I edited my post to make my source more clear. I know you are busy and sorry to burden you, but isn't this really important?

Do you have any pointer that can lead me to type of references you are thinking might support your opinion?

The case law says that as long as the user has managerial control then whether you sold a product enabling the user to take control, then as long as the developer has had no control, then the user entirely culpable thus the shares in the product that was sold at ICO are not a security, because there is nothing backing it. It appears you are wrong in the case that the developer steers far from any managerial control throughout the entire process. The devs could be liable for selling a faulty product if they didn't put proper disclaimers in the terms of sale, but that is orthogonal to the tokens of the product being classified as a security. Afaics, Ethereum did assert managerial control. Also perhaps one can argue that Monero's devs appear to assert managerial control (the 6 month forced upgrade thing is one potential sign of that control as who would diffuse that every 6 months if not the ongoing devs exerting managerial control, as the n00b users are totally dependent). It appears that whether the users think it is an investment or not, has nothing to do with the classification as a security. That is why I wrote in the OP to not try to apply your common sense opinion, because the law is not based on your common sense opinion.

smooth your opinion is appreciated, but I would like to point it seems to be entirely based on opinion; whereas, I cited the law (in the USA and in the EU).

In law, opinions are like ass-holes, everyone has them, but the law is something written down and appended to by case law court decisions as you know.

You claim the laws are not clear, but that appears not to be the case. The laws especially in the USA seem to use the test of managerial control. Did you even study the links and sources I provided?

http://www.lextechnologiae.com/2011/06/26/why-bitcoin-isnt-a-security-under-federal-securities-law/


So thus when there is another manager of the enterprise other than the users, then the shares of the enterprise are "investment securities". But then there is no manager and the user exercises the only management over his own shares, then the user exercise the only managerial control that exists, thus the shares are not securities! As stated in the law by the court decisions.

The European law appears to be more lax and you may not run afoul it as easily, but I argue that the same test will be applied in European law as follows... (I didn't have time to dig up European case law to confirm my logic)

Okay so placement into the DAG (consensus) graph can be assisted by a service provider. Payer signs the TX and that signature authorizes the service provider. Service provider signs the graph node. Or service provider sends the DAG node choice to payer who signs it, giving authority to place his signed TX at DAG node.

This has some nuances of difference versus the autonomous ability to directly formulate and send a transaction to the consensus block chain network (although in practice existing PoW systems devolve into essentially sending to pools in most scenarios, but this maybe could be fixed in other ways). But I don't as of yet see a problem with using a service provider.

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Changing the topic, one of the issues which I doubt is on your radar and probably not a priority in your view, is that a DAG system apparently can't order transactions (or can you?) and I believe ordering will be important for implement anonymity ring signatures entirely correctly (something I had pointed out to Monero but still need to get back to Shen and his 2007 prior art and such to make sure if I was correct or not).

How long does it take for a transaction to become "confirmed" such that it is very, very unlikely it can't be double-spent into the DAG?

Well that seems to make common sense that we entangle such that all transactions are included in the majority of the tips, then the consensus is those transactions are more likely final than the ones in the minority of the tips, since there doesn't appear to be an incentive to favor tangling with minority tips over majority tips. But that seems to imply that before I combine two tree branches into my signature, I must insure there is no double spend in the (combined) history otherwise my signature is invalid and no other node should include my branch tip as input to their node in the graph. Thus it seems each payer has to keep an entire history and table of conflicting branches (at least back to check points but aren't check points the antithesis of unmanaged, decentralized crypto-currency)? Are payer nodes supposed to entrust this verification to other nodes?

Okay I think I can see intuitively how participants have an incentive to maximally tangle (extend the depth of) the graph and not broaden it too much, but I will still need to go deeper to analyze attack vectors.

So far my main intuitive concern seems to stem around the apparently much more intensive (exponentially more?) resources that payers will need to have versus in a system where they can autonomously sign a transaction without context of other transactions in the network.

Also I can't see how anonymity technology such as ring signatures can be integrated into a system like this, nor Lightning Networks. My mistake. I realize the inputs and outputs of the transaction are orthogonal to the DAG. So yes transactions could still be signed with on-chain anonymity I presume. Afaics, Lightning Networks appears to not be compatible with the anonymity methods we've used for block chains.

It is very interesting the concept of a chain without the aliasing error of stepwise blocks. Somehow I think this stuff is important, but I haven't yet figured out the sweet spot for this technology. I need to understand more about the benefits and tradeoffs.

Definition of Bitcoin in the Evolution of Money

Watch the linked video. He nails this. Gold and silver are dinosaur relics now, as well paper, platforms, and institutions.

Andreas Antonopoulos makes the point that what distinguishes decentralized crypto-currency from other forms of money, including digital money, is that it is a decentralized protocol, i.e. a language and not centralized platform (API) nor institution. Since I agree 100% with this definition and especially how he explains it in the context of the history of money, it appears to coincide with my view that the securities law applies to managed platforms and institutions and not to decentralized, unmanaged protocols. Thus if some group is controlling the protocol, I think they could be argued to be the managers of the "investment securities" which are the coins.

Thus I agree with the voter who voted that all crypto-currencies which have a group managing the protocol are thus "investment securities", regardless whether they sold the coins or not.

I highly recommend listening to that presentation by Andreas. When he states "peer-to-peer" and "state moved to the ends i.e. the peers" he is referring to the End-to-End principle:


P.S. I inadvertently locked the poll but I unlocked it now. I didn't know I had clicked Lock poll. I also reset the poll (3 votes lost), because before some voted misunderstanding what the question stated.

Hahaha. Probably reasonable advice. Thanks for the humor and bluntness. Others of us would like to find another answer though, if there is one.

Are you implying you think everyone in crypto is either naive or of a criminal mindset? Or are you implying people are ready to fight their government and are fed up to the point of proactively not caring?

What are you offering in exchange? I am not saying I am interested (very small chance) but others might also prefer to have some idea of that up front.

I am qualified.

FWIW, we thought of this name to use as the smallest units of the coin we were thinking of using the name Dots in 2014. But that effort did not come to fruition. We purchased Dots.com for $500 and then the registrar went bankrupt and stole the registration from us. I didn't feel like hassling to try to get it back because we had registered it anonymously.

Interesting flip of perspective to name the coin that. I think we didn't like it for coin name because it is literally defined "nearly nothing", and we felt Dots were more social networking friendly.

I like the tech appeal of IoT and the sound of Iota. But I am not sure it sounds right, "I don't care one iota". "The price is 5 iota".


Isn't that what Bitcoin was supposed to do, before ASICs and pool mining denuded it.

Yeah I understand the "middle finger" attitude towards government, but what about those of us who don't want to go to prison or get slapped with fines down the line?

No. And I am hoping to get some feedback from those who are. My father is and I spent a fair amount of time reading legal briefs stacked around the house, but I don't claim to have any formal training in law.

Can anyone translate?

Here come the Chinese, which are good at copying everything. Plagiarism, no problem it is legal in China.

So far they've been able to make Chinese versions of everything we have in the West (e.g. replacement for Amazon.com, social networks, Google, etc) that cater to their markets which are large enough that they haven't had to worry about external adoption. But I think crypto-currency might be different. Crypto-currency straddles borders so they need our comprehension and adoption also.

I am in Davao, Mindanao (been here since 1996 mostly) and I concur with all the posts thus far.

It seems the killer app for Bitcoin in the Philippines will be micropayments. And you might end up being able to claim it was invented by a guy in Davao.

I programmed and launched Cool Page from a literal Nipa Hut (on a dialup connection) in 1998 and by 2001 I had 335,000 confirmed web sites (altavista confirmed) produced with the product back when the internet was 1/10 its current population.

I am an experienced programmer and entreprenuer and I have been working on this problem for a while. So stay tuned as 2016 is potentially going to be a very eventful year for crypto.

It concerns me that so far the only two voters have voted to characterize as "investment securities" a decentrally fairly-distributed coin, where no tokens were ever sold by the creator of the coin, and the creator (or his descendant group) has no ongoing managerial control over product (or company or scheme) invested in.

Also per the terms of the poll, unless the voters posted in the thread to explain why not, their votes means all items below their selected choice are also "investment securities", thus these two aforementioned votes are essentially saying that all crypto-coins including Bitcoin are unregistered "investment securities". Do they realize that would mean many exchanges and other exchanging of these securities are illegal? (at least the risk thereof in some jurisdictions)

My purpose with this thread is to try to gain insight into how users and investors are thinking about this risk. It appears to me thus far that no one has cared nor thought about it. Which is amazing to me given the potential harm that could come to all of us for not being astute on this issue.

But the securities law definitions seem to require that the group has managerial control in order to classify the shares of the investment to be "investment securities".

But if you bought tokens in a game, you wouldn't be taking the pronouncements of the users of the game as promises for the future value of your tokens. The users are not in control of the management of the product (its protocol, compiled code, marketing, planning/implementing hard forks, etc). Crypto-coins are like a virtual game and the value is what the users say it is, so isn't a currency unless the users treat it as such.

Thus as I read the way the "investment securities" are typically defined by the courts and law (at least what I could find quickly), it appears the test is whether there is a controlling group MANAGING the product that drives the value of the investment shares.

The users are not managing the coin. They often disagree with each other and have no consistent managerial organization. They are just using it within the confines of the protocol.

Only the developers truly have the influence to alter the protocol and have it widely adopted. So in my mind the test is whether the developers are acting like an organized controlling manager of the coin. A lead developer could be offering updated code for improvements to the coin and still not really be in control, if others are also doing so more or less uncontrolled by that lead developer and the nodes in the system are not dictated to or controlled by one managerial group as to which code they choose to run on their node. But if these developers have joined together in a coordinated group that is managing the coin and the users depending on the pronouncements and website of this controlling group for the official coin gospel, then I say it falls dangerously close to being classified as an "investment security" and especially if coins were sold to investors with the proceeds going to that managing, controlling group, and even more especially if there is ongoing revenue stream being taken from the coin and given to that managing, controlling group.

The stated reason that securities regulation exists is essentially to protect naive investors from incomplete, incorrect, and fraudulent disclosure by the managers of the investment. Thus if there are no managers, then there is nothing to protect the users from. How could the government regulate a protocol that no one is control of? Instead they can only regulate those who manage investments and those who facilitate exchanging shares in them.

Bitshares and Dash appear to me to be trying to escape the concept of "control" by passing the control off to masternodes and delegates, but in essence if you own most of the coins (or have influence over or confluence with those who do, because of your ability to control which developments get adopted), then you control these masternodes and delegates. So this appears to maybe be an obfuscation of their controlling and managerial role. They appear to be trying to sidestep the securities law, but I think they may fail. They are also US citizens, so I would not want to be doing what they are doing (I am also a US citizen).

Btw, I thought Monero was probably very safely distant from this problem until you told me they automatically manage the changing of the protocol every 6 months. That is a managerial role by a consistent controlling group. That would concern me if I were them. But I am very paranoid, maybe too much so.

Feel free to change your vote if I have changed your opinion with my post.

Edit: my opinion is that if there are funds supplied to develop a product and the managerial control is given up after delivering the product, then the product (and its tokens) are not "investment securities". So in my interpretation, a crowdfunded development of a coin that is then turned over to the community to run autonomously without ongoing managerial control of the developer or any controlling group, would thus not cause its coins to be "investment securities". But I am not attorney so consult your own legal advisor and I want to read what others think.

I presented details on why I think Europeans and others also are affected. I don't know why Europeans think (if they do so or if not why they are often say it is only a USA problem) they are immune to securities regulation?

I haven't dug into the core issues of the breadth of tree and its implication on convergence versus divergence and as pertains to double-spends and other metrics. So I am limited in terms of making insights at this time until I do.

I thought you replied to me up thread that the payer needs to accumulate a significant portion of the breadth of the tree (even historically) in order to evaluate where strategically to optimally insert his/her node in the DAG. Thus it seems to me that each payer has to see some N other payers, so this bandwidth and computation load on the payer is scaling as N x N for payers versus to a normal PoW system where the payer's signature is autonomous from the network. The latter is the end-to-end principle because the intermediaries—between the originator and the construction of a transaction to the destination—are incapable of harm, substitutable, and fungible. Put more abstractly, the intermediaries are idempotent, referentially transparent, transitive, and commutative.

I understand conceptually the global consistency requirement is lower than a more deterministic traditional PoW or even PoS system (although these diverge on reorganizations and total divergence at 51% attack), but doesn't that come with the tradeoff of a risk of divergence of the tree's *final* conclusion about a double-spend (two reasonably balanced leaves each with a double-spend)?

I guess what I am after in terms of characterizing the tradeoffs is some quantification or conceptualization of the frequency/probably (or characteristic principles) of divergence as we have succinctly with PoW (selfish mining, 51% attack, orphaned chains, etc). Something expressed in the English language and not requiring differential equations models to comprehend.

Cross-referencing and wondering why no one wants to rationally discuss this topic?

https://bitcointalk.org/index.php?topic=1218269.0

I am wondering why I can't get any feedback on this?

It is as if everyone wants to sweep this under the rug and pretend this issue doesn't exist  

My theory is the powers-that-be are allowing all this illegal activity to proliferate so that when they are ready in the future to collapse the crypto economy into a fully regulated one, they can bring securities law actions against various parties and their involvement in selling, brokering, exchanging, etc unregistered "investment securities".

I would appreciate some rational feedback from level-headed forum participants. Especially those with relevant experience and knowledge.