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A New Gateway: The End of Central Banking?
Recently, hyperinflation has ravaged Lebanon and people are turning to black markets to survive. Many countries are printing their currency into oblivion. The US dollar has gone down in value in the past month. It seems that a currency collapse is on its way across the world. However, assets like cryptocurrency have been climbing in value recently. Cryptocurrencies in general have been climbing in value for the past 12 years. Many countries have tried to crack down, some like China, Russia, Columbia, etc have even banned their usage and trading. Ironically, those countries have the highest trade volumes of cryptocurrencies. India for example has lifted its ban because laws against cryptocurrencies are unenforceable. Honestly, the catalyst for this Fourth Turning was the 2008 financial crash. Funny enough, Bitcoin was created that same year. And the dollar's collapse was inevitable when Nixon took us off the gold standard. This has been a long time coming. What I see happening is the abandonment of the fiat system. When the currency crisis does happen, people will probably move to using cryptocurrency. A common myth is that cryptocurrencies are unstable. Like all commodities, cryptocurrencies are affected by supply and demand. The more people use them, the more stable it becomes. Of course governments will try and sustain the old world fiat system. They'll probably go to war with each other to try and stimulate demand. Though it probably won't work since its tax revenues would be declining due to how cryptocurrencies are unaffected by government policies like regulations or tax laws. The government will try and crackdown on anyone using cryptocurrencies, as the coins are a threat to it. People will begin to see governments as a threat to their existence and will likely revolt. A regeneracy will happen to combat government tyranny. Hopefully, the resolution ends with the death of central banking. The next 1st Turning will happen roughly around 2030. So we essentially have a decade for this possible scenario to play out. If you want more information, read a book called The Sovereign Individual. It measures its cycles by 500 years. We're in the Modern Era, which started in the early 1500s, which fits the Late Medieval Saeculum. The book predicted something like this happening around the 2020s. Hope you guys share my POV.
COS Token Swap Terms and Conditions 1. Principles 1.1 The parties in this Token Swap Agreement are COSS.IO and the User. 1.2 By accepting the token swap of the User’s existing COSS/LALA Tokens in exchange for the COS Token, the User understands and accepts that the User participates in the Token Swap for the development of the COSS.IO Project. 1.3 The User understands and accepts that although COSS.IO is assigned to this task and will make reasonable efforts to continue to develop the COSS.IO Project/Platform, it is possible that such development may fail and the User’s COS tokens become useless and/or valueless due to technical, commercial, regulatory or any other reasons (see also section regarding Risks). 1.4 The User furthermore understands and accepts that - as the creation, as well as the assignment of the execution of COS Tokens are smart contract based - the terms and conditions applicable thereon are set forth in the Smart Contract System Code, existing on the Ethereum blockchain at the address published before the start of the Token Swap Period on: https://coss.io/. To the extent these terms contained herein or in any other document or communication contradict those set forth in the Smart Contract System, the terms of the Smart Contract System prevail. Furthermore, neither this document nor any other document or communication may modify or add any additional obligations to COSS.IO and/or publisher of these terms and/or developer of the Smart Contract System and/or any other person. 1.5 By accepting the token swap of the User’s existing COSS/LALA Tokens in exchange for the COS Token, the User expressly agrees that all of the terms and conditions set forth in Smart Contract System Code existing on the Ethereum blockchain (at the addresses set forth on: https://coss.io/) and in this document (together the “Terms”), are incorporated herein. The User further confirms to have carefully reviewed the Smart Contract System Code, its functions and these terms and conditions set forth in this document and to fully understand the risks and costs of participating in the Token Swap. 1.6 This document does not constitute a prospectus of any sort, is not a solicitation for investment and does not pertain in any way to an initial public offering or a share/equity offering and does not pertain in any way to an offering of securities in any jurisdiction. By accepting the token swap of the User’s existing COSS/LALA Tokens in exchange for the COS Token, no form of partnership, joint venture or any similar relationship between the Users and C.O.S.S. Pte. Ltd. and/or other individuals or entities involved with the deployment of the Smart Contract System and the setting up/running of COSS.IO Project/Platform is created. 1.7 The Token Swap will not involve any fiat currencies and will strictly be done in cryptocurrencies. 2. COS Swap Tokens Creation and Functionalities 2.1 The User understands that COS Tokens do not represent or constitute any ownership right or stake, share or security or equivalent rights nor any direct right to receive future revenues, shares or any other form of participation, governance and/or right in or relating to COSS.IO. The User has full ownership of the COS Tokens in his/her wallet. 3. Swap Rate Exchange 3.1 The amount that will be exchanged are as follows: 3.1.1 COS Token for every 1 COSS Token; and 3.1.2 COS Token for every 10 LALA Tokens. 4. No Refund 4.1. The User understands and accepts that all Token Swaps are final and may not be reversed. By participating in the Token Swap, the User acknowledges that he has no right to request a refund for the exchange that he takes part in. 5. User to Ensure to use the original Smart Contracts 5.1. Only the Smart Contract(s) existing at the addresses set forth will exchange COSS/LALA Tokens for COS Tokens. Access to this Smart Contract will be available on https://coss.io/ on the 25th of June 2019. To the extent that any third-party website, service and/or smart contract offers COS Tokens and/or facilitates the allocation or transfer of COS Tokens in any way up, such third-party websites or services are, unless explicitly mentioned on https://coss.io/, not authorized by C.O.S.S. Pte. Ltd. and have no relationship in any way with COSS.IO Project/Platform. 6. Representation and Warranties of User 6.1. By accepting the token swap of the User’s existing COSS/LALA Tokens in exchange for the COS Token, the User represents and warrants that: 6.1.1. The User is not a citizen or resident of a country, whose legislation is in conflict with the present Token Swap Allocation and/or the COSS.IO Project/Platform in general; 6.1.2. The User has a deep understanding of the functionality, usage, storage, transmission mechanisms and intricacies associated with cryptographic tokens, like bitcoin (BTC) and Ether (ETH), and blockchain-based software systems; 6.1.3. The User understands and accepts that the consensus mechanism securing the Ethereum Network may change in the future, and the stakeholders who are in control of the Network may also change as a result. 6.1.4. The User has carefully reviewed the code of the Smart Contract System located on the Ethereum blockchain at the addresses set forth at paragraph 1.6 and fully understands and accepts the functions implemented therein; 6.1.5. The User is legally permitted to participate in the Token Swap in the User’s jurisdiction; 6.1.6. The User will exchange COSS/LALA Tokens from a wallet respectively within a wallet service provider that technically supports the COS Tokens. The User understands and accepts, that failure to ensure this may result in the User not gaining access to his COS Tokens; 6.1.7. The User is legally permitted to receive software and participate in the Token Swap for the continued development of the COSS.IO Project/Platform; 6.1.8. The User is of a legal age to legally exchange COS Tokens; 6.1.9. The User will take sole responsibility for any restrictions and risks associated with the exchange of COS Tokens by the Smart Contract System as set forth below; 6.1.10. The User is not participating in the Token Swap for the purpose of speculative investment; 6.1.11. The User is not participating in the Token Swap for any illegal purposes; 6.1.12. The User is participating in the Token Swap primarily to support the continued development, testing, deployment and operation of the COSS.IO Project/Platform, being aware of the commercial risks associated with the COSS.IO Project/Platform; 6.1.13. The User waives the right to participate in a class action lawsuit and/or classwide arbitration against C.O.S.S. Pte. Ltd. and/or any individuals involved in the creation of COS Tokens; 6.1.14. The User understands the exchange of COS Tokens does not involve the purchase of securities as defined by relevant and applicable legislation and law or any equivalent in any existing or future public or private company, corporation or other entity in any jurisdiction; 6.1.15. The User understands that accepting the token swap of the User’s existing COSS/LALA Tokens in exchange for the COS Token, the creation of COS Tokens and the development of the COSS.IO Project/Platform carries significant financial, regulatory and reputational risks as further set forth in these Terms; 6.1.16. The User understands and expressly accepts that there is no warranty and/or representations whatsoever on COS Tokens, the Smart Contract System and/or the success of the COSS.IO Project/Platform, expressed or implied, to the extent permitted by law, and that the Smart Contract System is used and COS Tokens are exchanged at the sole risk of the User on an “as is” and “under development” basis and without, to the extent permitted by law, any warranties of any kind, including, but not limited to, warranties of title or implied warranties, merchantability or fitness for a particular purpose; 6.1.17. The User understands that the User has no right against any other party to request any refund of the COSS/LALA Tokens, which are exchanged for the COS Tokens under any circumstance; 6.1.18. The User understands that with regard to COS Tokens, no market liquidity can be guaranteed and the value of COS Tokens over time may experience extreme volatility or depreciate in full; 6.1.19. The User understands that the User bears the sole responsibility to determine if the User’s participation in the Token Swap may have tax implications for him. The User agrees not to hold any third party (including developers, auditors, contractors and/or founders) liable for any tax liability associated with or arising from the creation, ownership or use of COS Tokens and/or any other action or transaction related to the COSS.IO Project/Platform; and 6.1.20. As part of the Token Swap process the User will use his/her own account (address) on the Ethereum network, with a private key associated to this address and password. The password is used to encrypt the User’s private key. The User understands that the User must keep his password and private key safe and that the User may not share them with anybody. The User further understands that if his private key and/or password is lost or stolen, the User will not be able to generate a new password or recover his private key, and if the User also loses his private keys and password, the COS Tokens associated with the User's account (address) will be unrecoverable and will be permanently lost. Furthermore, the User understands that there is no recovery mechanism for lost keys and passwords, so no one will be able to help the User retrieve or reconstruct a lost password and private keys and provide the User with access to any lost COS Tokens. 7. COSS.IO Project/Platform Execution 7.1. The User understands and accepts that the User does not have any expectation of influence over governance and/or management of the COSS.IO Project/Platform. 7.2. The User understands and accepts that the COSS.IO Project/Platform may need to go through continued development works. The User understands and accepts that as part of the continued development, an upgrade of the COS Tokens may be required (hard-fork) and that, if the User decides not to participate in such upgrade, he may no longer use his COS Tokens and that non upgraded COS Tokens may lose their functionality in full. 8. Audit of the Smart Contract System 8.1. The Smart Contract System has been, on a reasonable effort basis, audited and approved by technical experts. Technical experts have confirmed that the Smart Contract System has, with regard to both accuracy and security, been programmed according to the current state of the art. 8.2. However, the User understands and accepts that smart contract technology is still in an early development stage and its application is of experimental nature, which carries significant operational, technological, financial, regulatory and reputational risks. Accordingly, while the audit conducted raises the level of security and accuracy, the User understands and accepts that the audit does not amount to any form of warranty, including direct or indirect warranties that the Smart Contract System and the COS Tokens are fit for a particular purpose and/or do not contain any weaknesses, vulnerabilities and/or bugs which could cause, inter alia, the complete loss of COS Tokens. 9. Risks 9.1. The User understands and accepts the risks in connection with accepting the token swap of the User’s existing COSS/LALA Tokens in exchange for the COS Token. The User shall not hold COSS.IO and any other third party liable in the event of any of the following risks occurring. In particular, the User understands the inherent risks listed hereinafter in addition to any other risks: 9.1.1. Risk of software weaknesses: The User understands and accepts that the Smart Contract System concept, the underlying software application and software platform (i.e. the Ethereum blockchain) is still in an early development stage and unproven. Accordingly, there is no warranty that the process for creating COS Tokens will be uninterrupted or error-free and that there is an inherent risk that the software could contain weaknesses, vulnerabilities and/or bugs causing, inter alia, the complete loss of COS Tokens. 9.1.2. Regulatory Risk: The User understands and accepts that the blockchain technology allows new forms of interaction and that it is possible that certain jurisdictions will apply existing regulations on, or introduce new regulations addressing, blockchain technology based applications, which may be contrary to the current setup of the Smart Contract System and which may, inter alia, result in substantial modifications of the Smart Contract System and/or the COSS.IO Project/Project, including its termination and the loss of COS Tokens for the User. 9.1.3. Risk of abandonment/lack of success: The User understands and accepts that the token swap of the User’s existing COSS/LALA Tokens in exchange for the COS Token and the continued development of the COSS.IO Project/Platform may be abandoned for a number of reasons, including lack of interest from the public, lack of funding, lack of commercial success or prospects (e.g. caused by competing projects). The User therefore understands that there is no assurance that, even if the COSS.IO Project/Platform is partially or fully developed and launched, the User will receive any benefits through the COS Tokens held by him. 9.1.4. Risk associated with other applications: The User understands and accepts that the COSS.IO Project/Platform may give rise to other alternative projects, promoted by unaffiliated third parties, under which COS Tokens will have no intrinsic value. 9.1.5. Risk of loss of private key: COS Tokens can only be accessed by using an Ethereum wallet with a combination of User’s account information (address), private key and password. The private key is encrypted with a password. The User understands and accepts that if his private key file or password respectively gets lost or stolen, the obtained COS Tokens associated with the User’s account (address) or password will be unrecoverable and will be permanently lost. 9.1.6. Risk of theft: The User understands and accepts that the Smart Contract System concept, the underlying software application and software platform (i.e. the Ethereum blockchain) may be exposed to attacks by hackers or other individuals that could result in theft or loss of COS Tokens. 9.1.7. Risk of Ethereum mining attacks: The User understands and accepts that, as with other cryptocurrencies, the blockchain used for the Smart Contract System is susceptible to mining attacks, including but not limited to double-spend attacks, majority mining power attacks, "selfish-mining" attacks, and race condition attacks. Any successful attack presents a risk to the Smart Contract System, expected proper execution and sequencing of COS Tokens transactions, and expected proper execution and sequencing of contract computations. 10. COSS.IO Project/Platform Execution 10.1. To the maximum extent permitted by all applicable laws, regulations and rules and except as otherwise provided in these Terms, COSS.IO hereby expressly disclaims its liability and shall in no case be liable to the User or any person for the following: 10.1.1. the COS Tokens being used for any purpose in connection with money laundering, terrorism financing or any other acts in breach or contravention of any applicable law, regulation or rule; 10.1.2. any cancellation or withdrawal from this Token Swap; 10.1.3. any failure or delay in the delivery and receipt of COS Tokens by the User 10.1.4. any failure, malfunction, breakdown of, or disruption to the operation of COSS.IO, COSS.IO Project/Platform, COSS website and COS Tokens, due to occurrences of virus, bug, hacks, cyber-attacks, distributed denials of service, errors, vulnerabilities, defects, flaws in programming or source code or otherwise, regardless of when such failure, malfunction, breakdown, or disruption occurs; 10.1.5. any failure or unfitness of COS Tokens for any specific purpose; 10.1.6. failure to disclose information relating to the progress of the Token Swap; 10.1.7. failure or delay in the availability of COS Tokens for trading; 10.1.8. any rejection of trading of COS Tokens; 10.1.9. any prohibition, restriction or regulation by any government or regulatory authority in any jurisdiction of the operation, functionality, usage, storage, transmission mechanisms, transferability or tradability or other material characteristics of COS Tokens; 10.1.10. occurrences of natural disasters, acts of God or other events beyond the control of COSS.IO that affect the businesses and/or operations of COSS.IO; and 10.1.11. any risks associated with COSS.IO, COSS.IO Project/Platform, COSS website and COS Tokens. 11. Limitation of Liability and Indemnification 11.1. To the maximum extent permitted by the applicable laws, regulations and rules: 11.1.1. COSS.IO shall not be liable for any loss arising out of or in connection with the purchase, use, receipt or holding of COS Tokens by the User; 11.1.2. In any case, the aggregate liability of COSS.IO, arising out of or in connection with the exchange, use, receipt or holding of COS Tokens by the User shall be limited to the amount exchanged by the User for his/her exchange hereunder; and 11.1.3. To the maximum extent permitted by the applicable laws, regulations and rules, the User shall indemnify, defend, and hold COSS.IO harmless from and against any and all claims, damages, losses, suits, actions, demands, proceedings, expenses, and/or liabilities filed/incurred by any third party against COSS.IO arising out of a breach of any of these Terms herein. 12. No Assignment 12.1. Subject to these Terms, only the User and no other person shall have the right to any claim against COSS.IO in connection with the User’s exchange hereunder. The User shall not assign, trade or transfer his/her right to any such claim. Any such assignment or transfer shall not impose any obligation or liability on COSS.IO to the assignee or transferee. 13. Right to Amend 13.1. COSS.IO may revise these Terms from time to time in any circumstances, including but not limited to: 13.1.1. changes in the type of cryptocurrency used for this Token Swap; 13.1.2. changes in the value of the COS Tokens; 13.1.3. changes in the Governing Law and Jurisdiction; 13.1.4. any other changes that may be required from time to time following changes to our business practices and further or required developments to the COSS.IO Project/Platform. 14. No Waiver 14.1. Any failure of COSS.IO to enforce or to assert these Terms shall not be construed as a waiver of the right of COSS.IO to enforce these Terms against the User. 15. Governing Law and Jurisdiction 15.1. These Terms shall be governed by the laws of the Republic of Singapore, and COSS.IO and the User agree to be subject to the exclusive jurisdiction of the courts of the Republic of Singapore in relation to any dispute arising out of or in connection with these Terms. 16. Third Party Websites or Platforms 16.1. COSS.IO may provide certain hyperlinks to third party websites, and the inclusion of any hyperlinks or any advertisement of any third party on the COSS website or other platforms does not imply endorsement by COSS.IO of their websites, products or business practices. If the User accesses and uses any third party websites, products, services, platforms and/or business, the User does that solely at his/her own risk for which COSS.IO will bear no liability. 17. Contracts (Right of Third Parties) Act 17.1. The Contracts (Rights of Third Parties) Act (Chapter 53B) of Republic of Singapore shall not under any circumstances apply to these Terms and any person who is not a party to this agreement shall not enforce these Terms. 18. Severance 18.1. If any of these Terms is rendered void, illegal or unenforceable by any legislation to which it is subject, it shall be rendered void, illegal or unenforceable to that extent and no further and, the rest of these Terms shall continue to be valid and in full force and effect. 18.2. The illegality, invalidity or unenforceability of any of these Terms under the law of any jurisdiction shall not affect its legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision. 19. Intellectual Property Rights 19.1. These Terms shall not entitle the User to any intellectual property rights, including the rights in relation to the use, for any purpose, of any information, image, user interface, logos, trademarks, trade names, Internet domain names or copyright in connection with the COSS Website, the Token Swap and the COS Tokens. 20. Entire Agreement 20.1. These Terms contain the entire agreement between COSS.IO and the User and supersedes all prior agreements, understandings and/or arrangements in relation to the Token Swap. 21. REMEMBER 21.1. Your tokens, transactions, wallets and passwords are your responsibility. Protect your keys and passwords, they are unrecoverable. If you lose them someone else may get access to your tokens.
I am a tax attorney, here is why you should strongly consider filing an FBAR by the June 30th deadline if you had an account at MtGox prior to its collapse (US taxpayers only).
RETRACTED 4/3/2018:I have decided to retract and revise this position on FBAR filings for cryptocurrency assets in light of inaction by the IRS and unofficial statements by IRS personnel. This post should not be relied upon in determining whether you have an obligation to report your cryptocurrency assets or trading accounts on the FBAR or Form 8938. I am leaving the original post unedited below for posterity's sake, but it should not be considered my current view or opinion. Hey Guys, I know that many people in the bitcoin community don't really care about complying with US reporting requirements. While I generally don't recommend that course of action, I especially urge you to reconsider if you had an account at MtGox prior to its collapse. That's because MtGox is no longer in a position to safeguard your confidentiality (if it ever was in the first place). The US has been ruthless in recent years in chasing down US taxpayers with undisclosed foreign accounts, and bitcoin holders are not likely to catch any breaks. The US Attorney's office has already issued a subpoena to MtGox for it's records, and given that Japan already cooperates with US account holder disclosure initiatives, I find it unlikely that the subpoena will go unenforced. Additionally, many large bitcoin holders have joined the class action lawsuit against MtGox/Karpeles for their lost coins, or at the very least filed a claim with the court-appointed bankruptcy trustee. These are tacit admissions in open court of your prior bitcoin holdings. It would take almost no effort on the part of the US Justice Department to obtain and cross-check these records. So, those with qualifying account balances at MtGox prior to it's collapse should strong consider filing an FBAR by the June 30th deadline. Before anyone says it, I am not trying to spread FUD. I care about this community and do not want to see any of you go to prison or pay outrageous fines that can easily wipe out your bitcoin holdings (and then some). To say the US Government has been ruthless when it comes to FBAR non-filers is an understatement. The MtGox fiasco provides a perfect opportunity for the government to crackdown on the wide spread non-compliance among the bitcoin community. I wouldn't bet against it. Here is some additional information for those who want to know more: How do I know if I need to file an FBAR? The FBAR requirement applies if you have more than $10,000 in foreign accounts at any given time during the year. This test looks at the total of all your foreign accounts, not just MtGox. So, you're technically required to look at the daily account balance of the BTC and USD in all your foreign financial accounts and add them up. If the total exceeds $10,000 on any given day, then you are supposed to disclose each account on the FBAR form (even if the individual accounts are less than $10,000). Now, I'm sure many will consider disclosing just their MtGox accounts and leaving off other foreign bitcoin accounts, but recognize that your FBAR in this case would be false and you could be subject to additional criminal prosecution. More information on FBAR filings are available on the [IRS website] What are the penalties for failing to file an FBAR? The penalty for failure to file an FBAR starts out at $10,000 for non-willful violations. If your failure was willful, the penalty is the greater of $100,000 or 50% of the highest account balance for each account per year. Criminal prosecution is also known to occur. Willfulness is defined generally as the intentional disregard of a known legal duty. The IRS will typically asserts willfulness if you fail to file FBARs in multiple years. Otherwise, the determination will depend on your knowledge, sophistication, and experience as an investor. How do I file the form? The FBAR form is actually called FinCEN Form 114 and is e-filed with FinCEN. Here is the link. Note that you will also have to amend your 2013 tax return to check the disclosure box on line 7a of Schedule B. You should also add any unreported income while you're at it, see below. Which bitcoin exchanges are "foreign?" Most bitcoin exchanges to my knowledge are foreign. MtGox, Bitstamp, BTC-e, BTC-China, BitFinex, and OKcoin are just a few that come to mind. You'll have to do some research if your account is with a different bitcoin exchange. One redditor suggested in the comments that http://bitcoinx.io provides the country information of various bitcoin exchanges. What if my MtGox account was worth more than $10,000 for just one day? That's all it takes, one-day is enough. You need to file. What if I can't access my MtGox records? Many former MtGox account holders may find that their records are unavailable. If you are certain that your account balance exceeded $10,000 even without being able to look at your prior records, then I suggest you make a good-faith estimate of your highest account balance. Although guessing is not ideal, it is all you can do under the circumstances and filing your best-guess is better than not filing at all. Is my paper wallet a "foreign account?" Probably not. It's pretty difficult to imagine that a paper wallet containing would qualify as a “financial account” held at “foreign financial institution”. Is my blockchain.info or similar online wallet a "foreign account?" These are probably not subject to the reporting requirements either, although it depends on the nature of your account. The most important factor is whether you give custody of your bitcoins to the e-wallet provider. If you do, then your e-wallet is likely subject to the reporting requirements. On the other hand, if you maintain control of the e-wallet and the provider has no access to your bitcoins, then it’s unlikely your e-wallet is a “financial account.” Without a financial account, you cannot be subject to the reporting requirements. A simple test is to check if you are given a personal key for the wallet. Most custodial e-wallets do not provide you with a personal key, meaning that you must request a transfer of your bitcoin, which they then execute on your behalf. A noncustodial e-wallet, on the other hand, gives you the personal key and you can transfer bitcoins out of the wallet without any interaction with the e-wallet provider. They have no access to your bitcoins and essentially just generate a valid wallet address for you without keeping any control over your account. Therefore, it would be unlikely that they are maintaining an account on your behalf. What if I need to file an FBAR for 2012 also? Since the value of bitcoins was much lower in 2012, this is not a problem for most people. However, if you were over the $10,000 minimum in 2012 (or earlier) and did not file an FBAR, I suggest you talk to a tax attorney about your next step. Late FBARs implicate some very serious penalties, and it would be wise to consider all of your options with a knowledgeable attorney before choosing the best course of action. What if I didn't report the income from my MtGox account (and/or other bitcoin exchange accounts)? You're going to need to amend your returns to include the missing gains, in addition to filing the FBAR forms. If you situation extends back to 2012 or earlier, I suggest you discuss the matter with a tax attorney. Unreported income and missing FBARs for multiple years can trigger criminal prosecution. Conclusion FBARs are tricky business and the stakes are exceptionally high. If you are in doubt about your situation, I strongly suggest you contact a tax attorney to discuss your options, particular if your case involves multiple years of missing FBARs with unreported income. Also, this post does not discuss Form 8938, which is an additional foreign disclosure requirement for higher balance accounts and was due April 15th. Legal Disclaimer This post was created for general guidance on matters of interest only, and does not constitute legal advice. You should not act upon the information contained in this publication without obtaining specific advice from a tax professional. No representation or warranty (expressed or implied) is given as to the accuracy or completeness of the information contained in this post, and I do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this post or for any decision based on it. CIRCULAR 230 DISCLOSURE To ensure compliance with requirements imposed by the IRS, I inform you that any U.S. federal tax advice in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. THE AUTHOR Tyson P. Cross is a tax attorney in Reno, Nevada. He can be reached at Tel: +1 775-376-5690 or Email: [email protected].
The Problem with North Carolina bitcoin legislation, and how we can prevent that from happening in California
In North Carolina, due to the enactment of bill H289 on June 30, 2016, the sale or issuance of any payment instruments or stored value primarily for personal, family, or household purposes, or even receiving of money or monetary value primarily for personal, family, or household purposes (including bitcoin or any cryptocurrency) is considered a crime unless you have a permit from the state or fall under one of very limited exemptions. As such, H289 in North Carolina was very similar to California's proposed AB 1326, but the difference was that California's bill failed twice due to overwhelming opposition from both residents of the state and EFF, and H289 (North Carolina) seemed to slip through the cracks and get passed by the Governor despite that the content of the bill makes it so horrible (not to mention unenforceable). Perhaps the only redeeming quality of H289 was that it stated that "For the purposes of this Article, a person is considered to be engaged in the business of money transmission in this State if that person solicits or advertises money transmission services from a Web site that North Carolina citizens may access in order to enter into those transactions by electronic means," so you'd have to advertise a service on a website in order for the act to be applicable to you. However, that also meant that North Carolina residents would be unable to put up a website and advertise that they are accepting bitcoin as payment for goods or services, without running the risk of having someone from the State demand they get a license for money transmission (the cost of which is at least $1,500 for the application, and there are likely other costs for the applicants). Altogether, H289 is a horrible bill, yet it managed to get enacted. So let's examine how we can prevent such a bill from being passed in California. We managed to kill AB 1326 the first time it was brought up, and the actions of people across California, the EFF, the Bitcoin Foundation, and many others, helped kill AB 1326 the second time it reared its ugly head. But despite all this, Assemblymember Dababneh in California plans on bringing a similar bill back in January 2017. So, what are we going to do about this? Really, what are you going to do about this? We can't let the likes of Dababneh create financial censorship for everyone. It's already happened in New York and arguably in North Carolina as well. We have to draw the line here in California or else it will happen everywhere. Here's my suggestion: 1) Don't wait until January 2017, when Dababneh's legislation comes out. If you are in California, start contacting not only Dababneh, but your state legislator now to tell them what you do and don't want. How to contact your California Legislator on this issue As a bit of a backgrounder, it seems there is always talk about the "necessity" to provide certification of one's identity (in a traditional sense, using government-created identification methods) in order to maintain "security" when using exchanges. This notion leads to a false sense of security and actually exposes users to a larger possibility of attack due to the scope of data that might be granted to a service provider in these circumstances. It is important to remember that the notion that a user should provide some form of identity to a service provides absolutely no additional security to that service. The underlying structure of the service remains just as secure or as vulnerable as it was before. And if it was vulnerable in any way, the additional data you provide if you consent to a request to provide identity of some form, means that this identity information will one day soon be divulged to someone else. It may even happen instantaneously before any hack even occurs, due to provisions relating to how third parties are treated in US law. As many people have conveniently forgotten, the passage of the "cromnibus" bill in December 2014 included a sneakily passed provision of financial surveillance which allows the government to basically do full surveillance on any transaction routed through a bank, credit card company, or any associated 3rd party service to which your data is passed in the process of financial transactions, SARs, or any related processes really. This is one more reason why you should not use web-based exchanges, and should not use web wallets also, but rather should use fully decentralized exchanges and wallets which are installed on your computer and give you full control over both the application and your keys (no service, no corporation, no login required, etc.). 1) As a user, who has no control over what the exchanges will and will not do, and assuming for a moment that the exchanges make no improvements in their security practices, you can nonetheless approach the market in a way that will protect you (and your friends, colleagues, family, etc.) simply by using more secure tools. I've detailed some ways to do this in a recent post here. You'll note that the above recommendation doesn't require (if you do it right) that you provide anyone with any identification (with the exception of certain circumstances where there is a dispute which would require moderation, I believe) but it will allow you to exchange one currency for another. 2) Now let us assume that you wish to try to make a dent in what exchanges will do. You can write them of course and encourage them to improve their security practices in different ways, but in reality the number of exchanges and the variation in the security practices each one utilizes would make this task meaningless. Fortunately, with the defeat of AB 1326 (CA), twice, the worst possible legislation (which could have been used as a model for the nation, actually) was stopped in its tracks, but similar legislation may be revived in new proposals in California in January, because in California, legislators do not learn. They understand only fascism, and how to oppress and tax people until people flee the state (which has been occurring in California more or less since 1990 in a process of outmigration). So then, what can you do in the legislative front on this issue? It's actually rather simple. If you are writing California legislators (because CA legislator Dababneh has promised to bring back something like AB 1326 in January 2017), and you should be writing them now on this subject, remind them of the first two attempts they made to pass this bill ended in giant flaming failures, for good reason, because a bill that proposes to add permitting requirements to exchanges, startups / startup accelerators, bitcoin businesses, and individuals, merely for them to use their currency of choice, simply has no chance at passage, ever. Instead, when they next try to pass a cryptocurrency bill (and they will), they should simply pass a minimum security standard that exchanges would have to meet in order to operate. (The requirement would be applicable to web-based exchanges, which function as MSBs and are already required to be licensed in the US by the US Treasury / FINCEN. There's no need for state level licenses... but if the state passes additional legislation, it should focus only on specifying security requirements for web-based exchanges. The regulation or standards would be required for MSB / FinCEN licensed exchanges and advisory (voluntary only) for decentralized exchanges and exchanges that are not web-based exchanges, because there are limits to enforceability of a security standard. This would not require any permitting or fees, but simply setting of standards for consumer safety.) Wait, you say. This would be impossible to set a standard. Each state would want to have its own standard and say that its own is best! We'd simply be back in the same situation as we are now, right? Well, maybe not. Why? Because some of the best minds in bitcoin, including Andreas Antonopoulos and others, have already made some security standards. So those standards could be worked up a bit by the Cryptoconsortium folks who made them, tailored for the purposes of securing web-based exchanges, adopted by states and that could be what the basis would be for protecting consumers. If it proved inadequate (and no doubt any standard will be tested by someone trying to break it) then someone can always improve it. Also, you can propose your own changes to the Cryptoconsortium standards. Here are a couple (1, 2) that I've proposed. (My proposed changes mostly suggest distinguishing between government-issued ID and background requirements for exchange operators, versus standard users of exchanges who should not be required to provide government-issued ID, but rather should be able to utilize pseudonymous or decentralized (blockchainMe / blockchain ID) identification options. Again -- How to contact your California Legislator on this issue Don't wait until January 2017 when Dababneh comes out with his own version of how he thinks you should live your life. Tell legislators now what you want (and don't want) now. Remind them that legislation like AB 1326 won't work and we've defeated it twice -- and that applying new licensing requirements for use of cryptocurrency to individuals and businesses has no benefit for the public. Tell them that security standards for exchanges are what any new legislation in the area should focus on, and they should rely upon experts who have developed open standards such as the Cryptoconsortium model. Thanks for reading this long ramble.
We have no hope of abolishing or even meaningfully reducing the state using the political process. Revolutions inevitably form into new states. We live in a world full of statists, if we just get rid of states all at once most of the people are going to obey when new governments are formed. Educating the masses takes a long time, which we don't have enough of. We need to have an immediate mechanism to prohibit the formation of a new state, and to weaken any existing states. To do this we must break their central power: the monopoly on force. A monopoly on force cannot function without direction. Each state has it's own top-down bureaucratic enforcement arm, the few individuals who make it up organize all of the force deployed by their subordinates. The state is just the largest gang with the most branch offices and assets. These enforcers can only stop wrong-doers that they know about, the enforcers receive information from lots of sources. They can only seize physical property (guys in costumes come to take it), and they can threaten the operators of electronic institutions. The monopoly on force could be partially broken by eliminating information available to enforcers and storing wealth in forms that can't be seized. For example, if Jim trusts James because he has a high rating in the web of trust, and the two of them use strong encryption to negotiate a deal of some sort, the enforcers can't do anything about it. With secure communications, distributed webs of trust, and distributed ledger money systems (like bitcoin) the enforceability of many laws can be greatly reduced. These technologies are easy enough to imagine, because attempts at them already exist today. If the monopoly on force is to be broken, making law unenforceable doesn't change the fact that there are enforcers, and there are lots of people currently who gladly follow all the laws. I think Jim Bell has the solution to this predicament. He wrote about something called the assassination market. There are lots of forms it could take, perhaps a distributed bounty system or a futures exchange where the futures are bets whether someone will be alive on a date. Whatever form it takes, people with enemies could have bounties for their death or capture. I do not think this is morally good by any means, lots of innocents will be hurt if such an institution emerges. That said, such an institution, like the other technologies talked about earlier, would completely reshape society. This technology is so powerful because of two things: it breaks the state's monopoly by competing with it, and it disincentivises people from public office and police jobs just as much as it disincentivises people from joining violent street gangs or hurting cats and putting videos on youtube. It changes the state from being the exclusive firm dealing in force, to one of many participants in the market for force. Because the state is the only firm right now it isn't accountable for its actions, with competition states don't stand a chance winning over customers. I imagine that DROs might not even have to hire goons, they could be investment funds that place lots of bounties on the leadership of groups trying to tax or conscript. Either the states buy all the claim tickets to the bounty so no one else can get them- financing the DRO that sold them, or they must expend more resources just defending themselves. If the assassination market and the technologies that support it can survive the onslaught of scared and dying states, it may overthrow them. What makes this power vacuum different from one after a violent revolution is that there is a pretty hard mechanism against a new state forming. If a warlord tries to claim some territory, those that live on that territory will likely put bounties on the warlord and his commanders. If the people are too poor, neighbors will likely assist out of their own interest in being able to trade with the conquered people. I imagine that insurance systems, rights enforcement agencies, and yet more webs of trust will rapidly form in this void because there is a demand for those services. If something like this starts to ever gain traction, it will force the hand of all the states. They will have to either give up their current power and try to make the best of the stateless world, or they could get authoritarian and genocidal. I'm not sure who'd win out. But, I think it's preferable and that we've got better chances than waiting 50 or a 100 more years for people to decide they don't need governments any more. Which does /ancap prefer: slow phase out of states by education, or rapid perhaps chaotic phase out of states by innovation? TL;DR: google "assassination market" Welcome ELS voting brigade
How could authorities ban Bitcoin without actually banning it?
Some countries' financial watch dogs had, intentionally or not, issued highly ambiguous official statements, which then led to the situation, when the wast majority of country's institutions, organization and business entities refuse to deal with Bitcoin not because it's unlawful but because it's too scary. One of those examples are the Kyrgyz Republic "Bitcoin's ban". The state of Bitcoin legality in Kyrgyzstan has been widely misinterpreted by medias. For example, in November 2017 one of the popular Bitcoin-outlets reported the following: "... Like banning drugs, alcohol, or the Internet, banning Bitcoin sounds nonsensical and unenforceable. Nevertheless, that's exactly the case in five countries: Bangladesh, Bolivia, Ecuador, Kyrgyzstan, and Nepal. ..." Nonetheless, it might be that Kyrgyzstan had found itself in this list only because of the "lost in translation" trivia. It was all started at July 25, 2014, when the National Bank of the Kyrgyz Republic (NBKR) published (in English) its lengthy statement named: "Warning of the National Bank of the Kyrgyz Republic on the spread and use of the ... , in particular, bitcoins (bitcoin)". It had became one of the first times when a national bank directly addressed the issue of Bitcoin payments in its official memorandum. Unsurprisingly, this documents has an unmistakable anti-Bitcoin flavor to it. Among other assertions it contains the following: ... At the same time we should not forget that under the legislation of the Kyrgyz Republic the sole legal tender on the territory of our country is the national currency of Kyrgyzstan ... . And the use of ... , bitcoins, in particular, as a means of payment in the Kyrgyz Republic will be a violation of the law of our state. This declaration, taken out of the context, has been then re-published multiple times by various Internet periodicals. However, the same documents also holds this unequivocal statement: "... National Bank notes that ... (Bitcoin) is not governed by the laws of the Kyrgyz Republic and for today no legal and regulatory framework for the regulation of relations connected with ... (Bitcoin)". Obviously, those two assertions can't live together in one official document without causing a major controversy. We, then, can assume that either an unanimous Kyrgyz bureaucrat (s), which was (were) responsible for this "warning", did it with the unlawful, conspiratorial purpose to unilaterally bring Bitcoin down, or, which I think is more probable, it's simply the case of the bad translation (funny enough, an original Kyrkyz language version is absent from the NBKR site). Still, after so many (four) years passed since that contentious memorandum saw the light of the day, it has became very difficult to separate causes from the effects. Today, paradoxically, Kyrgyzstan is "officially" the "Bitcoin-free" country, at the same time, unofficially, remaining the place, where Bitcoin is not regulated. Business Notes for Startups Founders in Kyrgyzstan: political climate: moderately friendly; economic climate: not friendly; regions to focus: locally; industries to focus: mobile apps, FinTech, e-commerce, tourism; major limitations: small, low-tech economy, small population with users base, which is largely limited to Bishkek, low per capita (under $1000), aged infrastructure, low Internet penetration rate, brain drainage, an absence of seed and VC financing; stimulus: GDP growth has started to take off (currently stands at 4%), low tax rates; opportunities: niche, mobile based e-services. Bitcoin (outlook): not regulated (negative). The author: Svyatoslav (Svet) Sedov Angel investor and founder of The First International Incubator for Silicon Valley Companies (FirstInternational.In) in the Bay Area, CA, USA. Twitter: https://twitter.com/SvjatoslavSedof
Best of the best Q&A Stephens and Shingos. BQX Bible Regulations
Shingo about regulation, [19.08.17 02:40] Regulation is meant to protect consumers. Everyone hates regulation until an unregulated market bites them in the ass. Complying with regulations will also force us to build a robust consumer protection framework which will be beneficial long-term When we enter the U.S. market we want to be extremely prepared and have the technical considerations already built into the platform for the U.S. regulatory landscape. It has always been our plan to get to U.S. as soon as possible from day 1. That was part of the reason we were excited to bring Stephen Corliss on board. US is gold standard of regulation. Being compliant in the US would also necessitate having a solid product. stephen corliss, [08.09.17 18:47] Don't be afraid of regulations! Yes, some will be written and implemented poorly as legislators never get these things right BUT the most important thing is how much value this industry already generates (income, capex, etc) and the massive potential it delivers to create the next economic wave or revolution. Everything else is just noise! stephen corliss, [23.08.17 02:14] The SEC isn't the issue really as their position shouldn't have come as a surprise to anyone. I know it did but it really shouldn't have. Regardless, we can help exchanges understand how to manage through this as we know this space inside and out. Now don't shoot me for saying this but the SEC actually is on our side, as long as we show that we are protecting consumers. That is their original mandate but unfortunately they get the bad wrap because the financial industry keeps forcing them to write regulations in response to fraud and bad behavior by financial firms that consistently hurts consumers. stephen corliss, [16.11.17 01:43] [In reply to EstimatedProphet: What has been your experience when speaking with regulators so far? Many individuals I speak with tend to be very concerned about the SEC and the impending regulation/ restrictions on how we can utilize and or liquify our assets. In your experience, is there much room for concern?] Thank you. I believe the main concern of regulators are those tokens that clearly are violating securities laws. Unfortunately, many of the tokens issued in earlier cycles clearly are or may be securities and will face some headwinds if they don’t self-correct and adjust their models. I believe regulators will allow “utility” tokens to continue with a slight potential for a move in the future involving some sort of a “regulation-lite” solution. From our perspective, we chose to develop our model and platform in a way that embraces regulations by accommodating for them in all of processes, which allows us to operate with minimal disruptions and business risks. More importantly, this approach allows us to service consumer and business customers interested in BOTH crypto and traditional assets thus enabling us to engage newbies on the traditional asset side while slowly introducing them to crypto. I believe this optimizes our customer growth plans as it removes many of the onramp issues we would have in meeting our objective to deliver mass adoption in crypto. Personally, I’m not concerned about regulators in the least as worst case is our industry is pulled into the fold, which has already occurred at some level anyway because of money transmitter regulations. stephen corliss, [02.10.17 16:13] Now the toxic question, would this get caught up in jurisdictional definitions of a security? My answer, no but only with the right model. Let me expand on this.. First, I'm not going to do all the work for our existing or future competitors so give me some leeway as this is one of many competitive advantages. Yeah, maybe they will figure it out after we launch but by then it won't matter...! First, a security is something that is defined prior to issuance as it sets the legal structure and parameters of the token itself. As most of you know, almost all POS coins define upfront a dividend paying model that in effect sets the legal rights of all coin holders. Without revealing all the reasons why, this is the first big mistake as to sell coins like this to the public, one must first go to their local regulator (company origin) and submit documents to authorize a public sale. Additionally, a firm like this will also have to understand the foreign issuer rules for every jurisdiction their holders reside. Not an easy task let me tell you. Now, small business exemptions exist in most developed economies for capital raised below a certain amount but these almost never involve holders/investors who are not "accredited investors". Out dated rules but nevertheless they exist on the books almost everywhere. Is there a better model? Yes sir ee! What is this model? Ah, why mess around, the functional token with a very specific overlay business model. That's where I will stop but I promise I will reveal more details as we move forward as we do want to ensure new entrants get this right so that all of you don't have to worry about all this legal mumbo jumbo One last point, for those firms like us residing within the financial side of the blockchain industry, the complexity level increases 10x minimum as everything must be assessed versus global rules involving many different types of financial business types, products or services. It is a painstaking process but if this is where you choose to hang your hat, you best know all of the ins and outs and, no offense to all my lawyer friends, you best not depend entirely on your law firm as they can only advise you on the facts you present to them. If you present them wrong, which many do even large financial firms, you will find yourself on the end of a major fine and maybe even banned entirely. This last point is huge as what I see when I look out across the competitive landscape are firms who have made very big mistakes in their business models. This will mean they will face severe legal headwinds going forward that when combined with strategic pivots that will have to come, they will be left behind by those of us who got this right. stephen corliss, [23.08.17 02:24] Hello there! I will stay away from tax authorities opinions but with regards to the SEC it will depend on the behavior of our peers and industry. If the fraud and theft continues, they will have no choice. This is unfortunate as I've worked with many financial products over the years that were "self-regulated" and it works well. Unfortunately, the financial industry messed that up too so now there are basically no self-regulated products. If we don't fix this from within, regulation "around the world" is inevitable. stephen corliss, [23.08.17 22:22] It is actually quite positive really as this means we are growing up. Sometimes that seems like a bad thing but it truly isn't especially if we want this eco-system to thrive. I love this stuff!! Easy as pie! Everything I've done for the last 25+ years has been regulated whether it was in Europe, Asia or United States so I embrace things like this, just a part of life. This is actually our advantage! stephen corliss, [23.08.17 22:26] [In reply to Benjamin: stephen nice to hear that! take the time you need to build a good ground for bqx!] We absolutely will! The most prudent thing we can do for all of you, besides building you a badass platform, is mitigate all the risks so BQX can absolutely flourish. That is what we will do, bank on that! stephen corliss, [23.08.17 22:33] [In reply to Rawls: This guy knows how the things are supposed to be done. Nice.] Thanks Raul! The more we do up front the more we remove all the unknowns to ensure the platform maintains its superiority. If you mitigate for all risks now then that removes chances of unwanted outside disruptions. We have 100% clarity and a detailed plan to do just that.. Fun stuff!! stephen corliss, [27.08.17 03:49] I wholeheartedly believe that regulations are inevitable and that regulations are the thing that allows this space to explode. Initially, the immediate reaction would be a very short term negative price reaction (could be a period of hours or several days) before the market realizes that this is just what happens to any product as it matures. Its the maturity of the eco-system that requires it to be regulated, which allows it to move to mass adoption and price explosion driven by massive demand. This is why everything we do here at Bitquence assumes we operate in a regulated environment and thus is embedded in our "immediate" and longterm strategic plans". By doing so, we remove most, if not all, potential future business disruption, unlike most others who will get caught off-guard. Consider the most recent disruption to Exchanges and Exchangers, where most of the industry were negatively effected by the opinions put out by the SEC (US) and MAS (Singapore) regulatory bodies regarding ICO's. What happened in a lot of cases here was that firms operating in these spaces had to hit the pause button while they sought legal advice on how to adapt their business operations and procedures. By planning ahead, one can remove much of these known and unknown variables by building a model that can flourish in such an environment. This is our approach. stephen corliss, [27.08.17 04:23] Almost all global regulators follow a process that entails first publishing "proposed rules" to the public for comments, 2nd An internal assessment of all commentary received and finally, the issuance of final rules. The entire process averages about 9-15 months. Now, lets assume the first to enter is the SEC in the United States. Not a bad assumption because one of its key National Legal Bodies, NATIONAL CONFERENCE OF COMMISSIONERS ON UNIFORM STATE LAWS, has just approved something called "UNIFORM REGULATION OF VIRTUAL CURRENCY BUSINESSES ACT". This is important as this provides a National Law Framework for each of the States to approve and add to State Laws. With this key piece of law defined, we could assume that others will begin to build off of this. Thus, my best guesstimate for you would be we could see some regulations in early 2019. There are a lot of moving parts here all around the globe so we need to monitor a lot of things across a lot of countries! But, the first mover historically tends to be regulators from the US. stephen corliss, [03.09.17 05:13] [In reply to catmando: Now the impacts of more regulations. im not sure. Will it slow growth but help promote better products? will regulations dampen much at all? Idk, but im sure by the end of next year the prices of a good handful of these coins will be significantly higher.] Regulations may, if not will, be a major disruption for most of our industry. However, we are building Bitquence to sustain this liquid rule environment by embracing rules and structures that are commonplace with traditional investments. This is one of many differentiators for bitquence over the long term. stephen corliss, [03.09.17 14:09] [In reply to Bodhisattwa: Does bqx has clarify on it not being a security ?] Hello, BQX is a Functional Token that enables users to access services on the Platform. It is not a Tokenized Security because of the above reason along with the facts that it does NOT carry with it any rights other than "access", like voting, profits, dividends or any other feature common with traditional "shares". stephen corliss, [03.09.17 15:51] All, We hear you 100%. Let me make one point reference competition. Competition will be and is a healthy thing for any industry as it provides options for consumers while also allowing consumers to choose the better service provider and technology. However, when building a model in an industry such as this one that has to align with a complex financial industry centuries old, most will either fail or miss the mark significantly. What we have right now is a classic "square peg round hole" situation where ONLY those with the necessary technical, business AND industry expertise will win. What I can share here is this, we've done all of the necessary work designing a comprehensive solution that can flourish in a highly fluid business environment, where most others will be confused and distracted. I've set up many financial firms in my life worldwide so this is not unchartered territory and we will do whatever is necessary to ensure BItquence can flourish. FOCUS, BE BOLD, BE FAST, BUILD AND DELIVER, it is as simple as that. stephen corliss, [03.09.17 22:35] A little more color: "Our list of younger members in our forums is growing because of the mission for mass adoption is resonating with them and a lot of these younger folks need help understanding this complex space." Thus, lets be sure to operate accordingly. stephen corliss, [04.09.17 23:23] Ben, There are some overlapping parts but many do not. At the end of the day we could simply conclude that a critical differentiating factor is they are more "active" focused and we are focused more on the "passive" end. However, these two investor types and related features do overlap in similar respects but our Universal Wallet feature is unparalleled and is not something they offer. Now, I have a much stronger opinion with detailed specifics of the numerous functionality that separates us but lets keep that to ourselves so we can maintain the advantage over the competition. stephen corliss, [06.09.17 14:34] Brian, we are a Functional Token and should not be thought of as any type of Tokenised Security as our Tokens represent access to services on the Bitquence Platform. Our Customer Acquisition Strategy is broad in scope and is aligned with our product roadmap to ensure we reach all desirable markets and grow our user base. Exchanges are a critical component of extending our customer reach so anything we do here would be part of our business development efforts, which is a continuous process. Let me remind the community that coins and tokens involve significant volatility and risks and, more importantly, according to our Terms, Token Sale Participants were not submitting Contribution Tokens to obtain BQX for the purpose of speculative investment. Furthermore, market liquidity was not guaranteed and the value of any token could depreciate in full, be highly volatile and inherently risky. With regards to development progress, our Alpha version has been released to the Product Council for review and testing, which will most likely run for a few weeks. Beta will immediately follow for a period and we expect to release the Bitquence Prediction functionality in Q4. stephen corliss, [14.09.17 04:48] [In reply to John Weston about news: Upcoming changes regarding Canadian users] John, I know of them well. I want to be respectful here so I'm just going to speak big picture rather than speak of any other firm. First, one must first understand if a token is a Functional Token or Tokenized Security. A Tokenized Security is evident if tokens represent ownership in the company and token owners have rights to vote and participate in company profits/dividends. Tokens facing fact patterns like this are going to be very problematic in a lot of OECD member jurisdictions, including US, Canada, EU, EN, Asia, etc. (Basically all developed and emerging economies). The big issue here would involve the legal hurdles anyone must overcome and adhere to when raising money from the public. If a firm runs a global ICO and it involved a tokenized security, and the firm didn't meet the legal requirements across all regions before issuing, this could be a big problem to overcome. Secondarily, the business model operated by any Token company must also be assessed to understand if it is involved in securities activities. Again, in most OECD jurisdictions when somebody accepts any type of funds from investors in-kind for a share of something being offered by the Token company, it is quite typical for regulators and courts to find a security because investors are investing capital, in a common enterprise (the tokens firms structure which represents a value to the investor, like a fund for instance) with the expectation of profit (literature claiming returns) from the efforts of others (whether the Token firm itself or a 3rd party who manages the fund). This would be the same for a mutual fund for instance. This situation could be made even more problematic for several reasons, beginning with 1) a companies own Token being classified as a "security", 2) a token firms structure for accepting investors money as part of its business (post ICO) will most likely also be classified as securities, and 3) if neither the token firm or its outside 3rd party service providers were licensed as authorized investment advisors or asset managers, they could face some severe regulatory difficulties. Furthermore, because any transactions involving any of the above would be considered securities, a token firm could also have a fourth issue stemming from the trades they accepted from users, as these could be securities and thus require a broker dealer or brokerage license. I hope this helps but ping me back here or directly if you have any other questions. Sorry, there's a potential 5th issue, if a company such as the above were handling transactions that ultimately were determined to be securities AND that firm executed customer trades (rather than send them to an external exchange), that firm could be found to be a securities Exchange and require those authorities in every region. stephen corliss, [22.09.17 16:23] [In reply to Ron Mata: good morning . So Jamie Dimon is at it again. He just had another interview where he says government will shut down bitcoin and throw people in jail like china. But from your end it sounds different. You are bullish on this and was approached by china to help transition china. Do you know something Jamie Dimon doesn't know? Do you respect the man?] Remember, not everything is as it appears. To answer you last question first, I would say he is a smart man who is aligning his public comments with current conventional thinking. Meaning, we all know there is a lot of dark money flowing around our industry along with some firms who are committing fraud. With that as the backdrop, he cannot publicly support this industry as he cannot be at odds with the rules that are in place to safeguard the global system. Until we start embracing KYC/AML, nobody in the financial industry or those who regulate it will support it, at least publicly. However, what he is not saying is that because of rules and conventional thinking, he cannot participate in Token-Sales or this broader economy and this is a problem as at some level it impacts his businesses. For instance, it is expected that at least $3billion will pile into Blockchain startups in 2017 and ONLY 25% of this total will come from traditional Venture Capital firms and 75% will come from Token-Sales. The financial industry already struggles with their capacity to put Institutional Investors capital to work in alternative investments strategies. If we are drawing away larger pools of potential venture investment, this leaves them in a bit of a bind as their customers need higher performing assets in their total portfolios. Additionally, if this model continues to flourish, this will have a knock on effect across Private Equity as they will have much less firms to provide later stage funding or acquire, which also means they will have less capacity to put capital to work. This also means that the financial industry loses a bit of control they currently have over typical fintech firms where it is a major source of innovation for them that they typically acquire through acquisitions, which also increases competitive threats to their business that they cannot mitigate. So, what do you do? You speak negatively about this industry for all of the above reasons. I haven't even touched on the larger issues about how an industry left unmanaged or unchecked could lead to systemic failures. This is the bigger issue that I think none of us are really talking about as we cannot simply change the way capital markets work without carefully and respectfully thinking about its impact on the system as a whole. This is what regulators and central banks must, and are, thinking very carefully about, which is why I believe every national economy will begin to shift towards our model and force us all to play by the rules. (which is exactly what China is doing). In essence, a lot of this noise at some level is intended to scare the dark money out of this space, which I actually believe is working. Not a bad thing for those of us who are legitimate, both consumers and businesses. Respect? Not sure as I prefer transparency and this is very rarely what you get from leaders. stephen corliss, [24.09.17 17:27] [In reply to CB: hi mate, are you guys concerned about Change Bank??] All, let me give a bit more thought on my Change Bank comments. Although we think about competitors, my biggest concerns are almost always driven by a single question, which is "Can a token be part of the population of tokens available to our customers in their baskets?". This is important as a token can only be included in the Basket Service if it passes a few tests. 1) Is it legitimate and 2) Would adding it expose Bitquence to serious legal, financial and reputational risk? This 2nd question is absolutely critical as we only need to look to the DAO and Slock.it to discover how 1 firm's mistake can expose the entire industry. Why does this matter to Platform users? Because the business risks associated with any Token you hold are correlated 1:1 with the firm sponsoring the token so if they face serious legal/regulatory headwinds, and fines, this could drive the value of their token to zero leaving token holders with a worthless token and no service to use it with. Since our mission is to provide tech and services to our users that helps them build wealth and make prudent decisions, Bitquence will need to do whatever it takes to provide them with critical information through our Token Rating System to help you mitigate or manage risks. stephen corliss, [25.09.17 12:33] [In reply to Dean Jaman: stephen with all the news coming out of China, I read an article that speculates China is working on placing a proportion of their currency on the blockchain, to be able to offer liquidity to its people and moreover the world. It would essentially function as Tether USDT. Can you shed some light on this theory?] Hi Dean, Moving some of a countries monetary system on to a DLT based structure makes sense but it has its challenges as understanding the impact on existing lending, credit and other macroeconomic factors will be quite difficult. However, we know China believes and invests in the technology. Purely from an economic perspective, being first in this space has tremendous potential advantages on future economic activities. If governments believe in the technology, why would they not invest in the innovation to secure a leading position in the field, generate employment and investment , etc. Personally, I know China is investing in the technology and I know the US is doing the same but to a lesser extent. However, indirectly, the US through its Venture Capital Sector is investing a growing amount of capital in DLT. I also know through some initiatives I've been involved with that the US is intently focused on how to use DLT to tackle the unbanked and underbanked, internationally. So, with all that said, I know governments see the potential benefits of this innovation and that this will have a positive impact on our efforts to move towards mass adoption. Is China actually looking to move a small share of the monetary base on chain? No idea but the fact pattern does seem to support such a move but only if they can truly understand the implications of doing so (macroeconomic factors). Plausible for sure. However, we all do need to understand how very complicated such a shift would/will be and how dangerous it could be if a central bank got it wrong. Baby steps is the only possible approach, which will require us to be very patient as this will be extremely complex and take decades to occur, if it ever does. stephen corliss, [25.09.17 21:45] [In reply to Greg: Thanks for video and explenation of TCF. So coins from all categories will be on the platform? Will you be able to add "tokenized security" coins to portfolio without colision with the law?] Tokenized Securities can be either those that are "registered" by Issuers with National Regulatory Bodies or those that are not, whether knowingly or not. The latter example, cannot be traded on any platform whatsoever whether the platform itself is regulated or not because the Issuer has not registered their tokens. If it is, then all of the firms involved in a transaction like this could be in violation of certain rules and subject to fines. The former, Or registered Tokenized Securities, can be transacted on a Platform but only if the platform itself is structured appropriately. What I mean by this is that unless a Platform is structured correctly, registered Tokenized Securities can only involve other regulated entities such as a licensed Broker, Exchange or Advisor depending on ones role in the process. stephen corliss, [02.10.17 12:53] [In reply to Greg: If team figure out how to deal with asian regulators it will be a big step ahead.] Been working with Asian regulators for years so this is covered! stephen corliss, [14.10.17 23:57] [In reply to EstimatedProphet: I think these individuals deal with government regulation all the time. They have a much more realistic perspective on how the government might come down on it. I think Stephen disagrees but I may be wrong.] Most leaders don’t really understand regulations and investment law and this is typically a conscious decision. Many of the leaders I know or have met over the years actually have very little knowledge about the rules involving global finance and almost none of them understand market structures and there inner mechanics. Knowledge is something you desire for yourself, or if you don’t have this desire you mostly rely on others. Unfortunately most opt for the latter and this is how most companies operate nowadays. Its a personal choice, simple as that. What leaders unfortunately do have is the ability to apply leverage over policy. This is what I worry about and develop strategies to protect against. Shingo, [23.10.17 01:53] [In reply to Harshad Thakar: Do you think that the way you guys are developing the "upper layer" that might involve such crypto stuff, it will be subject to incremental scrutiny by these countries?] This is more of a @BQXStephen question, but I think that this is an area that the law hasn't fully caught up to the technology. When you send funds to an address, it is just that. The address doesn't "reside" anywhere. You could look at who owns the private key and where they reside, but it can often be unclear and unenforceable. I think the best solution that any crypto company can do is operate ethically and under the auspices of reputable regulators. For services that can clearly be tied to a jurisdiction (fiat transfers etc.) then you restrict based on location of origin. Stephen: Thanks Harshad. Shingo is absolutely right. I want to tread carefully here but without exposing our strategic model too much, the problem our industry faces is that our default strategy is to run “from” regulation rather than to it. By taking such an approach, our industry sends signals to those whose mandate is to protect consumers that we don’t care or respect rules or that we have something to hide. That position, stance or strategic approach, is fundamentally flawed in our view and we believe there is a better approach that allows a firm to minimize obstacles rather than create new and additional ones. Shingo, [04.11.17 17:33]* I think blockchain has the ability for us to rethink the global financial system from the ground up. Financial firms tend to do a lot of abstraction: securities, funds, etc. in order to make the system more efficient. The entire system we have now can be made more transparent, ethical and accessible through blockchain. That is really the holy grail of blockchain technology stephen corliss, [06.11.17 03:36] Questions From User (Oscar) In Response To The Securities Question From Earlier 1.) Does BQX consider people holding BQX currently as investors or gamblers betting on a "utility token"? This is important... From a fundamental standpoint, why should we hold bqx if it does not consider us investors, offer returns, offer voting, etc? Why hold a measely utility token if its only use is for powering an app? Doesnt bode well for the long term. 2.) Are you considering selling/converting bqx for stock/stoken at some point? Perhaps some % share in fees etc? I think if bqx could incorportlate a way to incentivise $$ people to hold and buy more, they could use this opportunity to gain more popularity and lead the way. Telling people who very much consider this an investment that they are "thinking wrong" makes it sound like bqx has very little value. 3.) What happens if the sec labels BQX a security? This is key... Lots of people are backing a project and you are right they are not being promised ownership or voting rights - and you say the problem is how people think of utility tokens - yeah we handed you 40 million to "just" play on your app... that does not make me want to hold BQX. You guys may want to find a better incentive than "using the platform," to encourage long term holding and building value or further investment. Im sure all coins will have to deal with this Indeed, but we all know how to use a VPN, and a coin offering a return or stake in the comoany is a lot more valuable than one that does not. This could really help or hurt BQX.” My Response:
Your Question: Does BQX consider people holding BQX currently as investors or gamblers betting on a "utility token"? My Answer: Neither. We see token holders as members, supporters and customers who have purchased tokens necessary to access and use products and services they desire and deem essential and critical with regards to financial services. I liken this to a cooperative where those with shared interests came together to solve shared problems to improve outcomes for all members.
Your Question: Why should we hold bqx if it does not consider us investors, offer returns, offer voting, etc? My Answer: Customers should hold BQX because they believe it has value to them personally AND that others will also believe it has value, and thus purchasing the token and holding it could serve 2 benefits, 1) It allows holders to lock in their cost to access the system at a lower cost while 2) potentially selling some of their lower cost tokens to others in the future at a higher price because of increased demand by new customers / users
Your Question; Why hold a measely utility token if its only use is for powering an app? My Answer: In conjunction with the potential benefits in #2, the utility provided to customers can also replace services available today at a lower cost, allowing customers to pocket cost savings. Additionally, depending on the product or service, benefits can come in the form of better outcomes that could take the form of increased returns and decreased risks. There are numerous others but lets leave it there for now.
Your Question: Are you considering selling/converting bqx for stock/stoken at some point? My Answer: We have not furthered our thoughts on this with an actual strategic plan, as of yet, but if customers would benefit we wouldn’t hesitate. However, this may be the end result anyway when regulators mature their thinking, which is also why we would consider making such a transition anyway in order to remove any unknowns or uncertainties and allow us to operate with minimal distractions.
Your Question: Perhaps some % share in fees etc? I think if bqx could incorportlate a way to incentivise $$ people to hold and buy more, they could use this opportunity to gain more popularity and lead the way. My Answer: Absolutely.
Your Comment - Telling people who very much consider this an investment that they are "thinking wrong" makes it sound like bqx has very little value. My Response: I didn’t say people were thinking wrong, what I said was even though some firms are not issuing tokenized securities, the mentality of holders is identical, which may create a regulatory “problem” with regards to the legal structure of functional / utility tokens. This is important from the perspective of regulators because of their consumer protection mandates. As such, whether something is a utility token or not may not matter at the end of the day as regulators will protect the public when they see the need. Personally, I believe this review will be necessary as we all know predators and fraudsters are out there.
Your Question: What happens if the sec labels BQX a security? My Answer: First, we didn’t offer tokens during our Token Sale to US residents and Secondary offerings made subsequent to our token sale are not made between the company and customer but rather customer:customer. However, as mentioned, we think and plan for all variables so any such determination would have limited impact as we’ve done a ton of work to mitigate risks such as these.
Your Comment: This is key... Lots of people are backing a project and you are right they are not being promised ownership or voting rights - and you say the problem is how people think of utility tokens - yeah we handed you 40 million to "just" play on your app... that does not make me want to hold BQX. My Response: First of all, the 40m number doesn’t apply to BQX so lets make sure that is clear. Please read everything I post and comment on very carefully as I believe you are using my comments out of context. This disconnect is not a pro blem for me but rather a problem with respect to current laws and opinions, which presents a gap that courts will need to close so everyone has the clarity they need.
Your Comment: You guys may want to find a better incentive than "using the platform," to encourage long term holding and building value or further investment. Im sure all coins will have to deal with this Indeed, but we all know how to use a VPN, and a coin offering a return or stake in the comoany is a lot more valuable than one that does not. This could really help or hurt BQX. My Response: I’m feeling like you misunderstand how we think of our customers. We don’t believe the only incentive we offer customers is “using the platform”. The token provides access to countless benefits both from products and services AND the benefits listed above under #2 and #3 Bitquence will be the currency that enables new projects, products and services to launch within a new global financial eco-system. So, yes there are differences but a lot of similarities as well.
Cryptocurrencies, Global Governance and Our Collective Future
A cryptocurrency tied to world democracy, sustainability and poverty alleviation could save the world. The bitcoin rise decentralizes power and represents a shift in loyalties from governments to technology. Millennial enthusiasm for virtual currencies and the upcoming $30 trillion intergenerational wealth transfer could make a major shift possible. Change may be inevitable, the question is how painful or beneficial it will be. Government fiat currencies are problematic when controlled by corrupt leaders. Cryptocurrencies are problematic when used by criminals. These two systems - governments and bockchains - could work together and we may need them to. Our system of global governance suffers from a democratic deficit and is failing. The UN has limited power, the Paris climate agreement is unenforceable and we have an accountability vacuum that permits carbon emissions to rise, putting us all at risk. We need new systems. Let's imagine a theoretical cryptocurrency called the World Future Coin, backed by a new system of global governance based on the Internet. Why the Internet and not the UN? Some conflicts do not see justice in the UN, while the Internet has an effective and functional form of governance. Some contested territories, for example, are not recognized by the UN but are granted domain names. In the Future Coin system every human being could be granted an online Future Coin account, with citizenship, a passport, and financial assets, as a birthright. Partnerships with Aardhaar, Facebook and others together with in-phone cameras could capture biographic and biometric information to recognize unique individuals and prevent fraud. Users could vote in global elections and referendums using the Future Coin blockchain to guarantee security. As the Future Coin currency and passport grow to become global standards, asset seizure and cross-border travel prevention could serve as a new basis for international law enforcement. The money part would be easy. Cryptocurrency entrepreneurship is a form of wealth creation unlike anything seen before. Valuations are driven by speculation and the story behind each coin. A new coin with good story can become very profitable. One cryptocurrency rose from $200 million to $150 billion in one year. As a system for global citizenship the Future Coin could do even better. It could offer to pay for the education of needy citizens through participating online schools. It could also pay a guaranteed minimum income each week to all active users in a situation of economic need thereby eliminating extreme poverty. Costs could be recovered by charging a small financial transaction tax on commerce. A loyalty program could incentivize merchants to switch to the Future Coin. Early adopters would receive free coins and select partners would offer customers lower prices if they pay with Future Coins. B Corporations could be taxed less, incentivizing all corporations to go green. The divest-invest movement could accelerate growth. A new coalition of groups like NEXUS, the World Economic Forum, and online networks could invite members to participate in the ICO, both an Initial Coin Offering and an Initial Citizenship Offering. As a wealth creation process, we could use the opportunity to realign historic injustices and consider our “carbon debt.” The key measuring stick would be how much carbon dioxide nation states, citizens and their ancestors emitted into the atmosphere since the start of the industrial revolution. Indigenous tribes from the Amazon would earn a lot, Americans less. Africans more, Europeans less, etc. After the ICO, an ongoing analysis of fossil fuel extraction and satellite images of forest cover could be measured to govern how many Future Coins to pay out each year to governments, corporations, non-profits and individual citizens. All stakeholders could be financially incentivized to plant more trees, halt unsustainable logging, and keep fossil fuels in the ground. We would need a constitution. The smart contract system of the Ethereum blockchain could be used to codify policies and make them enforceable. A global consultation process could engage many all over the world. Admired leaders like Malala Yousafzi could be invited to co-chair the process. The Global Challenges Foundation, with its focus on global governance, could rally funders. One question is how to create democratic structures that don't polarize. Randomly selected citizen juries could be used to tackle the most thorny issues and a new political process based on the celebration of diversity could fundamentally change the way that we collectively look for answers. On his deathbed in 1954, Einstein asked a friend to start two projects to help prevent World War III, a “movement” to unite religions and a “world youth parliament,” a system for all young people to have access to and influence on global decision-making. Those who see their stake in the future political welfare of the earth would choose policy instead of violence to solve their problems. If the Future Coin works, perhaps we'll eliminate terrorism as well. Is this idea really possible? Ask the millennials. To learn more: www.worldfuturecoin.org Jonah Wittkamper is a Co-Founder of NEXUS, a movement to bridge communities of wealth and social entrepreneurship. With thousands for members, NEXUS connects young change makers, investors, philanthropists and allies from over 70 countries. Wittkamper is an alumnus of Williams College and Camp Rising Sun. He lives in the Washington, DC area with his wife and two children.
THE CYPHERNOMICON: Monero Edition (heavily abridged and annotated by AmericanPegasus)
As you may know, I didn't exactly roll a natural 18 under the Arithmatic stat: https://np.reddit.com/Bitcoin/comments/3fgrk5/how_long_would_we_have_to_use_bitcoin_before_we/ctomj9y However, I have other talents, very analog ones. Among my tomb-raiding today, I found an old link to a massive document about cryptography created in 1994. This was a time when the brightest minds on the planet trying to figure out how to implement cryptography into every day life. It was also the year before the infamous "Violence @ NBC" video where the hilarious inept Today Show hosts didn't even understand an email address - much less the greater internet (https://youtu.be/95-yZ-31j9A). So these were the Internet Middle Ages; bronze and steel had been invented, but we were still learning how to shape it into useful things. Now imagine my shock to find an incredible amount of prophecy written in this document about not just the eventual emergence of Bitcoin, but also Monero as well. Along with some other zany Nostradamous-level call outs, there are the occasional claims that "digital coins may be impossible" which we can only look back 20 years and smile on, knowing that the future solves all problems. In fact, I hope the author of this document is still around today: perhaps his 1994 self would be both horrified and relieved to know that true digital cashiseventually invented; it just takes two decades for it to happen. I'm only going to cover a few highly relevant sections here. Currently this entire piece of history is available in full over on https://cpunks.wordpress.com/cypherpunks-faq/
The Heavily-Abridged Cyphernomicon:
5.4.4 + Digital Cash - focus: privacy in transactions, purchases - unlinkable credentials - blinded notes - "digital coins" may not be possible 5.5.9 + can a "digital coin" be made? - this is formally similar to the idea of an active agent that is unforgeable, in the sense that the agent or coin is "standalone" + bits can always be duplicated (unless tied to hardware, as with TRMs), so must look elsewhere + could tie the bits to a specific location, so that duplication would be obvious or useless - the idea is vaguely that an agent could be placed in some location...duplications would be both detectable and irrelevant (same bits, same behavior, unmodifiable because of digital signature)
This fills me with happiness that back then we were wondering if the idea of a digital coin were even possible... and yet here we are. We did it... humanity achieved the impossible.
10.8.5. "Why might digital cash and related techologies take hold early in illegal markets? That is, will the Mob be an early adopter?" - untraceability needed - and reputations matter to them - they've shown in the past that they will try new approaches, a la the money movements of the drug cartels, novel methods for security, etc.
Basically exactly what happened. As with all new technology, the criminals quickly latched onto it.
10.8.6. "Electronic cash...will it have to comply with laws, and how?" - Concerns will be raised about the anonymity aspects, the usefulness for evading taxes and reporting requirements, etc. - a messy issue, sure to be debated and legislated about for many years + split the cash into many pieces...is this "structuring"? is it legal? - some rules indicate the structuring per se is not illegal, only tax evasion or currency control evasion - what then of systems which _automatically_, as a basic feature, split the cash up into multiple pieces and move them?
We know the answer now. The key to anonymity is to mix the coins together automatically on a protocol level, "splitting" the amounts up. The secret to creating the first true digital coin was to stop thinking of them as 'coins' at all: if a bit can be copied freely, then don't resist that - embrace it to the maximal limit. If everyone has a copy, then no one has a copy
10.8.7. Currency controls, flight capital regulations, boycotts, asset seizures, etc. - all are pressures to find alternate ways for capital to flow - all add to the lack of confidence, which, paradoxically to lawmakers, makes capital flight all the more likely 10.8.8. "Will banking regulators allow digital cash?" - Not easily, that's for sure. The maze of regulations, restrictions, tax laws, and legal rulings is daunting. Eric Hughes spent a lot of time reading up on the laws regarding banks, commercial paper, taxes, etc., and concluded much the same. I'm not saying it's impossible--indeed, I believe it will someday happen, in some form--but the obstacles are formidable. + Some issues: + Will such an operation be allowed to be centered or based in the U.S.? - What states? What laws? Bank vs. Savings and Loan vs. Credit Union vs. Securities Broker vs. something else? + Will customers be able to access such entities offshore, outside the U.S.? - strong crypto makes communication possible, but it may be difficult, not part of the business fabric, etc. (and hence not so useful--if one has to send PGP- encrypted instructions to one's banker, and can't use the clearing infrastructure....) + Tax collection, money-laundering laws, disclosure laws, "know your customer" laws....all are areas where a "digital bank" could be shut down forthwith. Any bank not filling out the proper forms (including mandatory reporting of transactions of certain amounts and types, and the Social Security/Taxpayer Number of customers) faces huge fines, penalties, and regulatory sanctions. - and the existing players in the banking and securities business will not sit idly by while newcomers enter their market; they will seek to force newcomers to jump through the same hoops they had to (studies indicate large corporations actually _like_ red tape, as it helps them relative to smaller companies)
Basically describes NY's BitLicense and other nonsense to a tee. Yes, in order to make crypto "play nice" with the relics of the past there is a shit ton of regulation to wade through first.
- Concluson: Digital banks will not be "launched" without a *lot* of work by lawyers, accountants, tax experts, lobbyists, etc. "Lemonade stand digital banks" (TM) will not survive for long. Kids, don't try this at home!
Blink and you'll miss it. This hombre just issued a warning to Mark Karples and Mt. Gox a decade and a half before it even existed!!!
- (Many new industries we are familiar with--software, microcomputers--had very little regulation, rightly so. But the effect is that many of us are unprepared to understand the massive amount of red tape which businesses in other areas, notably banking, face.) 10.8.9. Legal obstacles to digital money. If governments don't want anonymous cash, they can make things tough. + As both Perry Metzger and Eric Hughes have said many times, regulations can make life very difficult. Compliance with laws is a major cost of doing business. - ~"The cost of compliance in a typical USA bank is 14% of operating costs."~ [Eric Hughes, citing an "American Banker" article, 1994-08-30] + The maze of regulations is navigable by larger institutions, with staffs of lawyers, accountants, tax specialists, etc., but is essentially beyond the capabilities of very small institutions, at least in the U.S. - this may or may not remain the case, as computers proliferate. A "bank-in-a-box" program might help. My suspicion is that a certain size of staff is needed just to handle the face-to-face meetings and hoop-jumping.
As is discussed later, too much regulation early on can be absolutely fatal. We are almost past that danger zone though (bitcoin is well past it), and I think once the under-the-hood work is complete and the GUI is out next year we will finally move past that precipice.
+ "New World Order" - U.S. urging other countries to "play ball" on banking secrecy, on tax evasion extradition, on immigration, etc. - this is closing off the former loopholes and escape hatches that allowed people to escape repressive taxation...the implications for digital money banks are unclear, but worrisome.
This is the safety blanket for those who are afraid of the United States losing its dominance in an eventual crypto dominated world. If one world government is inevitable, far better to usher in its creation and own a major slice of it rather than resist it and find ourselves as the new North Korea. This way we can control who participates vs. being spectators. For example, the internet was always going to exist; it was only a question of who created it first.
10.9. Legality of Digital Banks and Digital Cash? 10.9.1. In terms of banking laws, cash reporting regulations, money laundering statutes, and the welter of laws connected with financial transactions of all sorts, the Cypherpunks themes and ideas are basically _illegal_. Illegal in the sense that anyone trying to set up his own bank, or alternative currency system, or the like would be shut down quickly. As an informal, unnoticed _experiment_, such things are reasonably safe...until they get noticed. 10.9.2. The operative word here is "launch," in my opinion. The "launch" of the BankAmericard (now VISA) in the 1960s was not done lightly or casually...it required armies of lawyers, accountants, and other bureacrats to make the launch both legal and successful. The mere 'idea" of a credit card was not enough...that was essentially the easiest part of it all. (Anyone contemplating the launch of a digital cash system would do well to study BankAmericard as an example...and several other examples also.) 10.9.3. The same will be true of any digital cash or similar system which intends to operate more or less openly, to interface with existing financial institutions, and which is not explicity intended to be a Cypherpunkish underground activity.
This perfectly encapsulates the themes of the successful cryptocurrencies that we have seen. Start small, and slowly build. Don't draw too much attention to yourself too quickly, and for fuck's sake keep a low profile. Once things seem to be going well, take a small risk to grow. Keep taking these risks and look for key opportune moments to strike at rivals and decimate them completely, absorbing their.... hey, wait. Are we talking about cryptocurrency or a successful agar.io strategy? ;) :D The universe is full of so many delicious coincidences.
12.3.8. "Can a "digital coin" be made?" - The answer appears to be "no" + Software is infinitely copyable, which means a software representation of digital money could be replicated many times - this is not to say it could be _spent_ many times, depending on the clearing process...but then this is not a "coin" in the sense we mean - Software is trivially replicable, unlike gold or silver coins, or even paper currency. If and when paper currency becomes trivially replicable (and color copiers have almost gotten there), expect changes in the nature of cash. (Speculation: cash will be replaced by smart cards, probably not of the anonymous sort we favor.) + bits can always be duplicated (unless tied to hardware, as with TRMs), so must look elsewhere + could tie the bits to a specific location, so that duplication would be obvious or useless - the idea is vaguely that an agent could be placed in some location...duplications would be both detectable and irrelevant (same bits, same behavior, unmodifiable because of digital signature) - (this is formally similar to the idea of an active agent that is unforgeable, in the sense that the agent or coin is "standalone")
Again, the answer was always to stop thinking about it as a coin and think about it as a ledger. When forces in life challenge you and your desires, it is far better to properly direct their energies vs. struggling against them. You will find that many eastern philosophers discovered this tennant long ago and used it to great success for thousands of years. When the nature of digital information resists being made precious - do the exact opposite: make a successful digital cash system with the information as ubiquitous. When AmericanPegasus won't shut the fuck up about whatever-he's-posting today, don't continue to fight a losing battle: at least direct his efforts towards something worthwhile. :)
12.3.9. "What is the 'granularity' of digital cash?" + fine granularity, e.g., sub-cent amounts - useful for many online transactions - inside computers - add-on fees by interemediaries - very small purchases + medium granularity - a few cents, up to a dollar (for example) - also useful for many small purchases - close equivalent to "loose change" or small bills, and probably useful for the same purposes - tolls, fees, etc. - This is roughly the level many DigiCash protocols are aimed at + large granularity - multiple dollars - more like a "conventional" online transaction - the transaction costs are crucial; online vs. offline clearing - Digital Silk Road is a proposal by Dean Tribble and Norm Hardy to reduce transaction costs
Nigga what. It wasn't mentioned in the vein of an online illegal market place, but this is still the earliest mention of a 'Silk Road' that I can find on the internet in relation to digital currency.
12.7.2. "What are some motivations for anonymous digital cash?" + Payments that are unlinkable to identity, especially for things like highway tolls, bridge tolls, etc. - where linkablity would imply position tracking - (Why not use coins? This idea is for "smart card"-type payment systems, involving wireless communication. Singapore planned (and perhaps has implemented) such a system, except there were no privacy considerations.) + Pay for things while using pseudonyms - no point in having a pseudonym if the payment system reveals one's identity + Tax avoidance - this is the one the digicash proponents don't like to talk about too loudly, but it's obviously a time-honored concern of all taxpayers + Because there is no compelling reason why money should be linked to personal identity - a general point, subsuming others
We can see resistance to Bitcoin's pseudo-anonymous "solutions" even now. As I always have said, Bitcoin was the first true digital decentralized collectible but it was not true e-cash. Privacy and fungibility go hand in hand.
12.8.4. Nick Szabo: - "Internet commercialization in itself is a _huge_ issue full of pitfall and opportunity: Mom & Pop BBS's, commercial MUDs, data banks, for-profit pirate and porn boards, etc. are springing up everywhere like weeds, opening a vast array of both needs of privacy and ways to abuse privacy. Remailers, digital cash, etc. won't become part of this Internet commerce way of life unless they are deployed soon, theoretical flaws and all, instead of waiting until The Perfect System comes along. Crypto- anarchy in the real world will be messy, "nature red in tooth and claw", not all nice and clean like it says in the math books. Most of thedebugging will be done not in any ivory tower, but by the bankruptcy of businesses who violate their customer's privacy, the confiscation of BBS operators who stray outside the laws of some jurisdication and screw up their privacy arrangements, etc. Anybody who thinks they can flesh out a protocol in secret and then deploy it, full-blown and working, is in for a world of hurt. For those who get their Pretty Good systems out there and used, there is vast potential for business growth -- think of the $trillions confiscated every year by governments around the world, for example." [Nick Szabo, 1993-8-23]
15.8.2. Absent laws which ban strong crypto (and such laws are themselves nearly unenforceable), it will be essentially impossible to stop anonymous transactions and purely reputation-based systems. - For example, Pr0duct Cypher and Sue D. Nym will be able to use private channels of their own choosing (possibly using anonymous pools, etc.) to communicate and arrange deals. If some form of digital cash exists, they will even be able to transfer this cash. (If not, barter of informations, whatever.) - So, the issues raised by Hal Finney and others, expressing doubts about the adequacy of reputation capital as a building block (and good concerns they are, by the way), become moot. Society cannot stop willing participants from using reputation and anonymity. This is a major theme of crypto anarchy: the bypassing of convention by willing participants. + If Alice and Bob don't care that their physical identies are unknown to each other, why should we care? That is, why should society step in and try to ban this arrangement? - they won't be using "our" court systems, so that's not an issue (and longer term, PPLs will take the place of courts, many of us feel) - only if Alice and Bob are counting on society, on third parties to the transaction, to do certain things, can society make a claim to be involved - (A main reason to try to ban anonymity will be to stop "bad" activities, which is a separate issue; banning of "bad" activity is usually pointless, and leads to repressive states. But I digress.) 15.8.3. Part of the "phase change": people opt out of the permission- slip society via strong crypto, making their own decisions on who to trust, who to deal with, who to make financial arrangements with + example: credit rating agencies that are not traceable, not prosecutable in any court...people deal with them only if they think they are getting value for their money - no silly rules that credit rating data can "only" go back some arbitrary number of years (7, in U.S.)...no silly rules about how certain bankruptcies "can't" be considered, how one's record is to be "cleared" if conditions are met, etc. - rather, all data are considered....customer decides how to weight the data...(if a customer is too persnickety about past lapsed bills, or a bad debt many years in the past, he'll find himself never lending any money, so the "invisible hand" of the free market will tend to correct such overzealousnesses)
Got to get that Hal Finney SHOUT OUT. While NWA was in Detroit causing fans to rush the stage, Hal Finney was straight outta Coalinga changing the world in other ways. Also, in this section pay attention to the text, it's important because it gives us insight into what's next, in the 2020's after the rise of digital money, Cryptography based reputation systems are gonna, rise up, like this bottle of Berry Ciroc, left from the Halloween videos so let's wrap it up.
16.16.3. Doug Cutrell summarized the concerns of many when he wrote: - "...the availability of truly secure anonymity, strong encryption, and untraceable digital cash could allow contract killing to be an openly conducted business. For example, an anonymous news post announces a public key which is to be used to encode a contract kill order, along with a digital cash payment. The person placing the contract need only anonymously place the encrypted message in alt.test. Perhaps it is even possible to make it impossible to tell that the message was encrypted with the contract killer's public key (the killer would have to attempt decryption of all similarly encoded messages on alt.test, but that might be quite feasible). Thus it could be completely risk free for anyone to place a contract on anyone else." [Doug Cutrell, 1994-09-09] 16.16.4. Abhorrent markets - contract killings - can collect money anonymously to have someone whacked...nearly anyone who is controversial can generate enough "contributions" - kidnapping, extortion 16.16.5. Dealing with Such Things: + never link physical ID with pseudonyms! (they won't kill you if they don't know who you are) - and even if one pseudonym is linked, make sure your financial records are not linkable - trust no one - increased physical security...make the effort of killing much more potentially dangerous - flooding attacks..tell extortionists to "get in line" behind all the other extortionists + announce to world that one does not pay extortionists...set up protocol to ensure this - yes, some will die as a result of this - console yourself with the fact that though some may die, fewer are dying as a result of state-sponsored wars and terrorism (historically a bigger killer than contract killings!)
.....or not. In the scariest part of this entire article we find the truly horrifying ramifications of what anonymous communications and anonymous currency will do. Don't resist it, because it will happen whether we want it to or not. So what to do? Prepare for it and anticipate. Law enforcement should be ready to catch an entirely new class of criminal in the future, and we should all be prepared to protect ourselves (especially non-anon dumbasses like me - but I'll tell y'all what, I don't/won't negotiate with bad guys because it only encourages them, and as soon as this shit gets 'real' imma hire some 'real' security)
16.29.3. "What is the "crypto phase change"?" - I'm normally skeptical of claims that a "singularity" is coming (nanotechnology being the usual place this is claimed, a la Vinge), but "phase changes" are more plausible. The effect of cheap printing was one such phase change, altering the connectivity of society and the dispersion of knowledge in a way that can best be described as a phase change. The effects of strong crypto, and the related ideas of digital cash, anonymous markets, etc., are likely to be similar. - transition - tipping factors, disgust by populace, runaway taxation + "leverage effect" - what Kelly called "the fax effect" - crypto use spreads, made more popular by common use - can nucleate in a small group...doesn't need mass acceptance 16.29.4. "Can crypto anarchy be stopped?" + A goal is to get crypto widely enough deployed that it cannot then be stopped - to the point of no return, where the cost of withdrawing or banning a technology is simply too high (not always a guaranteee)
Yes, a phase change is coming. In it, we are going to see borders reduced and a 'world currency' standard established. It's going to be absolutely epic.... in both good and bad ways. Some will opt out, but those will quickly find themselves stuck in the stone age as more and more of the first world opts-in. Eventually, nations that try to wall themselves off from the coming phase shift will end up as the next North Korea's.... laughing stock wastelands. I think the United States and most of Europe is smart enough not to let this happen. My only worry is for Russia and I hope they find the light soon enough that they don't become a third world country.
17.3.1. "Why have most of the things Cypherpunks talk about *not* happened?" + Except for remailers and basic crypto, few of the main ideas talked about for so long have actually seen any kind of realization. There are many reasons: A. Difficult to achieve. Both Karl Kleinpaste and Eric Hughes implemented simple first-generation remailers in a matter of _days_, but "digital cash" and "aptical foddering," for example, are not quite so straightforward. (I am of course not taking anything away from Kleinpaste, Hughes, Helsingius, Finney, etc., just noting that redirecting mail messages--and even implementing PGP and things like delay, batching, etc., into remailers--is a lot easier conceptually than DC-Nets and the like.
...It took a long, long time to make it.... through the hard times and the good....
17.13.4. "When will it all happen? When will strong crypto really begin to have a major effect on the economy?" + Stages: - The Prehistoric Era. Prior to 1975. NSA and other intelligence agencies controlled most crypto work. Cryptography seen as a hobby. DES just starting to be deployed by banks and financial institutions. - The Research Era. 1975-1992. Intense interest in public key discovery, in various protocols. Start of several "Crypto" conferences. Work on digital money, DC-Nets, timestamping, etc. - The Activism Era. 1992--?? (probably 1998). PGP 2.0 released. Cypherpunks formed. Clipper announced--meets firestorm of protest. EFF, CPSR, EPIC, other groups. "Wired" starts publication. Digital Telelphony, other bills. Several attempts to start crypto businesses are made...most founder. - The Transition Era. After about 1999. Businesses start. Digital cash needed for Net transactions. Networks and computers fast enough to allow more robust protocols. Tax havens flourish. "New Underworld Order" (credit to Claire Sterling) flourishes.
Then I wonder what they would call us in our era? The Age of Enlightenment? No, that comes next. First is the great shift.... where the greatest wealth transfer in the history of mankind takes place.
After reading through this document I can see that not only was cryptocurrency not a random mistake, but even Monero was a dream long sought after by the greatest minds on the planet. What does that mean? It means to get ready, because this thing is slowly coming together in a big way. And Monero is no alt-coin. This is the first valid implementation of Cryptonote, and from everything I can see will eventually serve as the private ledger for our entire fucking planet. I'm not talking $2,000 Moneros.... I'm talking $300,000 Moneros by 2030. And the more I ponder how it will happen, the more I realize that we are somewhere on an S-curve of adoption. And perhaps no one really knows where that vertical part of that S-curve is, but when it hits, you'll know. You will see Monero users go from 10 million to 1 billion very, very quickly. The price will skyrocket and we will see the vast majority of humanity's wealth transfer into it. At least, that's what this bottle of Ciroc is telling me will happen. But then again, you shouldn't believe anything I say: I sometimes have trouble with even simple math. ;) Have a good weekend everyone.
That seems like a fair complaint to me, in general. In practice, and as opposed to Krugman's thoughts on the matter, we have many thousands of happy Bitcoin transactors, I think people like to spend their bitcoins with others, give them away, and use them for things. I do know some Bitcoin businesses that try never to spend their coins. That said, we have had some periods like last year where EVERYBODY wished they'd spent their coins.. To my mind volatility is a worse 'evil' than being deflationary. As I said above, I think most government economists wish an inflationary currency (and many bitcoiners hate this, and talk a lot about how much they hate it), but I think there's definitely a place in the world for a deflationary value system. An interesting thought experiment for you -- if you forked the Bitcoin blockchain and changed issuance so that it tracked say, USD or USD/EUR inflation rates for issuance, would it have the same uptake or not?
The practical security aspects of running Bitcoin businesses are a REAL need, and it's something we want to help on with advice, and possibly opt-in certification at some point. I say more about this elsewhere in the AMA.
Re: bitcoin site usability -- I agree, it's often terrible! I'm not sure why this is, except to say that bitcoins make transacting online so easy that even people who can't afford a designer can do it.
So far, because market cap is so low, (Roughly $100mm of value), Bitcoin exchange rates are highly susceptible to people pushing it around. This is really tough for everyone. There are a bunch of businesses that might not be viable until you have some exchange rate certainties that extend beyond a short (one day-ish) window.
There are some macro-economic things that could be done, like exchanges publishing all trades to a central area, and implementing locks if prices rise / fall too suddenly, but those all have their own effects to consider. I think the fundamental thing to do is help Bitcoin acceptance and uptake grow, increasing the size of the pie until there are a much smaller number of parties that could push the price around.
So, we all do have a part in that stabilization for sure. There's also the angle of creating whole supply chains that are bitcoin denominated -- paying our staff in Bitcoins only is an attempt to work on that angle.
This borders on the troll-ish, but I will say that the Bitcoin network autosizes coin generation based on how many people wish to do it. That is, people opt in to make the coins and secure the network. Nobody is forced to.
I have experience launching a non-profit, hence my job.
ED's typically get a salary and work full time at the job; we didn't know if we'd have budget to pay someone who could operate such a thing, so we went with this structure. I anticipate that I will step down from being the ED at the earliest moment we know we have someone better to do it; running CoinLab is plenty of work for me.
Our assistant director Lindsay Holland is not a white male.
In general, Bitcoin is a white male sausage-fest, though. I urge you and all Bitcoiners everywhere to work on changing that.
I don't know the future of Bitcoin, but I hope that I and the Foundation are a part of it!
I don't believe Bitcoin will ever obsolete a government currency, but I only speak for myself when I say that. Bitcoin is a fascinating and novel technology with a HUGE number of potential benefits to the world, so I'm into it. I don't see a government wishing to cede control of its currency to anything like the technocratic / consensus model that Bitcoins are governed by, though.
That said, I do hope that Bitcoins will be able to help people in areas of the world that need better money features. Mpesa is a great example of something that helps Kenyans (and people from a few other countries) by changing how money is used. Bitcoin has the potential to help people like that, all over the world, whether or not the 'market' is large enough in that country.
I personally think that sort of thing is SUPER exciting.
Sure! It's a trade organization, member-driven. Its goal is to promote, protect and help standardize Bitcoin. Our initial goals are to provide funding for the core development team, run a 2013 Silicon Valley Conference, and create some opt-in certification methods and best practices for businesses dealing with Bitcoin.
I can tell you hate our goals, so I won't spend a long time trying to convince you. But, I will say that businesses often need a long, secure timeframe to make investment decisions, and they need to have some sense that what they work on or invest in will be roughly similar at the end of their investment to the beginning.
For instance, imagine ebay deciding to take bitcoins. The person-hours to get that done inside ebay are staggering to imagine, from wallet scalability issue to accounting treatments, refunds, ... It would be a major endeavor.
You might hate everything about that, and that's cool. I urge you to go ahead, fork the code, advocate as much as you like for something else. Bitcoin's free, both the protocol and the software. Nobody is stopping you.
Like Jeff says below, I would distinguish between fundamental protocol security and security practices.
Bitcoins fundamental protocol security seems pretty good at this point; I'm sure we'll all be keeping an eye on that quite intently into the future.
Practical Security has been, largely, terrible in the Bitcoin space for most businesses, Mt. Gox perhaps excepted. The amount of work it takes to secure 80 byte strings that may be valued in the million dollar range is non trivial. Think securing missile codes as to the level of security needed.
Many bitcoin businesses can't afford (or don't wish to) this sort of security. I'm hoping we can provide some tools and pointers for these businesses and their users to help people understand what they're getting into when they transact with a bitcoin business, and what their risks are.
Right now Jon Matonis is considered our "Europe Expert" on the board. There's a huge amount of work to do just in keeping track of how Bitcoin is categorized and regulated around the world. I would expect the Foundation to put some time and energy into helping with that process, but it's not our first goal.
We're aiming to be highly transparent. I proposed today that we publicize our cold wallet public keys so that people can check our balances. This got pushed back a month while we work on some logistics. I will follow up about this, though. I think having auditable books from day one is really cool.
I love it and wish more of it. I'm totally grateful that nations have standardized and created currencies for their people, so that I can travel and buy stuff without worrying about the reputability of a local bank when I go to exchange my money.
TBD, But I am imagining that businesses could vet their processes and procedures against a set of published standards, pay for an audit, and then be able to help their users understand what level of security they provide, e.g. "Bronze certification -- the site could be trusted with 50 bitcoins of stored value per person."
We're a member organization. Some of our members do have access to and influence over bitcoin.org and bitcoin-qt. I have no idea if they would like us to help manage bitcoin.org, since we just launched yesterday.
If the decision makers for bitcoin.org and bitcoin-qt want us to help out in those areas, I wouldn't mind. I don't think either of those things is super strategic to helping Bitcoin right now; there's more need for messaging and some financial security for the core team, and the other stuff we said we're going to work on this year. bitcoin.org and -qt publishing don't seem broken to me or risky right now.
I don't know how we'd encourage or ignore exchanges, since everyone is welcome to join.
I do think this individual / corporate angle is at the heart of the Bitcoin, though; it's got a lot of parties that care about it, passionately. Some are investing millions of dollars. Some are tirelessly advocating for Bitcoin. Many sit around and troll and waste people's time.
I guess that partly we expect our board members will act with integrity, and that if they aren't representing the needs of their member class, they'll get replaced with someone who will.
I also don't know how we would, practically, decentralize Bitcoin, even if we wished such a thing. I don't think anyone on the board thinks Bitcoin is doing badly. We're all really excited about it and want to help. I personally believe if corporations (a small group or just one) ever provably controlled Bitcoin, they would become vastly less appealing and useful. So, we're on watch.
Not as on watch as a paranoid bitcointalk forum troll wants us to be, but we're on watch.
The Foundation's core values include openness and transparency. I think the Bitcoin anonymous thing is overblown and a bit of a myth, by the way. Every bitcoin transaction links two addresses; often people can be determined from those addresses.
At any rate, we wish to make sure you can't stuff the ballot box during voting, and we wish civil productive discourse among our members, so we need real names and addresses.
If you just want to support us without joining, you can always send money to our vanity donation address: 1BTCorgHwCg6u2YSAWKgS17qUad6kHmtQW.
I think Bitcoin adoption is growing nicely. There seems to be a sort of stair-step function where people figure out something new and broadly appealing to do with them, and it makes a big jump. I expect we'll see that many times over the next five or ten years.
Bitcoin's brand seems bad to me; mostly the highly publicized exchange attacks worry people. It's too hard to have a secure cold storage wallet for even a very smart individual. I'd like to see some of those things improved.
I can't speak for Bitcoin, but the Foundation has no criminal combatant plans. We do want our members to use their real names and promise that they only engage in activities legal in their jurisdiction, though.
That's mostly just a way of us saying who we want to hang out with, and expressing some community values we think will help our organization be a success.
Yeah, there's an interesting set of questions there about certification. I would LOVE to see a certification that brought with it the ability to be insured against loss and theft. Think how nice it would be for an exchange or wallet business to be able to offer that insurance. That said, I don't know of any bitcoin company that has such insurance yet. I think we have some work to do vetting out the processes and procedures, and then some sales and relationship work with insurance companies first. At any rate, we won't be stumping up security for certified companies through the main Foundation corporate vehicle ever. But I think the membership will want to discuss what a good set of next steps is toward that goal, if we're all sold on trying to make it happen.
Bitcoin is inherently free, it's peer to peer, it can be forked, it's not controlled by the Foundation, especially one that's one day old.
So, I look forward to large donations from BIG businesses. We will use that money to further the Foundation's mission. Our members will, no doubt, be highly engaged in discussions about what to do with large donations. I'm looking forward to it.
I would be stunned if we voted on source code, ever. I don't think anyone thinks that is in the remit of the Foundation.
Pragmatically, the dev team is one arm of bitcoin source code governance, and miners are the other, since they can refuse to work with code changes they don't like if they do it in bulk.
The board meets often, and should be listening to its constituents; sign up as a member, and then mail your appropriate rep. As a sample of what we discussed today: "Should we do an AMA? Who will get member signup confirmations out? Can we publicize Patrick's bylaws yet?" were the scintillating topics of conversation.
I think we felt a foundation that didn't somehow acknowledge Satoshi would be a bit churlish, like ignoring Linus completely while making the Linux Foundation. Satoshi is, as always, free to participate as he/she chooses.
The second, arguably more powerful one is provable computation time spent on creating the consensus. So you can look at a set of bitcoin transactions and say "Ah ha, that had roughly [say] $1mm worth of computation time put in to securing and validating it! I believe it's safe to consider my $55 transaction secure."
Totally. They are confusing; it's a truly novel solution. Essentially it mixes something non-intuitive and magical-seeming (public key cryptography) with something very hard to imagine a solution for (distributed timestamping among non-trusted parties).
We will be seeing the concept extended out into a number of technology arenas over the next 25 years I imagine. It's an incredibly powerful solution-space.
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