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Just because the SEC continues to pretend there is nothing new with tokens, and tags most of them as securities, doesn’t mean that tokens are doomed and have no future except for being labelled and treated like securities.

To the contrary, the token model is a fundamental innovation of blockchain technology, and it will eventually gain its footing and respect with the regulators who haven’t yet seized the scope of the paradigm shift that tokens encapsulate.

I’ve been thinking about and analyzing the tokens phenomenon long enough to have acquired a significant depth in perspective [here, here, here, here, here and on Tokenomics]. What I’m seeing now is a significant lack of knowledge and understanding on the part of the gatekeepers of change. We could blame them for not trying hard enough, but we can also blame ourselves for not trying to better explain these changes.

Simplicity increases the chances that the general public, regulators and incumbents of all nature comprehend the need for change.

What makes the token difficult to comprehend is that it is a multiple function abstract, and we are not used to seeing something that simultaneous a) has several functional properties, b) represents diversified units of value, and c) is embodied in a digital form that binds it all together. Tokens are a new beast, and if we keep wanting to fit them or classify them within the previous paradigms or lenses we have, we will fail to seize their beckoning.

Simply put, tokens could simultaneously have properties of a:

  1. Currency
  2. Equity
  3. Financial Instrument
  4. Reward
  5. Right
  6. Digital Asset

So far, we have used separate artifacts to symbolize each of these functions. Then, came the token that melded them together in a mush, causing our mental ability to also become mush.

For currency, we have had the dollar, yen, euro, pound, and scores of sovereign fiats.

For equity, we have share or stock units, and they are known as securities.

For financial instruments, we have derivatives, bonds, futures, options, swaps, etc. and they are typically administered by brokers, agents, custodians or exchanges.

For rewards, we have mileage points, airline miles, loyalty cards, and the likes.

For rights, we have government-issued identity cards, or share proxies that allow us to have a (voting) voice in the governance affairs of what matters to us.

Finally, we have a blockchain novelty: a singular representation of a digital asset as a uniquely transferable unit of value: the non-fungible token that could represent a caricature-like version of a cat (eg CryptoKitties), a cartoon monster, a tank toy, or a purple sword won at a game, but could also represent a concert ticket, a collectible, or maybe something else not invented yet.

I believe that this classification covers all of the use cases for cryptotokens. Currency is used for payments, either for goods and services or for blockchain-related computer resources (eg gas). Equity represents ownership in a physical asset (eg real estate) or a proxy to some commodity (eg gold). Financial instruments include all of the existing (and new) financial services products that will eventually move to a purely digital format. Rewards embody what is also referred to as a “work token”, because some human or computer work has to be generated to earn these tokens, either actively by doing something or passively by sharing something else of value (eg our data). A right could include a right to vote (eg governance related), or a right to access something (eg digital content or some actionable service). The digital asset represents what is also called in the blockchain circles as NFT (non-fungible tokens), and they represent natively created digital objects that live only in a purely digital form, and have no physical equivalent. Finally, there’s one more factor that can apply to any token: they can be locked or unlocked, which means that their usage is tied to a time element.

A cryptotoken can be all of the above functions at once, or it can be some of them. Or, it could start as one thing, and develop into different ones, hence lies the puzzle and head scratcher that regulators and others are grappling with: how can we regulate, let alone understand this novelty concept that has many concurrent lives, when we have been used to seeing them and treating them as distinct units?

Furthermore, each token can have many different permutations in how it can be created, earned, bought, sold, granted (or received), stored, or used. And the most important remaining feature is that these tokens can be exchanged, traded or transmitted in a purely peer-to-peer fashion, without the friction of central actors.

As a chameleon symbol, the token is a weapon that punches through societal, governmental, and business related constructs via a technology component that is powerful and potent. It collapses many constructs into one.

This brings us back to regulation. It is erroneous to start with a securities framework for regulating how we want to govern the advent of tokens. Not only is that starting point like fitting a square peg into a round hole, it’s like trying to apply something where it doesn’t belong. More importantly, it chokes the new business models that want to emerge out of these token use cases.

Therefore, we need to recognize that the token is a unique type of asset. For a lack of a better set of words, it is “a new asset class” that needs its own laws and regulation. Unlike the “security” moniker that regulators want to box it in, the token doesn’t always represent a personal financial interest nor an equity share of a financial stake into something else. It is a new type of proxy to our increasingly digital lives.

The token needs to be given respect and it needs to be accepted as such. If the current regulators want to govern it, they will need to open their minds much wider, and one way to help them is by trying to explain it in a more friendly manner with a simple language like I’ve attempted here.

I don’t believe we have explained tokens in a simple enough layman’s language, yet. That is largely why change makers quickly put their blinders on when they approach the topic, or they only see what they can comprehend.

I believe that regulatory headwinds are the most imminent hurdles facing token adoption, and we must work on those first, by making it easy for everyone to talk about tokens, and to be accepting of the many applications that want to include them.

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For the 4th time in the past two years, Nick and I have the incredibly hard job to curate the Token Summit line-up of speakers and content topics. Every time, we turn down about 90-100 requests, in order to end-up with about 45 speakers we settle on.

Since the beginning, our philosophical focus has been on siding with the projects and people who are truly original and pushing the ball forward, with credibility and depth. And we have resisted the pay-for-play trap that comes from sponsors pressuring us to select their speakers, as it has been the hardest balance to strike.

With that in mind, we are pleased to release the Agenda for Token Summit IV (some parts are still subject to change). We believe it represents a good mix of experienced, new and original voices, pointing to where the industry is going, not where it has been.

Thursday May 16th

7:30 AM

Doors open, Registration and Networking over Coffee/Tea and Continental Breakfast

8:30 AM Conference Sessions Start

  • Opening Welcome and Setting the Stage. William Mougayar and Nick Tomaino
  • How Decentralized Are We? William Mougayar
    Measuring decentralization has multiple dimensions. Where are we in quantifying the technological and non-technical characteristics of decentralization?
  • Cryptocurrency Realism. Nick Tomaino
    Maximalists serve their purpose, but new projects align incentives and push the whole ecosystem forward. More collaboration is beneficial.
  • Token Taxonomy Act. Rep. Darren Soto
    A special video message recorded for the Token Summit, where Congressman Darren Soto updates us on the Token Taxonomy Act, and how the industry can help push it forward.
  • Fireside Chat with Timothy Massad,  with William Mougayar
    Discussing the Brookings report he recently authored on strengthening crypto-assets regulation, and proposed Congressional action with the former CFTC Chairman.
  • Blockchain Interoperability. Panel discussion with Jae Kwon (Cosmos), Robert Habermeier (Polkadot), and Lane Rettig (Ethereum), moderated by Nick Tomaino
    Will one chain rule all or are we at the dawn of a new era of cross-chain communication?
  • Behind the Scenes of the Blockstack Reg A+ SEC filing. Fireside Chat with Muneeb Ali, Blockstack CEO and William Mougayar.
    In an exclusive first, Muneeb takes us behind the scenes of their recent filings, how they did it, what’s next for Blockstack, and what are the implications for other players in the industry.
  • Stablecoins and the Future of MakerDAO. Fireside Chat with Steven Becker, MakerDAO president and Nick Tomaino
    MakerDAO has been the breakout success on Ethereum. What does the future look like for the first major experiment in decentralized collateralized stablecoins?
  • Decentralized Products Taking on Centralized Incumbents. Panel discussion with Justin Hunter (Graphite), Brian Hoffman (OB1), Ted Livingston (Kin), and Ryan John King (FOAM), moderated by William Mougayar.
    Every centralized online business will face competition from a variety of decentralized models that each have different value propositions and ways to lure new users to their platforms. What’s driving these decentralized projects, and how can they win against the incumbents?
  • Challenges in Decentralized Projects Governance. Panel discussion with Evan Van Ness (Week in Ethereum News), Lane Rettig (Ethereum Foundation), with William Mougayar.
  • Decentralized Finance (DeFi). Panel discussion with Hayden Adams (Uniswap), Nadav Hollander (Dharma), Robert Leshner (Compound), Renat Khasanshyn (Etherisc) moderated by Nick Tomaino   Ethereum is currently working well for open, global financial applications. Why is it working and what are areas for improvement?
  • Quantifying the Value of Blockchain Data. Panel discussion with Ryan Selkis (Messari), Arjun Balaji, Jose Maria Macedo (AmaZix) and Devin Walsh (Coinfund), moderated by William Mougayar
    Where is the value in tracking and measuring blockchain related data? What are the latest practices in extracting blockchain data for insight? What have we learned and why is this important now? What’s on the horizon?
  • Experiments in cryptoeconomics. Panel discussion with Kevin Wang (Nervos), Zaki Manian (Iqlusion, Tendermint), Doug Petkanics (Livepeer) Sunny Aggarwal (Tendermint) moderated by Nick Tomaino.
    A discussion on new token designs that seek to properly align incentives and capture long-term economic value.
  • The State of Practice in Security Tokens. Panel discussion with Josh Stein (Harbor), Heinrich Zetlmayer (Blockchain Valley Ventures), Sebastian Burgel (Validity Labs), moderated by William Mougayar
    It is now time to show security tokens in actions. What are the best cases that have leading implementations? How is it being done? And what else can we expect? Is this a revolution or step-wise evolution?
  • The State of Prediction Markets. Panel discussion with Joey Krug (Augur, Pantera), Tom Kysar (Forecast Foundation), Paul Fletcher-Hill (Veil), with Nick Tomaino.
    Augur launched in 2018 and v2 is on the way this summer. What have been the main learnings so far and where are prediction markets going?
  • The Future of dApps. Panel discussion with Kim Cope (Dapper Labs), Nick Grossman (Union Square Ventures), and Arianna Simpson (Autonomous Partners) moderated by William Mougayar
    How do we get dApps into the consumer mainstream? What are the latest practices and approaches that are working? What’s not working?
  • The State (or Stalemate) of Regulation? Panel discussion with Mike Didiuk (Perkins Coie), Nancy Wojtas (Cooley), Andreas Glarner (MME), and Robert Rosenblum (Wilson Sonsini), by William Mougayar.
    Is the US losing its position as the standard bearer? Is there a perfect jurisdiction? Who is ahead in the evolution of regulations and why?
  • Talking Tokens. Fireside chat between Fred Wilson (Union Square Ventures) and Olaf Carlson-Wee (Polychain) Two pioneers and early believers discuss what they see, and how they think about the space.
  • Show and Tell Lightening Talks (being finalized)


CMORQ (Dana Panzer)

Vesper (Jeff Garzik)

MolochDAO (Ameen Soleimani)

Audius (Roneil Rumburg)

Commonwealth (Dillon Chen)

Ava Labs (Emin Gün Sirer)

Titan (Ryan Condron)

bloxRoute (Uri Klarman)

5:40 PM

  • Closing remarks. William Mougayar and Nick Tomaino
5:45 PM – 7:30 PM  ~ Farewell Reception
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Aside from Bitcoin, Ethereum is the most important blockchain platform. It has undoubtedly inspired and moved the whole crypto market forward.

Five and half years into its inception, I believe that Ethereum is at a proverbial fork in deciding what future trajectory it wants to choose.

Recently, there has been some public criticism about Ethereum’s evolution that I will not re-hash here. I have been mostly silent, as I wanted to fully analyze the situation and come-up with some solutions, before rushing into judgement. I decided that if I was going to express dissatisfaction, I would do it along a constructive path.

For background, and for some newcomers who have joined the blockchain (or Ethereum) ecosystems only in the past 2 or 3 years, my history with Ethereum and its Foundation takes roots to its inception days in the late 2013 timeframe. Starting in early 2014, soon after the white paper was published, I became one of the first advisors to the Ethereum Foundation, and witnessed up-close its evolution and early emancipation, leading-up to its public sale. Back in 2014, I helped the initial Ethereum co-founders figure out their key messaging and positioning, much of that work still showing its fingerprint today, via the “platform for decentralized applications” moniker. In 2015, at a time when the project was still very technical, I felt the need to explain its implications in a more friendly business language, so I wrote the first business-oriented essay explaining what Ethereum meant and what it could become, The Business Imperative Behind the Ethereum Vision. I remained closely associated with the Ethereum Foundation and Vitalik in particular, helping them gain their footing, until early 2017 when the Foundation dissolved their Ethereum Advisors.

Since then, I continued to be a fervent and vocal Ethereum advocate, speaking at various occasions about the strength of the Ethereum Ecosystem at key events such as DevCon1 in London (2015), Edcon in Paris (2017) and Toronto (2018), ETH-Waterloo (2017), ETH-Denver (2018, starts at 52:00), and more recently, in March 2019 at the Paris ETH-CC with a talk titled Challenges in Growing the Ethereum Ecosystem as a Community. In this last talk, I pondered if Ethereum’s greatest strength,- its community approach, has now become its key challenge. In addition, I’ve attended (or listened to) several core dev or community calls, and regularly interacted for several years now, with developers and entrepreneurs that are using the Ethereum platform.

For disclosure purposes and added context, I do have a few investments in Ethereum-related startups, technology projects or cryptocurrencies. I am therefore vested in the success of Ethereum, so my criticism is not intended to cause it harm at the benefit of another competing platform (as some other critics’ motives are). Rather, my observations are meant to (hopefully) send a strong message of self-introspection and potential change for the better.

First, I’d like to make it clear that I firmly believe that Ethereum still has a significant edge over other players in the blockchain industry. To properly measure Ethereum’s market leadership, you need to evaluate “together” the combination of the several dimensions of factors that determine a given blockchain platform’s success: size of its global community of developers, degree of technological decentralization, number of apps created on it, number of P2P nodes that support it, capital generated from it or invested into its startups, diversity of industries it touches, richness in functionality, choice of development tools and languages, scale of innovation that springs from it, smart contract language capabilities, regularity and breadth of software updates, quality of cryptographic advancement research, and I’ve probably left a few other components.

Add to all of this, Ethereum’s most important characteristic: the fact that it remains dogmatically committed to decentralization as an infallible raison d’être from an infrastructure perspective. Running close to 5,000 nodes harmoniously bestows Ethereum a handicap index that no other blockchain (except Bitcoin’s) can claim to inflict itself with, resulting in actually being a bona-fide sovereign-grade blockchain. That is an ambitious principle to live by, a principle that, once removed, would lower the degree of complexity of achieving scalability and speed, by orders of magnitude.

Today, Ethereum is still the envy of other blockchains, and as an expected result of being the leader, it gets attacked continuously. Most other emerging competitors try to angle for a perceived weakness that supposedly Ethereum has, such as on-chain governance, faster settlement times, less energy consumption, or unclear market messaging. But as I’ve been saying for a while: Ethereum’s most important feature is not a feature. It is rather the strength of its contributing and supporting community, and that’s something that no competitor can copy.

Most other blockchain competitors have stronger central, command-and-control modus operandi as they try to emulate Ethereum’s success in propagating their footprint into global communities or luring developers with grants and financial incentives. In contrast, having started with an original, powerful and magnetic vision, Ethereum’s community gets drawn to Ethereum by their own accord, and in a ground-swell fashion. Ethereum’s grants aren’t focused on luring developers from other platforms, rather they aim to fund efforts that contribute to Ethereum’s own strength. The Ethereum community’s growth  is self- motivated. Many of its community events or hackathons regularly attract thousands of attendees whereas many of its competitors struggle to get a few hundred or dozen attendees at similar functions.

For an update on Ethereum’s strengths and uniqueness, please refer to Joe Lubin’s presentation in Seoul and video where he introduces the concept of “Distributed Transaction Processing” DTPS, a new measure that factors the degree of decentralization into blockchain transactions speed as a primordial factor that trumps fast, but less decentralized transaction throughput achievements in other blockchain platforms.

In light of the regulatory uncertainty that followed its ICO, the Ethereum Foundation went out of its way to not centralize itself. By its own admittance, and to prove the (SEC) loosely defined decentralized attributes, the Ethereum Foundation did not want to be a central force that drives or controls the economic outcomes of its underlying cryptocurrency. At the last DevCon 4, Ethereum’s Executive Director Aya Miyaguchi stated: “We are willing to decentralize decision-making and funding, no matter how chaotic it looks.”

However, this voluntary laissez-faire has been chaotic enough to the point of yielding inefficient progress, produced an extreme obsession with consensus decision-making (at the expense of some excessive delays in decisions), engendered overlapping agendas or efforts, and created an overall complacency for making changes happen fast enough.

Despite all this success, it is my opinion that the Ethereum Foundation must re-invent itself once again. How it evolves may determine Ethereum’s degree of future success. Change must come together from the outside, and not only from the Foundation itself. Ultimately, that would elevate the eventual state of effective decentralization it aspires to continuously live-up to.

How Ethereum evolves is a primordial topic today, and I don’t know of a better to way to express it than to lay out my specific thoughts about it.

Here’s what I think should happen with the evolution of Ethereum.

Let’s start with the Ethereum Foundation (EF). If its current annual burn rate of $20 million supporting 100 employees is correct, there is definitely room for improving what’s being delivered, and how its resources could be more efficiently managed. Historically, the EF has not excelled at efficiently managing its people, regularly communicating with the market (although it did so more on its blog previously), or being transparent about how it manages its financial and operational affairs.

I propose to keep the $20 million annual budget, but distribute it differently. Here’s a set of specific recommendations:

#1 Rename the Ethereum Foundation to Ethereum Research Foundation

The Ethereum Foundation’s focus should be on research, not development, and therefore could be renamed as the Ethereum Research Foundation. Let’s face it. The core of the Ethereum Foundation has been research, an area they excel and revel in, but since Jeffrey Wilcke and Gavin Wood left it, they have not been so efficient at rolling out a good cadence of software updates and improvements. I realize that splitting research from development is a delicate operation, given how embroiled both functions have become within the Ethereum Foundation, but there is a precedent if you look at how Microsoft Research is run for example. Budget $7.5M.

#2 Revive EthDev with a Focus on Software Development

Soon after raising $18M from its ICO, the Ethereum Foundation set-up a group called EthDev, a development oriented organization focused on delivering what they promised. I suggest to revive EthDev or form an equivalent organization that is headed by an experienced full-time CTO or Head of Software Engineering. That group should be laser-focused on software development and delivery based on known and agreed-upon priorities, across all aspects of Ethereum’s evolution,- Eth 1.x, Eth 2.0 and sharding implementations included. Budget $7.5M.

#3 Fund EthMarket to Properly and Regularly Communicate Ethereum’s Positions and Updates

Create a small group that focuses on officially communicating all of the work that Ethereum is doing, properly messaging to the market Ethereum’s strengths, and defending/rebutting claims made by the competition. Allow this group to organize the next Ethereum global conference, not just as a DevCon but as a true melding of business and technical communities together. And it would provide a unified voice that can re-reclaim the “Ethereum narrative”. Initial budget $1M.

#4 Spin EthHub as EthEducation, the Education Jumping Point

Energize EthHub’s excellent work, and make it a cohesive jumping point for everything related to Ethereum education for developers. Beef it up even further. Initial budget $1M.

#5 Create EthBizDev to Support the Strategic Adoption of Ethereum Technology

Ethereum can take a page from AWS or Microsoft Azure’s approach to forging and nurturing relationships with key developer organizations. Form a small group, focused on strategic relationships, evangelism, and adoption. Initial budget $1M.

#6 Form an Ethereum Governance Council with a Mixed Business and Technical Composition

This Ethereum Council would become the new Ethereum heartbeat. Initially, it could consist of 1 representative from each of the above groups (except for 2 reps from the Ethereum Research Foundation), and another 4-6 external members with noted business experience in growing and managing tech organizations. A 6-month chair rotation could be implemented. The council would meet once per month, with an agenda of updating each other on progress, discussing issues, making some decisions, and taking back action items to their respective groups.

What I’m proposing is not to shake or disturb any of the good ground community work and initiatives that are already taking place, but rather harness them better. Activities like the Ethereum EIPs, Ethereum Magicians, Ethereum Cat Herders, EthCC, EthGlobal, Ethereum Gitter, EthResearch, the Ethereum Enterprise Alliance, Ethereum Github’s repository would continue as they are vibrant and important, but they will be given extra shots in the arm if a newly invigorated distributed organizational structure takes place. A virtual, but more accountable organizational structure would help ensure that no good efforts (or intentions) are being squandered, nor that unproductive work sucks the air out of an otherwise healthy ecosystem that wants to strive and not spin its wheels unnecessarily.

Basically, what I’m proposing is a measured decentralization of activity, with better accountability and a thin layer of old-fashioned management to oversee the overall progress. In essence, we would be giving more muscle to Ethereum.

Let’s face it: the times, they have changed. We aren’t in 2015 or 2016 anymore when Ethereum was the only viable alternative to Bitcoin. Today, there is fierce competition, and it is a factor that cannot be ignored. Even if Ethereum continues to “play nice”, other players are not. The market mistakes Vitalik Buterin’s pleasant and charismatic personality as a soft spot. Some people conflate Vitalik’s kindness and intellectual generosity as an Ethereum project weakness, and exploit that to their own advantages.

Today, the Ethereum 2.0 that’s needed is not just technical. It’s also organizational. Company re-organizations are a common occurrence. For growth reasons or changing market conditions, what worked then doesn’t work anymore, and it gets changed. There is nothing wrong is being loud and clear about the need to change the structure of an organization, and then to proceed by just doing it.

It is my opinion based on what I’m hearing and sensing that if the Ethereum Foundation doesn’t overtly start to initiate change, that change will happen around them. The proposal to levy a % of mining fees as a continuous funding for development was a direct response to a lack of proper funding from the Ethereum Foundation. Where there is smoke, there is usually fire.

Throughout Ethereum’s journey, the Ethereum Foundation has been its spark, but going forward, we need to ensure it doesn’t become its anchor.

I hope this proposal gets debated and taken seriously. More importantly, that change happens for the better.

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The SEC has just released an 11-page statement with an analysis pertaining to digital assets being offered and sold as an investment contract. The report is titled Framework for “Investment Contract” Analysis of Digital Assets, and is prefaced by the following Public Statement framing it. Both documents are pre-requisite reads in order to get the full context of my remarks below.

Unfortunately, the SEC framework is late in its appearance. I wished that type of guidance was issued 15-18 months ago when it was most needed. As if it had been in draft mode for a very long time. The SEC is showing their inertia, and this concurs with how long it took them to issue the DAO Investigative report which came out more than a year after the actual event took place. 

The report is tilting on supporting why most tokens are securities by default, as it consisted primarily of an unpacking of the Howey Test, which sets the bar very high, and challenges most previous token offerings to actually jump to these compliance levels.

That said, the most important part of that report is in Section 3. Other Relevant Considerations. It is strangely buried as an ending section, whereas I wished it was actually encapsulated in the report’s headline, because that was the real novelty here, not how to interpret the Howey test. 

In essence, the SEC has offered a set of characteristics that are “not necessarily determinative, but the stronger their presence, the less likely the Howey test is met”.

Again, the bar is quite high on these conditions, as it strongly de-emphasizes the appreciation of the token in the speculative markets, in favor of the token usage inside these networks as a stable or even deflationary currency. This obviously makes it very hard to ride the speculative appreciation of the token as a way to fund the on-going operations of a project, and puts into perspective the importance of the timing and progression factors for a given token’s lifecycle.

This tells me that- going forward, public token offerings in the US are best done by following existing Securities rules (likely as a Reg A). Otherwise, the token utilitarian role must be very strict and deeply embedded into the network usage, while its speculative appreciation must be delayed as much a possible into the future.

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It is commendable for the SEC Chairman to have come out with a response to Rep. Budd’s inquiry about clarifying their stance on Ethereum and token classifications.

It took a while (5 months) for the SEC to respond, probably because they didn’t want to give these positive signals too early, while they were pursuing other enforcement actions that were already underway.

Begging the SEC for further clarity has been the industry’s crying signal for a while. In January, I enumerated 28 questions that the SEC needed to answer. Coin Center is to be commended for helping Rep. Budd draft that letter.

In my opinion, Chairman’s Clayton’s response represents a turning point in how the SEC might view tokens in the future. It is a first step, but a good one. They had been entrenched so deep against tokens as a utility for so long, such that they could only dig themselves out of that narrow hole gradually, and that was a very good first step.

What are the implications that could be interpreted from this response letter?

  • The SEC has indirectly implied they didn’t move fast enough to fine token offerings that were previously a security during issuance. As time went by, tokens became in use, and networks became operational and decentralized as intended. The end-result has made their case for finding (and fining) potential violators weaker and weaker.
  • The SEC acknowledged that a token can change its characteristics over its lifetime, and that’s a very important factor in accepting the novelty aspect surrounding the utilitarian role of tokens.
  • They acknowledged that they are willing to react to, and become more straight forward (or change their opinion) if prompted by a political force (the letter from Rep. Budd). [But it is interesting that industry calls for the same seemed to have fallen on deaf ears.]


Did the SEC just blink? I think they did. And maybe with a wink too.

They have no choice but to become more friendly and accepting of the innovative token-based models that entrepreneurs are eager to test the grounds for.

I am hopeful that an SEC token clemency regime is just beginning.

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In light of Elizabeth Warren’s proposal for breaking-up the big US Tech companies such as Facebook, Google, Amazon and Apple, some potential beneficiaries are already rejoicing at the prospects of a break-up, while others are betting on the fact that new startups that are based on decentralized business models will eventually usurp them by virtue of new user acquisitions.

However, we shouldn’t rush to believe that it will be so easy for these potential beneficiaries to expect users to fall into their lap, just because they will be based on decentralized models.

Of course, centrally-run systems could become unfair, corrupt, untrustworthy, evil, abusive, inefficient, expensive, or eventually plain useless. And there are plenty of examples to go around for each of these cases, and you would think that these bad practices would be enough to move users away from them.

Although I believe that one of the best value propositions the blockchain has for itself today, is to become an enabler for all these decentralization-focused business models, I’m not sure that it is going to be enough to move users to these systems, away from the centralized incumbents, just because the data is decentralized or not owned by the operator.

We can’t just say – let’s have a decentralized twitter, decentralized facebook, decentralized messaging, etc. just because it’s decentralized, and expect users to flock to these new applications. The incentive must be stronger for users to care about moving. There is a psychology of change that is prevailing here, and it goes like this: People are risk-averse in the domain of gains, and they are risk-seeking in the domain of losses.

As I covered this point in my previous talk Unpacking Decentralized Governance in the Blockchain Era, this means that- you aren’t going to move users or people to try something new if they are currently happy with what they are using, and you just tell them it is “better”. But if someone is currently experiencing a loss, a pain, a defect, a deprivation, or something negative, and you come in and propose to them a solution that stops these pains or losses, the motivation to move are much greater and they would gladly do it.

So, I think there will be two ways that users will move to these new systems:

  1. Via catastrophes that result in data loss, thefts, breaches, etc from the central players that lead to real financial and harm-type of losses for users, and that will push users to move to these new systems.
  2. By introducing new features and benefits that are not available from incumbents so that new users will be drawn to them for those uniqueness, and not from a “better me-too”.


Finally, we should keep in mind that all of these central players will have more than one trick up their sleeves, and if the tide moves completely to decentralized data, they could become two-faced about it, just like Mark Zuckerberg just did for privacy, and they will declare they are all for decentralized data as well.

How these new decentralized players emerge, and how they compete against centralized players is a very interesting development that will start to unravel in the coming months and years.

We plan on covering that topic at the next Token Summit in New York on May 16th where we will have a specific discussion with some of the new players that are leading this new paradigm shift.

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It is with great pleasure that Nick and I are announcing the fourth edition of the Token Summit, to be held in New York City on May 16th, 2019.

While public sentiment and prices are down significantly from last year, the underlying fundamentals are stronger than ever. We’re excited to bring together the leading entrepreneurs, developers, experts, and investors from around the world to discuss the most important tech, economic, and governance challenges and opportunities the cryptocurrency industry is currently facing.

This year, we are capping the number of attendees at 550, about the same number we had at the inaugural Token Summit in May 2017. The attendees’ positive feedback from that day continues to resonate with us and we’re bringing it back to our roots for Token Summit IV with an intimate venue and very tightly curated content.

The first 200 early bird tickets are openly available for purchase immediately at the early price of $699. After 200, anyone can sign up but we’ll be “invite only” and selecting signups based on quality, experience and diversity of thought they bring. In an industry that tends to be quite tribal, we strive to bring together a collection of different perspectives from around the industry into one room.

In terms of the content, this edition of Token Summit will focus on the following issues:

  • Cryptonetworks and open source blockchain protocols versus startups: what are the differences and similarities?
  • Open finance: what are the challenges to getting open, global financial products in the hands of millions of users?
  • dApp development: can next-generation dApp platforms be a catalyst for greater adoption?
  • Latest practices in extracting blockchain data for insight: what can we learn and why is this important now?
  • Are we decentralized yet? Is there an optimal criteria for decentralization, and how do we get there?
  • How do we quantify the value of blockchain protocols, and applications?
  • What are the success factors in deploying decentralized protocols?
  • Decentralized governance – what is working now versus what is experimental?
  • Tokens evolution- what are the best cases with real innovation, real users and real benefits?
  • The regulatory front: Is the US losing its position as the standard bearer? Is there a perfect jurisdiction?


We have been working behind the scenes to confirm the initial roster of speakers, and we will announce that first batch in the coming weeks. Many of them may not be well known yet, but their work is notable in pushing the industry forward.

If you’d like to be in the first batch of 200 attendees, here’s the link to register.

We are looking forward to hosting you at Token Summit IV on May 16th!

William and Nick

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Here’s a bold prediction: a consumer-to-blockchain revenue model will be emerging.

We know that the current publisher-driven content pay model sucks. Fred Wilson chimed on it again here, The Free and Open Internet. Paywalls are not a panacea.

We know that most ISPs are highway robbers. I don’t know any user that would admit they aren’t overpaying for Internet access services. Telcos profits and ISP monopolies are there to prove that point.

We know that public blockchains need a “continuously viable” economic model to ensure their ongoing decentralized independence. Today, the economic equation is driven by a mix of mining revenues, gas related tolls, transaction fees, and rising token prices,- all summing up to actual monetary value changing hands.

Today, miners are paid to validate transactions. Developers pay to run blockchain programs (smart contracts). Most processors (or central exchanges) charge additional fees (off-chain) to ensure the finality of transactions. Some blockchains have built-in on-chain fees as part of the transaction’s journey.

Sound economics of public blockchains depend on a delicate balance that needs to always be in place. That balance depends on actual stakeholders, sponsors, activity, validators, stakers, etc. all humming together.  

What if there was a consumer model where a user would pay something nominal, say $10/month to start with, in order to have access to a given public blockchain and all the goodies that are running on it?

Imagine if that type of revenue would then be divided-up programmatically (according to a known protocol) among the various stakeholders, including the node operators, core developers, storage resources, and related supporting peer to peer networks.

Incentive-driven blockchain payouts are emerging. We already have models that have provided those beachheads: Steemit pays users for publishing content, Blockstack’s App Mining distributes payouts to populars apps, and the Kin’s Reward Engine incentivizes successful developers according to their contributions.

Of course, not all blockchains will be able to practice a paid model. Only the truly open, decentralized, universal, scaleable ones that have a large enough ecosystem of applications and developers will be able to contemplate that model in their future. And I would envision this possibility only when a blockchain is stable, and not still in development. Ethereum is a good contender for that model. Perhaps Blockstack as well.

Imagine a new paradigm where mobile Dapps are not subservient to the Google or Apple stores, and rather retain a lot more of the value they earn, while still being rewarded for their overall contributions on a more fairly and equitable basis.

Imagine a new marketplace where we will find the next generation of decentralized apps there, the ones where privacy and data are in the hands of owners and not monopolies. I don’t believe Google or Apple will be the gateways to such a future because they are currently its gatekeepers.

If you think of the blockchain as a universal utility, just like the Internet or the telephone or water, then the idea of paying for it may not be a crazy one.

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There is mounting pressure on the Securities Exchange Commission (SEC) to further clarify their policies and positions pertaining to the impact of blockchain technology on the financial sector. Of specific interest are the classification and regulatory requirements pertaining to the initial generation of cryptographic tokens that are tied to new companies, protocols and projects.

Arguably, the SEC is the most influential (and largest) securities regulator in the world. By their actions (or inactions), they have considerable influence (and overreach capabilities) over what other financial regulators decide around the world, and how they think about this space.

Despite some innovative directions from other jurisdictions such as Malta, Gibraltar, Liechtenstein, Cayman Islands, Singapore, the UK, Japan, and Switzerland, and the publishing of thoughtful reports from FINMA, FCA (and one from the UK Government), MAS and ESMA, a substantial and well researched report from the SEC is still missing.  

For background, in December 2018, SEC Chairman Jay Clayton was interviewed twice, at the Consensus Invest conference, and by Andrew Ross Sorkin on TimesTalk. Unfortunately, both interviews were dominated by soft ball questions, and neither interviewer challenged him with more pointed questions. Previous to that, on June 6th 2018, Chairman Clayton sat down with CNBC’s Bob Pisani to discuss the SEC’s position. One week later, William Hinman, Director, Division of Corporation Finance gave remarks at the Yahoo Finance conference titled, Digital Asset Transactions: When Howey Met Gary (Plastic).

While Chairman Clayton and Director Hinman tried to clarify some positions, the outcome of their interviews and talks included contradictory implications, continued lack of clarity, and resulted in more market confusion. What is even more problematic (and unfortunate to entrepreneurs) is that the SEC continues to believe that the status quo in continued enforcement of existing rules is the best path forward.

There are some key (and tougher) questions on people’s minds. Here is a list of questions we should be asking the SEC. The industry is eager to see the SEC try to answer them with depth and substance.

Can you define “sufficiently decentralized” more precisely? And clarify whether that is the one and only condition for the classification of tokens as a utility? If not, what are other conditions? And why have you said that only Bitcoin and Ethereum are not securities?

How do you envision the progression process from a token generation event to the classification of a given token as a utility? If you have assumed that all tokens are securities to start with, what evolutionary path could make them cross-over to a non-security status?

Since you are planning to lighten up the filing requirements for small to medium public enterprises, why not consider the emerging token-related projects category in the same league, and provide a lighter regulatory regime?

What are your comments on the recent bills that are being proposed?

Specifically, the Token Taxonomy Act (H.R. 7356), introduced on Dec. 20, 2018, by Congressmen Davidson and Soto; “To amend the Securities Act of 1933 and the Securities Exchange Act of 1934 to exclude digital tokens from the definition of a security, to direct the Securities and Exchange Commission to enact certain regulatory changes regarding digital units secured through public key cryptography…”

Would you consider a moratorium on new actions similar to the historic stance the White House took in 1997, when they issued a seminal report called Global Framework for Electronic Commerce, specifically outlining a “Do no harm” policy?

I have outlined this historical precedent, in this article, Revisiting “Do No Harm” for Blockchain Regulation.

What scares you the most about the cryptographic tokens? What are the open issues and questions that you are currently grappling with? How about sharing them publicly and asking for input?

Do you only see blockchain technology as DLT or also as a business model catalyst? Do you believe that the blockchain ha more profound implications than just being a DLT that offers efficiencies to the financial markets? Why not recognize there is something new here in terms of business models?

During the interview with Bob Pisani, Chairman Clayton’s opening remarks were: “Let me start with the technology: distributed ledger technology; incredible promise. It can drive efficiencies not only in the financial markets but in a lot of markets.”

But, the blockchain is a lot more than “distributed ledger technology” (DLT), which represents maybe 10% of its potential functionality. DLT is a simplified moniker that floats in enterprise circles. It is a limiting way to view the blockchain, and is typically used in the context of: DLT is OK, but cryptocurrency is not.

A more exciting opening statement might have been “the blockchain is a fundamental technology that is potentially as significant as the web, and therefore we recognize its potential disruptive characteristics, not just on the market, but on us as well.”

Is the entire staff at the SEC fully aligned with the same positions, or are you having divergent views on how to tackle the space?

What are your thoughts on “security tokens”? Will you allow the tokenization of native and non-native assets on the blockchain in areas such as real estate and commodities?

Do you plan on releasing clear guidelines that would include the conditions for which not all tokens are perceived to be securities?

Do you recognize that one role for these tokens is to be a currency, therefore it cannot be a security. Is currency considered a security?

In the June 2018 interview, Chairman Clayton said: “… cryptocurrencies, these are replacements for sovereign currencies,- replace the Dollar, the Yen, the Euro with Bitcoin. That type of currency is not a security.”

By acknowledging that cryptocurrencies are replacements for sovereign currencies and not securities, did Chairman Clayton put his foot in his mouth, or is that a bankable statement?. Today, many cryptocurrencies are on that path. By creating their own private economies, cryptocurrencies such as Kin or Steem are fiat replacements where users earn them and spend them. Therefore, they should not be considered as securities.

Under which circumstances are tokens considered a utility?

Are you worried that your current stance and positions have forced companies to seek other jurisdictions and has reduced the level of blockchain entrepreneurship activity in the US?

Would you consider exempting from registration overall or individual investments below a certain level?

What experts have you consulted with in order to educate your staff with a deep understanding about the blockchain?

Have you been consulting with other jurisdictions outside the US? Do you plan on co-ordinated policies or positions across different nations?

Are you co-ordinating with other regulatory entities in the US, such as a joint and common policy is clearly communicated? Do you plan on, or can we hope for universally co-ordinated actions, such as what CFTC Chairman Giancarlo has already advocated?

Why haven’t you published a comprehensive report or asked for public consultation in a meaningful way? Some examples include what the CFTC or FCA have started.

Do you plan on publishing your learnings from the dozens of subpoenas and voluntary information requests you have conducted in the past year and a half?

Would you go out on the field and present your latest thinking while meeting entrepreneurs? Why not engage amicably instead of antagonistically with the industry? (eg. FINMA has done 3 public roundtables in Switzerland)

Can you lay out your plans and priorities for the next 12 months pertaining to cryptocurrency and blockchain technology?

Can you clearly state your position pertaining to alternative trading exchanges?

What specifically are you seeing as lacking in the ETF proposals? Why not make that public?

What innovative steps are you taking that allow entrepreneurs to be innovative while still protecting consumers? Are you not worried that you may be throwing out the baby with the bath water?

What is your viewpoint pertaining to stablecoins, especially those that are pegged to a fiat currency?

Do you realize that a lack of cohesive, comprehensive, published guidelines is actually creating confusion, uncertainty and is equivalent to cryptic messaging where the market is left reading the tea leaves and guessing your next moves?

Are you considering opening a new registration process for ICOs?

Have you undertaken a thorough analysis of what other jurisdictions around the world have been doing, and whether there are learnings or best practices from them?

It is unfortunate that the SEC is digging their heels by saying that the current regulation “will continue to work well”, while not recognizing the blockchain’s novelty elements.

To imply there is nothing new here is an insult to entrepreneurship, startups and the whole US tech ecosystem.

The SEC has not been open with the industry. They have left the industry trying to second-guess them, and read their tea leaves. Their real agenda is not clear. It is hidden.

For the sake of the industry, some further clarity is needed.

The market expects more thought leadership from the world’s leading and most respected regulator. If not now, when?

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A well-known weakness of the Web today is that it has become too centralized, and that wasn’t part of its original design intent. It is too centralized from the point of view that big central players (e.g. Facebook and Google) own a lot of our data because we interact with them on a daily basis and leave breadcrumbs along the way. What is annoying about this situation is that we don’t know exactly how these large companies use our data. They tell us vaguely because personal data is at the heart of their business models. Without our data, they can’t sell targeted advertising or display relevant ads.  

One way to claim back your privacy is to use Tor, a free software that helps you defend against traffic data which can be used by others to learn about you. Tor is not widely used by the average web consumer, but it is used by the military, journalists, law enforcement officers, activists and others who require their privacy to be preserved. Using Tor is not illegal, but using dark web sites (that use Tor) and are engaging in illegal activities is subject to country-specific regulation.

In the blockchain space, a number of activities have emerged under the classification of “claiming back the web”, and using the decentralized infrastructure of blockchain (and its strong encryption) to serve-up a new class of applications capabilities.

I’ve already written about the emerging Unstoppable P2P Networks, with their important censorship-free and privacy features. I’ve said that the future of viable P2P networks can’t be stopped, because they are necessary infrastructure for the next generation of decentralized protocols, functional capabilities and applications.

And in another post discussing Decentralized Governance, I’ve written that one of the best value proposition the blockchain has for itself today, is that the data is stored on decentralized networks that can’t be easily taken down, hacked or forced to be shared.

You don’t really need a blockchain to re-claim your privacy but there are emerging blockchain-based applications that could become popular due to their specific value propositions centered on natively decentralized data and access.

So, there are 2 ways to approach this. You can block data on existing web applications via the way you access them, or you can design from scratch new apps that only store their data on decentralized networks, and are by default censorship and privacy resistant.

Aside from Tor, here are a few of these early beacheads. Some have a blockchain component, but not all of them do.

Duckduckgo – a search engine that protects the searcher privacy, avoiding personalized search results.

Brave – a browser that prevents tracking and blocks ads.

Adamant – mobile browser that blocks ads, popovers and invisible tracking scripts.

Tox – open source, surveillance-resistant messaging application that runs without central servers, and with end-to-end encryption.

Graphite – a decentralized and encrypted alternative to G-suite and Microsoft Office where only users own their data.

Tenta – a VPN-like mobile browser with built-in privacy and encryption, including ad blocking.

Haven – a privacy shop & chat app that includes exchanging cryptocurrencies (developed by the OpenBazaar team – disclosure: I’m an investor)

Stealthy – a decentralized, end to end encrypted, communication protocol built with security & privacy in mind.

Note that the above apps can be used by a non-technical user. I didn’t include technical frameworks and protocols that are more targeted for developers.

I foresee a trend where users will be gradually attracted to these new types of applications. However, the stumbling block is that users need a strong incentive to move towards them. Today, the urge to move is more out of curiosity than it is about necessity. That’s because few users have been negatively impacted by loss of data, privacy breaches or other harmful circumstances due to central controls.  

This emerging field is early and deserves to be followed.

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