Daily Crypto, Finance, and Tech News Summary – November 30, 2023

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Welcome, and thank you for being part of the MyZucoins community! Let’s get into an interesting piece of crypto, finance, or tech news to stay ahead.

Person searching for a missing screw in a room, everyone is confused and scratching their heads

Crypto Cardano’s Founder Hoskinson Criticizes US Regulator’s Favoritism Towards Bitcoin

Charles Hoskinson, the founder of Cardano, has recently criticized the U.S. Securities and Exchange Commission (SEC) for its alleged bias towards Bitcoin.

Cardano was one of the first cryptocurrencies to use the Proof of Stake (PoS) way of validating transactions, beating others like Ethereum to the punch.

In a recent livestream, Hoskinson accused the SEC of giving Bitcoin a “complete pass” over the question of whether it’s sufficiently decentralized to not be considered a security.

He argued that Bitcoin is not truly decentralized and that other cryptocurrencies, including Cardano, are unfairly considered securities.

Hoskinson called the SEC’s treatment of Bitcoin an “absolutely pathetic joke,” and questioned the difference between Bitcoin, Ethereum, and Cardano.

He suggested applying the Howey Test, a legal test for determining whether certain transactions qualify as investment contracts, to demonstrate the inconsistency in the SEC’s approach.

The Cardano founder further accused the SEC of wasting vast amounts of money in a futile war against the cryptocurrency industry, predicting that the regulatory body will lose court case after court case.

He also criticized the unaccountability of government and regulators, while praising libertarian lawmakers for their efforts to improve the situation.

Cardano (its token is “ADA”) has been repeatedly targeted by the SEC, which asserts that it is a security.

The blockchain research and engineering firm behind Cardano, Input Output Global (IOG), has refuted these claims, arguing that ADA is not a security under U.S. securities laws.

Despite this, the SEC continues to maintain its stance, recently filing new charges against popular crypto exchanges like Kraken for continuing to offer Cardano. Read more here.

More On This Topic:

What is the importance of cryptos as commodities vs securities?

Understanding commodity vs security differences.

Ripple’s “security” legal ruling stirs security debate.

Gensler suggests Proof-of-Stake tokens are securities.

High US concentration of Ethereum nodes raises decentralization concerns. Lido staking pool worries.

What Could Cardano Be Missing To Be Considered A Digital Commodity?

The issue at hand according to Cardano’s Hoskinson is Bitcoin’s ‘free pass’ on the subject of decentralization, a topic that has plagued many cryptocurrencies including Cardano.

The lack of accountability and clear explanations among regulators raises questions.

Edmund Burke’s quote, “The only thing necessary for the triumph of evil is for good men to do nothing.” perfectly expresses Hoskinson’s feelings and the need for freedom-loving lawmakers to intervene and correct the situation.

To be clear, as Zucoin management has expressed numerous times, Zucoin is focused on becoming a digital asset commodity, not a digital security.

What’s the difference?

Well, it’s all of the stuff we regularly cover here.

In part, it involves these factors:

Permissionless: Anyone has to be able to join the network.

Decentralized: Anyone has to be able to contribute to the network. It’s also an effect caused by how easy it is to get involved. More complexity and friction create less participants, meaning fewer people get involved, thus more centralization.

Commodities tend to follow a few principles, basically the opposite of the Howey Test.

For example:

Who is doing the work—can anyone do the work?

If so, peers need to do “the work” mostly themselves.

This is why on Zucoin’s Splitchain network, the system is designed so that the peers do most of the heavy lifting when processing a transaction.

The network of nodes mainly just cache data so it’s available to other peers, when peers close their app or go offline.

We say mostly, because if you have a drill and are digging for oil—who made the drill used to dig up the oil?

Probably another company, but you’re using the tool to do the work yourself.

So there are some assumed dependencies there, but the way those dependencies are used is important.

It seems what Proof of Stake (PoS) cryptocurrencies miss is the idea that the Proof of Stake mechanism itself may be an investment contract, potentially forming a security.

In its simplest form, the way many PoS mechanisms work is that people put their coins up, locking them for a certain amount of time, and they expect to get a percentage of the fees that are processed through the network.

Often, the more coins you have staked, the more you process and the more of the processing fee you get to keep.

It’s a neat idea—a bit like an open-ended Visa, except that anyone with enough resources can join.

But in the eyes of regulators, is it considered a financial security?

There’s no decision made yet.

So far, regulators are leaning towards yes, for reasons similar to the above.

Splitchain’s network doesn’t have in-built fees.

It has a very different way of incentivizing the network while keeping true to commodity principles.

We’ll reveal more details as node scale milestones are hit, so subscribe to this newsletter if you haven’t already.

Zucoin is carefully navigating the constantly changing regulatory landscape, to help their products follow current and coming rules for digital assets.

Working to ensure compliance all the while making the network easy to join and inspiring coinholders to create their own applications and uses will be key.


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All the best,
—Rob
MyZucoins

Disclaimer: Of course, this is not advice, financial or otherwise. It’s also important to consider the risks and challenges associated with any potential benefits.