Category Archives: Web3, Decentralization, DAOs

Ethereum and Solana Staking Goes Live on WealthSimple

Securities.io | Mandela Amoussou | Oct 27, 2022

Wealthsimple launches stakingCanadian-based regulated financial services platform, WealthSimple, now offers crypto staking.

  • WealthSimple started as a stocks and exchange-traded funds (ETF) trading platform; it then expanded its services to offer crypto trading in 2020. WealthSimple remains one of Canada’s most valuable private technology companies with a valuation of $5 billion.
  • WS became the first non-bank/credit union in Canada to be approved by the Bank of Canada for a direct settlement account; this gives WealthSimple direct access to the Real-Time-Rail (RTR) payment system.
  • Staking is a way to earn percentage-rate cryptocurrency rewards by holding certain cryptocurrencies in a staking-compatible wallet or staking platform. To support the security and operations of the Proof-of-Stake (PoS) blockchain network, users “lock” or stake funds (in the blockchain network’s native token) and incentives (in the form of cryptocurrency) are paid into the wallet used for staking.

See:  Merge Complete. Goodbye Miners, Hello Stakers

  • ETH staking on WS:  In WealthSimple the minimum amount of Ethereum a user can stake is 0.01 ETH. At the moment, Ethereum staking on WealthSimple does not support “unstake” – this means that users cannot terminate an ETH staking contract, and any ETH staked will be locked indefinitely until after the Ethereum merge is complete.
  • SOL staking on WS:  Solana, on the other hand, has a much lower staking amount (when converted to the dollar value) threshold. Users can stake as little as 0.02 SOL, which is equivalent to $0.60 at the time of this publication. Unlike ETH, SOL can be unstaked at any time.

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NCFA Jan 2018 resizeThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Neal Stephenson Doesn’t Give a Damn About Meta’s Snow Crash

FastCompany | Jesus Diaz | Oct 25, 2022

Pexels – Tima Miroshnichenko – Metaverse googles

Image: Pexels/Tima Miroshnichenko

Like much of the world, Neal Stephenson doesn’t give a damn about Meta’s Metaverse.

  • Stephenson coined the term Metaverse in his seminal sci-fi book Snow Crash.
    • Stephenson is tired of people asking him about Zuck’s Snow Crash-turned-train crash, and I can’t blame him. Zuck’s Metaverse may be dead
    • No matter how many Quests—Meta’s VR headset—get sold to die-hard enthusiasts, as long as you need goggles, putting a piece of plastic on your face will always feel like an unnatural barrier; a barrier that will stop billions from embracing it in the same way they embraced the smartphone, computers, or game consoles.
  • The Metaverse already arrived years ago
    • 2D interfaces remain the most accessible and natural way to access the Metaverse.  "What happened is that Doom came along and gave birth to the video game industry as we know it"
    • In other words, the Metaverse in its primogenial form is already here. From World of Warcraft to Red Dead Redemption to Fortnite, these Metaverses are getting more sophisticated, increasing their level of fidelity while building up entire economies. The only problem is that they are still disconnected from each other. There’s currently no way for us to maintain our digital selves—and the assets we own—across these platforms. But the Metaverse does exist.  Instead of living inside those worlds, we live them through a looking glass that we can’t cross quite yet.

See:  Google’s Fusing Street View with AI to Create Metaverse like ‘Immersive View’

  • Lamina1: That is why Stephenson started a company with Peter Vessenes, who describes himself as a digital currency, tokenization, and blockchain technology expert. Its name is Lamina1, and it aims to allow anyone to build worlds and bridge them to others.
    • Blockchain technology will be at the center of all that, which they think is the only possible way to create digital economies, connect worlds, and interoperate with each other, so you can bring your battle armor or your supercar from one world to the next.
    • Stories are what matters: While these worlds are not physically immersive, as VR promised, we can feel them through the characters that we see on these flat screens. Their stories are our stories. And if those stories are very good, they draw us into their Metaverses.
    • Standards: It’s hard to see these worlds’ economies coming together as one wide open standard, even while the many companies—including Adobe, Nvidia, Sony, Microsoft, Epic, or Unity, but curiously not Apple or Roblox—are all part of the Metaverse Standards Forum, the W3C group that is supposedly working toward the creation of true interconnected Metaverse.

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NCFA Jan 2018 resizeThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Equifax Partners with Oasis Labs to Issue Anonymous KYC Credentials to DeFi and NFT Users

Decrypt | Mat Di Salvo | Oct 26, 2022

Web3 KYCCredit reporting giant Equifax, best known for one of the largest data breaches in history, will now help build a data privacy solution for Web3 projects.

  • The company today announced that it has entered into an agreement with privacy-focused cloud company Oasis Labs to develop an identity management and know-your-customer (KYC) product for Web3 startups, such as DeFi protocols and NFT projects.

See:  Liquid Avatar Releases Update to It’s Feature Rich Self-Sovereign Identity Mobile App

  • But the decentralization that blockchain affords does not mean that Web3 products do not need to follow through with identity verification and KYC procedures, and Equifax and Oasis say that a KYC solution with “strong privacy protection” does not currently exist in the Web3 space.
  • The two companies will therefore work together to build a solution by issuing “anonymous KYC-ed credentials” to Web3 users’ wallets.

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NCFA Jan 2018 resizeThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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NEAR Protocol to Shutdown Its Undercollateralized USN Stablecoin | Allocates $40M USN Protection Programme

Decrypt | Mat Di Salvo | Oct 24, 2022

NEAR stablecoin USN

To avoid another LUNA debacle, NEAR's undercollateralized USN stablecoin will be phased out.

  • USN: Since April, Ethereum competitor NEAR is a popular blockchain for building decentralized apps (dapps) and minting NFTs, has had its own stablecoin, USN, which was issued by the DAO Decentral Bank.
  • USN recently became undercollateralized, according to a Monday statement by the NEAR Foundation, a non-profit which supports the blockchain. This means that there isn’t enough collateral backing the token.

See:  Vitalik: Designing Principles-based Stablecoins that (may not) collapse

  • Shutting down:  As a result, the NEAR Foundation added, the token would be shut down. Decentral Bank announced later that day that it would indeed be winding down the USN project.
  • The NEAR Foundation said it was using $40 million to fund a “USN Protection Programme” to protect investors as the stablecoin shuts down.

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NCFA Jan 2018 resizeThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Matt Levine: The Crypto Story

Bloomberg | Matt Levine | Oct 25, 2022

Bloomberg – The Crypto Story by Matt Levine

Introduction

  • There was a moment not so long ago when I thought, “What if I’ve had this crypto thing all wrong?”
  • I’m a doubting normie who, if I’m being honest, hasn’t always understood this alternate universe that’s been percolating and expanding for more than a decade now. If you’re a disciple, this new dimension is the future.

See:  IIROC Approves Coinsquare Registration – A First in Canadian Crypto

  • If you’re a skeptic, this upside-down world is just a modern Ponzi scheme that’s going to end badly—and the recent “crypto winter” is evidence of its long-overdue ending.
  • But crypto has dug itself into finance, into technology, and into our heads. And if crypto isn’t going away, we’d better attempt to understand it. Which is why we asked the finest finance writer around, Matt Levine of Bloomberg Opinion, to write a cover-to-cover issue of Bloomberg Businessweek.

NCFA Jan 2018 resizeThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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Ooki vs CFTC: Emerging Questions on Legal and Tax Status of DAOs

Freeman Law | Andrew Mirisis | Oct 13, 2022

CFTC Chair Rostin BehmanThere are emerging and novel legal questions about how a DAO may be subject to regulatory or legal action. DAOs lack legal status in most of the United States, and, as a result, may be considered, by default, as a general partnership, with each member potentially having unlimited liability for its actions.

  • DAOs legal status in the U.S.: The lack of legal status in most of the United States is a significant liability risk to the DAO’s participants.  DAOs unlike their traditional legal entity counterparts are only recognized as legal entities in three states: Vermont, Wyoming, and Tennessee. Each of these states allows the DAO to register as a type of LLC.
    • It is unclear if a DAO may enter into a contract or conduct traditional business activities.
    • It is also unclear on what basis and how a DAO should be taxed. Should the IRS treat this emerging legal entity, by default, as a partnership? If so, how would Schedule K-1’s be issued since one of inherent features of a DAO is token holders anonymity? Absent a centralized structure, how would each participant receive aggregate information regarding the DAO’s activities (and their share thereof to be reported on a tax return)?
    • Finally, there are basic litigation issues under Federal Rules of Civil Procedure such as how can a party serve the DAO with a summons, discovery, notices, or motions?

See:  CFTC Enforcement Action Against Ooki DAO Outrages One of Its Own Commissioners (and Crypto)

  • CFTC v. Ooki DAO: On October 3, 2022, the United States District Court for the Northern District of California entered an order (the “Order”) granting the United States Commodities Futures Trading Commission’s (“CFTC”) motion to serve members of the “Ooki” DAO (formerly d/b/a/ bZx DAO) with a summons through online communications.
    • Specifically, the court granted the CFTC’s motion for alternative service on Ooki DAO and ruled that the CFTC effectively served Ooki on September 22, 2022, when the CFTC provided a copy of the summons and complaint through Ooki’s DAO help chat box as well as contemporaneous notice by posting the summons on Ooki’s online forum.
    • CFTC sued Ooki on September 22, 2022, alleging that the DAO, through its decentralized blockchain-based software protocol, illegally offered leveraged and margined retail commodity transactions in digital assets, engaged in activities that only registered futures commission merchants can perform, and violated the Bank Secrecy Act.
  • Who was caught in the summons?  The CTFC’s complaint seeks to impose legal liability on each Ooki DAO token holder that voted as part of the Ooki DAO’s governance process. The CFTC also did not make a distinction between token holders that specifically voted to engage in alleged illegal activities and those who did not.
    • The legal theory is likely that the exercise of the right to vote is an indication that the token holder participated in the governance of the DAO and if that governance resulted in illegal activity, that token holder should be held individually liable for their role in the collective DAO governance decision.

See:  BoE Speech by Carolyn Wilkins on DeFi Governance Limits and Opportunities: Get Up, Stand Up!

  • What's next?  Ooki DAO has until October 13, 2022, to respond to the complaint otherwise the CFTC may win a default judgment against the token holders that voted as part of the Ooki DAO governance process. If this happens, another novel legal issue that will emerge will be how will the government enforce the judgment on the DAO?
  • Implications: While decentralization may provide many technological benefits it comes with significant risk as it may introduce unlimited legal liability for any token holders that participate in the DAO governance process. This may be a headwind to the proliferation of Web3, DAOs, and other technologies that rely on decentralization. Additionally, the outcome of the Ooki case may spur additional state legislation to recognize DAOs as a subset of an LLC to limit the potential liability of token holders that participate in a DAO’s governance.

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NCFA Jan 2018 resizeThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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BoE Speech by Carolyn Wilkins on DeFi Governance Limits and Opportunities: Get Up, Stand Up!

BoE | Oct 19, 2022

Carolyn A. Wilkins is an external member of the BoE Financial Policy CommitteeCarolyn Wilkins talks about ways in which the crypto ecosystem can help reimagine governance. However, the models we see today may not be as decentralised as they might appear. To build trust, she encourages the crypto industry to build best practices in governance, codes of conduct, and set high expectations for transparency.

  • Examples when TradFi governance failed:  The history books are full of instances when faulty governance in traditional finance led to both failure of a particular financial institution, and financial instability. Just look back to the global financial crisis (GFC) when generalised weakness in risk management frameworks led to limited understanding and control of balance sheets.
    • Remember Bear Stearns, where the concentration of mortgage securities had been increasing for several years and was beyond their internal risk limits?
    • Lehman Brothers, of course, is another example.

See:  MiCAR: EU Crypto Regulation in the Making

  • Crypto governance:
    • The first is the possibility of organisational structures based on a greater degree of decentralised decision making than in traditional finance. Given this, some crypto proponents aim to challenge traditional economic institutions of capitalism – firms, markets, and potentially governments which allows financial services to occur at scale, with less recourse to an intermediary than in traditional finance.
    • The second opportunity is that the governance itself can spur growth by framing decision making as a game or an activity in which participants have something at (or to) stake.
    • The successful completion of Ethereum’s project – called “the Merge” – is a recent example of what can be achieved under the right circumstances. This accomplishment hopefully foreshadows further success as Ethereum works on upgrades to lower transactions times and costs, and will inspire other platforms to learn from this experience.Governance of this project looks quite familiar in a couple of ways:
      1. It was fairly centralised. The project was coordinated by the Ethereum foundation that oversaw a core development team, rather than a fully decentralised community. Given the complexity of the project, this centralisation was a necessary mechanism to accelerate the project. Vitalik Buterin – one of Ethereum’s key founders was understandably quite influential, although he did not have unilateral decision-making power.
      2. There were parallel runs and extensive testing. Almost two years ago, Ethereum developers created a new network called the “Beacon Chain” that uses the PoS validation mechanism. It ran in parallel to the PoW-based Ethereum network. They also conducted trial runs over a number of years, prudently delaying the project on a number of occasions given outstanding issues and the amount of money at risk. Their checklist of “readiness” milestones ahead of the Merge, shows efforts to be transparent about the project.

See:  Carolyn Wilkins: to achieve benefits, crypto must be made as safe as Canada’s financial system

  • Limits to decentralised governance in practice:
    • In practice, the governance of critical decisions is not completely decentralised even in a permissionless blockchain such as Bitcoin. In fact, the consensus mechanism and other governance protocols can lead to undesirable concentrations of power.  For instance, a few individuals who have accumulated significant voting rights can dominate.  A recent study shows that, among the top 10 proof of stake platforms by market capitalisation, the top ten validators held between 23% and 88% of the stakes, while the top 50 held between 47% and 100% of the stakes
      • the idea of quadratic voting to mitigate the issue of concentration in decision-making. Under this mechanism, 1 vote would cost 1 token, 2 votes would cost 4 tokens, 3 votes would cost 9 tokens and so on. Even though owning more tokens would still mean enhanced voting rights, the ability of large token holders to dominate would be reduced.
    • There are also issues regarding transparency. This raises questions about who is accountable for decisions and outcomes. There is a rich debate in the United States regarding whether the core protocol developers should be held accountable as fiduciaries. And the CFTC’s recent enforcement action against token holders of Ooki DAO is a live case study of the extent to which governance token holders can be held liable.
    • The hard lesson here is that, when tokens are transferable, special care is needed to ensure that their supply, distribution and price accurately represents the community members who are invested in the project.
    • On-chain voting can take too long:  The on-chain voting process on the blockchain platform Tezos is currently divided into five governance cycles (each lasting roughly two weeks): a proposal period, a testing-vote period, a testing period, a promotion-vote period, and an adoption period. In platforms like this, any event that requires urgent action is unlikely to be resolved promptly through the usual governance process.
      • Polkadot, an open source blockchain platform and cryptocurrency, allows for emergency referenda to be initiated by an assigned technical committee.
      • MakerDAO can implement an emergency shutdown functionality whereby a smart contact can suspend its normal operation and return the invested assets to their owners.

See:  Chainanalysis Breaks Down the White House Framework on Crypto

  • Financial risk and stability:  Institutional investors in DeFi are focused on reputational risk, not just financial risk, and will expect to see better governance and outcomes on this front.  “You can fool some people sometimes, but you can’t fool all the people all the time.”
  • Narrowing window for crypto to improve governance:  The window for the crypto industry to improve its approach to governance is narrowing: regulated firms in traditional finance are increasingly applying the underlying blockchain technology to traditional capital markets. They will be in a better position to capture this market if the crypto industry does not get its house in order, if only because they have more familiar and battle-tested governance.
  • A good place to start for DeFi is with industry-led mechanisms that develop codes of conduct and best practices. For instance, institutional investors may ultimately want to see high standards around disclosures in financial statements, sources and uses of funds, conflicts of interest and related parties, regardless of whether the activity is subject to regulatory requirements or not. These expectations could include regular audits of the code, and disclosure of how rights to change the code are determined and who holds the “commit keys.”
  • Governments and regulators still have work to do to build supporting legal and regulatory infrastructure. Finance is global but regulation is local, so coordination across borders is essential.

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NCFA Jan 2018 resizeThe National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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