ripple). 2/ Crypto policy people and the SEC have completely lost the lesson of Bill Hinman's speech on why ETH is not a security--because its value drivers are sufficiently decentralized. Reviving and refining this approach is more important than ever now that the SEC is attacking ETH.

hard to explain this well on X, but yes, code must be law for DeFi to work

these systems would need to be designed completely differently if they are meant to be subservient to offchain understandings

you can't reference that offchain understanding only in the case of 'hacks' For example, if Aave is meant to merely implement an offchain loan agreement, and thus the code of Aave may differ in performance from that agreement, then Aave needs to code jurisdictional usury limits on the interest rates or else that offchain agreement is itself void

ETH vs SOL the real issues, a thread I've been wanting to write this for a while and have been thinking about these issues ever since digging into Solana (and its sources of centralization at the DApp level) a year ago

https://twitter.com/lex_node/status/1601956819315957761

https://twitter.com/lex_node/status/1601966276125016065

Get Hyped! - We’re Hiring to Build BORGs

I’m working with @delphi_labs and @LeXpunK_Army to hire a super saiyan lead developer for a special new project:

Building a cybernetic law platform for DAOs.
Our initial focus will be on cybernetic organizations, aka 'BORGs' 🤖

BORGs are real-world business entities intrinsically bound to smart contracts (and, eventually, AI). They create a new design space of cybernetic law bridging onchain and offchain worlds.

Purported "tokenization" of purported "RWAs" is mostly fake/impossible--a brief thread 3 kinds of 'RWAs':
1. "real" securities (e.g. shares of stock, bonds, etc.)
2. ownership titles to offchain assets (e.g., a real property deed; registered IP can also fall in this category)
3. receipts/certificates of deposit for an offchain asset (e.g. a specific gold bar)

in 5 years crypto governance will be better than TradFi governance by every metric

I am devoted to making this happen

we've already made progress--in MolochDAOs people can ragequit; DAOs can defund a BORG; yearn's yETH vault has depositor governance

much more to come BTW, this is how you get good regulation for crypto--actually deliver objectively fairer and less trust-requiring results

the rest is noise

most tokens should be more like stock

*no premine, just mint as needed

*mints must be approved by existing tokenholders

*add series & convertibility

permanent supply cap is not meaningful (there can always be forks) & not needed (most tokens aren't vying to be money)

https://twitter.com/spreekaway/status/1704557785323548874

*the trend of minting the entire supply on day 1 and holding it in a treasury, but only releasing a small portion to circulation (i.e., 'low float high FDV'), inflates network valuations in a misleading way--let's stop doing it

if you run any kind of interface etc. for a DeFi credit protocol, block the U.S.

many people told me I was crazy when I said that the CFTC's case against OokiDAO simply makes DeFi illegal under the CFTC's view of U.S. law; I was right--they were wrong

cftc.gov/PressRoom/Pres… thedefiant.io/100-of-defi-co…

Proposed treasury regs for crypto asset 'brokers' just dropped and do indeed explicitly characterize various persons involved in DeFi (including operators of websites that communicate with wallets) as brokers . I'll need to dig in more but it looks pretty bad.





Many DeFi web apps with U.S. users would need to track users' PnL and issue them tax statements every year--disastrous.

This could be a devastating blow to the use of P2P protocols in the United States. It could even sweep in Etherscan since it can be used with smart contracts.

whatever you think of Hinman emails and Ripple's chances of wining/losing, I think we can all agree SEC policy, tactics, everything on crypto has been an absolute mess--even before Gensler--inviting arbitrary application of law through nebulous 'morphing' non-guidance we cannot have arcane priests going token-by-token through elaborate analyses of facts and circumstances deciding these issues every time--we need Congress to step up and create a clear, reasonable, easily navigated set of fit-for-purpose rules for crypto

Hinman emails are a nothingburger though great for ETH. No idea why Ripple thinks these emails help Ripple's case.... to everyone getting mad:

1. facts don't care about your feelings (or mine--I'd love it if this helped Ripple's case but it just doesn't)

2. vitalik talking to hinman pre-speech was a well known fact among cryptolawyers+ for years, this is not new information

I'm seeing some misleading takes on yesterday's OokiDAO decision. Here are some notes/clarifications from my understanding:

1. this is a *default* judgment--OokiDAO didn't defend itself, so the CFTC won without needing to prove its theories

limited precedential significance 2. *no OokiDAO members were held to be personally liable for anything*

I can't stress this enough. Nearly every commentator is getting this wrong.

OokiDAO *itself* was held to be liable for the alleged violations--not its members

three things I think 'the cryptolaw bar' (including myself) has gotten way too behind on while focusing on regulatory nightmares:

1. MEV
2. zkProofs & associated privacy solutions
3. interchain / app-chain

a lot of dialogue still implicitly premised on old tech, old issues great article on MEV from @zin_esq . . . the legal arguments / conclusions could be debated but it is a great introduction to all the moving parts involved in the block chain-of-production these days and how they challenge standard cryptolaw narratives:

zzzin.substack.com/p/where-the-ru…

okay, as promised, here is my long/stream-of-consciousnessy thread on the proposed crypto market structure bill

CAVEAT: this is one of the most of complex & ambitious financial laws ever written. I might miss stuff. I am paraphrasing some things for ease of readability. first, we need to step back & realize what this bill is trying to do-->unlike the EU's MiCA, it is *not* a 'let's figure out how to regulate crypto from scratch from first principles' kind of thing.

a key challenge with this market structure bill will be explaining to legislators that every idea they bake in about what blockchains, decentralization, etc. are supposed to look like are setting an incentive for them to be designed that way--not always for the better for example, a "decentralized network" is not SEC-regulated (you want to be that), but to have your system be considered a "decentralized network" you must, inter alia, not contribute to the code base for 3 months...

why incentivize this? what if there is a big security issue?

highlighted is a key modifier in the market structure bill I think some are ignoring

you might see "20%" and think 'oh that's not so bad, 30%-20% is a normal % for project teams to retain even now"

this is 20% of OUTSTANDING supply, not TOTAL supply IOW, this is an incentive (arguably in some sense a requirement) to release almost all token supply at once, otherwise devco can only take a very small % of total supply (far less than 20%)

but is that what's best?

good detail here and directly contradicts analysis of former SEC Chairman Joseph Grundfest that a given token is sometimes a security and sometimes not

that approach was also the foundation of Blockstack's SEC-qualified Reg A+ offering...

https://twitter.com/MeatTC_/status/1647980125118406656

if this is true then the SEC failed its job in the Blockstack qualification as IIRC Blockstack's model depended on treating the tokens as non-securities when held by Blockstack...I'll need to dig up those old letters between WSGR and the SEC re Blockstack...

I just read SEC's case against Bittrex & am floored...more aggressive than could've been imagined and goes directly against Dash's no-premine model, saying DASH is a security despite the fact that the devco is funded by validators out of block rewards... ofc some distinctions could be drawn b/w Dash (masternode model) and more open validator sets but I believe even relatively conservative cryptolawyers would've thought DASH is not a security

I just read SEC's case against Bittrex & am floored...more aggressive than could've been imagined and goes directly against Dash's no-premine model, saying DASH is a security despite the fact that the devco is funded by validators out of block rewards... ofc some distinctions could be drawn b/w Dash (masternode model) and more open validator sets but I believe even relatively conservative cryptolawyers would've thought DASH is not a security

TRM Labs head of policy is vice-chairing the new CFTC technology advisory committee

CFTC continuing its legacy from SBF/FTX of falling prey to utterly shameless capture by special interests

cftc.gov/PressRoom/Pres… For those who don't know what TRM Labs is--it's a chain analytics company.

They and anyone who works for them has a vested interest in extending the financial surveillance state onto all aspects of blockchain.

They absolutely are biased (of course!) and should not be… twitter.com/i/web/status/1…