RelayNode NYC #23 - October 14

RelayNode
Written By David Gogel

Welcome to RelayNode NYC Area edition! The NYC blockchain ecosystem is growing rapidly. Our goal is to harness its energy and innovation for the benefit of New Yorkers and provide a weekly curated list of interesting content, upcoming events, and local jobs.

Some personal thoughts…

While all eyes were on DevCon in Japan last week, I got into the weeds of US securities law. Suffice to say I am not a lawyer and nothing below is legal advice (DYOR as always!) Amidst the SEC’s ongoing crackdown on alleged illegal securities offerings, the harsh reality of regulation is settling in.

In 2018, Block.one and Telegram broke new grounds raising $1B+ in funding becoming ICO unicorns. The SEC is now suing Telegram, alleging its $1.7B token offering broke federal securities laws. The SEC announced it filed "an emergency action and obtained temporary restraining order" against two offshore entities, Telegram Group and TON Issuer, for selling "approximately 2.9B digital tokens called 'Grams' at discounted prices to 171 initial purchasers worldwide, including more than 1B Grams to 39 U.S. purchasers." Telegram promised to deliver its Grams tokens to initial purchasers by Oct. 31, at which time Telegram will be able to sell billions of Grams into U.S. markets.” The SEC is alleging that Telegram and TON Issuer Inc. failed to register the sale and offering of Grams, stating that the tokens are securities.

Meanwhile, Block.one recently agreed to a $24M settlement with the SEC after raising $4.2B in Ether during its initial coin offering. The ICO process lasted 340 days, was open to all participants globally, had no hard cap, and pricing evolved in stages. The SEC claims “Block.one did not register its ICO as a securities offering pursuant to the federal securities laws, nor did it qualify for or seek an exemption from the registration requirements.”

SO where do these enforcement actions leave us? Blockchain tech is here to stay. For some, the unregulated status quo is preferable due to the benefits of decentralization, immutability, and transparency. After all, Bitcoin’s governance is powered by consensus rather than by a centralized authority. Yet, the growing demand and supply of cryptocurrencies also increase the risks. Regulators have the responsibility to protect investors, prevent fraud, and ensure cryptocurrencies are not used for illicit activities, without stifling innovation. To support the ecosystem and encourage capital formation, industry participants must find a path forward and ensure that cryptocurrencies can interact with existing or new regulated infrastructure.

The US has yet to release a comprehensive regulatory framework to address the growing list of issues facing the industry. Most notably, the lack of guidance on whether all tokens are securities creates confusion. If all tokens are securities, they could trade on an alternative trading system (“ATS”) or other regulated exchanges. If a token is not a security, it could trade on other exchanges or marketplaces. The current contemplated approach, that all tokens trade on an ATS, is not a complete solution. For example, consumptive tokens which are exchangeable for, or provided for, the receipt of goods or services, including rights of access to goods, services, or content, would need to be purchased through broker-dealers and subject to complex securities law requirements.

The creation of a Trade Association that would aim to be recognized as a Self-Regulatory Organization (“SRO”) is one way to address these nuances and enforce solutions. In this vein, crypto heavyweights - Coinbase, Kraken, Bittrex, Genesis, Grayscale, Cumberland, Circle, and Anchorage - announced the formation of the Crypto Rating Council (“CRC”) to clarify whether cryptocurrencies are securities. The CRC uses a 1-5 rating scale, with 1 being a non-security (Bitcoin, Dai), and 5 being securities (none of which were disclosed publicly).

In the short-term, the CRC can show good faith to regulators and potentially be a rational basis for slowing down enforcement actions. In the long-run, the CRC would craft and enforce best practices, serve as an ally for regulators, and help police the marketplace. The CRC can spur the development of standards around token classifications, cybersecurity best practices, data handling, protection of customer accounts, trading practices, and other issues.

RelayNode Links: Sign up | Submit events

RelayNode NYC is curated by:

David Gogel

Advisor @ Paperchain fmr Associate @ Techstars' Blockchain Accelerator, Co-president @ Wharton FinTech

Hsin-Ju Chuang

Director of Community & Growth @TQ Tezos, ex-Head of Growth @Stellar/Lightyear, Side Hustle @Dystopia Labs

Things to read

Macro

  • CoinShares launched a series on macro trends. Part 1 covers the status of continued unconventional monetary policy tools. “More monetary tools are still in play, and the likelihood of further expansion of cash-limits adopted worldwide will be key to even more control over macroeconomic policies by regulators. Such concerns have already marked the return of investors to gold markets, or moved new funds into Bitcoin which has now established itself as an institutional store-of-value.”

  • “QE4” is coming. Despite the Fed’s intervention in the repo market in September, usage of overnight repos has continued to climb. We were told the cash shortage was temporary and the issue would fix itself at the end of the third quarter. Well, the Fed just announced it will buy $60B of treasury bills a month starting October 15 to ease cash shortages and improve its control over the benchmark interest rate it uses to guide monetary policy. The Fed’s plans to buy short-dated bills, rather than longer-term Treasuries, is an attempt to distance the new measures from quantitative easing.

Funding & Exits

  • NuCypher, a blockchain network that brings data privacy to dApps built on Ethereum and other public blockchains, raised $10.7M in funding via a simple agreement for future tokens (SAFT). The round was led by Polychain Capital, with participation from Y Combinator, Bitmain, Bitfury, Arrington XRP Capital, Notation Capital, among others. Participants purchased $10,675,000 NU tokens (8% of initial supply) and agreed to stake-lock their tokens for 2 years. NuCypher recently launched its public testnet and its mainnet is expected to launch by Q1 2020.

  • ACINQ, one of the three main Lightning Network development firms, raised a $8M Series A led by Idinvest Partners, with participation from Serena and Bpifrance. Funds will be used to grow its team and expand its business as a major Lightning node operator and liquidity provider.

  • BlocWatch, an enterprise blockchain monitoring, analytics, and security company, raised a $5.5M Seed round, led by Mistral Venture Partners, with participation from Reno Seed Fund and Impact Capital. Funds will be deployed to help BlocWatch expand its blockchain management platform used for enterprise implementations of Hyperledger Fabric, Ethereum, and Corda.

Open Finance / DeFi

  • MakerDAO released its “Dai in Numbers” Q3 report. With Dai approaching its two year anniversary, clear trends are starting to emerge. Max Bronstein, BD at Dharma, highlights takeaways. Meanwhile, Maker Foundation Rune Christensen revealed that Multi-Collateral Dai (MCD) will be ready to launch on November 18.

  • There has been concern recently about whether or not the “composability” property of Ethereum - the ability of different applications to easily talk to each other - will be preserved in an eth2 cross shard context. Vitalik Buterin’s post argues that, yes, it largely will be. In a separate post, he explores what the transition from Eth 1 to Eth 2 will look like for app developers.

STOs / Stablecoins

  • FAT Brands, the parent company of franchises such as Fatburger, Bonanza Steakhouse and Ponderosa Steakhouse, in cooperation with digital securitization platform Cadence, is tokenizing a $30M bond offering on the Ethereum blockchain. The assignment would see FAT Brands issue securities via conventional paper contracts, with Cadence then creating digital tokens from those notes.

  • Bad news for Libra. Mercado Pago, Visa, eBay, Stripe, and Mastercard dropped out of the association a week after PayPal pulled out. The association which started with 28 founding members no longer has any representation from the financial services industry. Withdrawals follow scrutiny from regulators and politicians, some of which have pushed for the entire project to be shelved, citing AML / financial stability concerns. In a tweet, Libra co-creator David Marcus thanked Visa and Mastercard for "sticking it out until the 11th hour" and cautioned “against reading the fate of Libra into this update."

Institutionalization

  • BlockFi released an excellent overview of the institutional investor landscape diving through public filings. TL;DR: there is already a large, healthy, and growing ecosystem of U.S. institutions that are in crypto, and they happily disclose this fact, as well the service providers they use to enable crypto activity, to their investors and the SEC.

  • Bitwise’s application for a Bitcoin ETF has been denied by the SEC. Bitwise responded to the SEC’s 112-page order with the following statement.

Layer 1

  • Joseph Lubin, co-founder of Ethereum & Consensys, announced the creation of a new project called “Pushing The Limits” which seeks to attract 1 million developers to Ethereum in a year.

  • The Stellar Development Foundation (SDF) is asking validators to consider disabling the current inflation mechanism (Note: however, until the network votes to accept protocol 12, these changes won’t be active on the network).

  • Hasu, James Prestwich, and Brandon Curtis released a research paper introducing a model for Bitcoin’s security. They show that Bitcoin can tolerate a very high incentive to attack, which is the function of a surprisingly small number of factors. More than any external attacker, the biggest threat to Bitcoin’s security is baked into the protocol itself through the block subsidy schedule. As Nic Carter explains the paper “formalizes the intuition that miners behave well because of long term incentive alignment.”

  • Chris Burniske, Partner at Placeholder VC, outlines in a post explaining why protocols are not businesses.

  • Ali Yahya, Partner at a16z crypto, has a monster tweetstorm making the argument against a protocol winner-take-all dynamic. “It’s more likely that many networks will emerge as winners in their own subdomains of the crypto sphere.” The debate rages on.

Legal

  • Bombshell. The SEC sued Telegram, alleging its $1.7B token offering broke federal securities laws. The SEC announced it filed "an emergency action and obtained temporary restraining order" against two offshore entities, Telegram Group and TON Issuer Inc. The action by the SEC is the latest example of an ongoing crackdown on alleged illegal securities offerings in the industry (although this seems more severe than the $24M fine on EOS’ $4.2B token offering.)

  • In a new FAQ, the IRS supplied new information regarding cryptocurrency tax treatment as well as reminders of their current policy. Noteworthy in new guidance regarding 1) how to handle hard forks and airdrops 2) clarification that specific identification can be used for cost basis calculations 3) clarification that transfers are not taxable events. Marco Santori has a tweetstorm covering some of the key takeaways.

  • Heath Tarbert, the Chairman of the CFTC, stated that it was his belief that "ether is a commodity." As a result, he expects ETH derivatives to be traded on the U.S. in the near future. Preston Byrne, a senior partner at the U.S. law firm Byrne & Storm, explains why he thinks if Ethereum were launched today, it would be considered a security.

Audio of the Week

  • Jason Choi, Head of Research at the Spartan Group and RelayNode curator for HK / Singapore, has an excellent twitter thread reviewing major crypto podcasts.

Highlighted Industry Jobs (non-exhaustive list for NYC / remote):

If you would like to highlight jobs or internships in future editions, please email links here.

Events this week:

⚡R3 Presents: Overview of the Corda Platform⚡ (Free)

When: Monday, October 14, 2019, 6:30 PM to 9:00 PM

Where: WeWork Dumbo Heights, 81 Prospect St · Brooklyn

Overview of the Corda Platform with Peter Li from R3. In this short talk, Peter will present an overview of the Corda platform, briefly discuss the concepts and functional features of Corda, and review both some use-cases and live CorDapps that are built on Corda. In addition, Peter will explain the structure of the wider Corda community and the role of R3. After, there will be an open discussion as a group where we can conduct Q & A to answer any questions you may have.

NYC Cardano meetup with Nathan Kaiser Chairperson of the Cardano Foundation (Free)

When: Tuesday, October 15, 2019, 6:30 PM to 8:30 PM

Where: dLab 255 W 36th St. (between 7th and 8th) Floor 3 · New York, NY


Nathan Kaiser Chairperson of the Cardano Foundation will be in attendance to meet community members and report on the recent steps the Foundation has taken to expand its reach and influence.

Hashgraph: Exploring Decentralized Networks with Diamond Standard and DragonGlass (Free)

When: Tuesday, October 15, 2019, 6:30 PM to 8:30 PM

Where: 413 W 14th St, New York, NY

At this meetup, Hedera Hashgraph will be presenting on the Hedera developer experience. We will have a presentation from two dApp developer company Diamond Standard (which utilizes DLT for a permanent public record for each commodity’s diamond geological contents and provenance, and to enable remote auditing and transactions) and Dragon Glass (which is a cloud-based service that provides live and historical data across all distributed ledgers).

Mondo.NYC music festival & global music / tech business conference ($99 - $598, 20% discount using “relaynodemondo”)

When: Tue, Oct 15, 2019, 4:00 PM – Fri, Oct 18, 2019, 5:00 PM

Where: Williamsburg Hotel, Brooklyn, 96 Wythe Ave., Brooklyn, NY

Mondo.NYC is the first music festival and global business conference focusing on the intersection of emerging music discovery, blockchain and other frontier technologies, and how these new applications and economies will significantly impact both music and tech industries. Emerging artists, innovators and industry insiders will connect and collaborate with fans in a mission to advance human creativity in an ever-changing world.

[Whitepaper Wednesday] Coded Merkle Trees (Free)

When: Wednesday, October 16, 2019, 12:00 PM to 1:00 PM

Where: Rent24, 25W 39th Street 14 Fl · New York, NY

This week, we are reading about Coded Merkle Trees, a proposed data structure that lets light clients verify that fullnodes aren't with holding data from them: https://eprint.iacr.org/2019/1139.pdf. We'll discuss how the data structure works, and why data availability is important for Layer 2 solutions.

Friends of Melon meetup (Free)

When: Wednesday, October 16, 2019, 7:00 PM to 9:00 PM

Where: Coinshares office, 101 Fifth Avenue, 6th Floor, Suite 605 · New York, ny

Mona El Isa (former Melonport founder, current Avantgarde Finance CEO and MAMA founder) will talk about the Melon Protocol past and present, asset management 3.0, and where DeFi fits into all of this!

Skycoin's NYC Skywire Mainnet Meetup at the NYC Blockchain Center (Free)

When: Thu, October 17, 2019, 6:00 PM – 8:00 PM EDT

Where: NYC Blockchain Center, 54 West 21st Street, Suite 1001, New York, NY 10010

The NYC Blockchain Center welcomes our new member, Skycoin, and their Skywire Mainnet NYC meetup group. Join the Skycoin team to learn about the censorship-free, private internet called Skywire, and find out how to join the community working to protect internet freedom.

#DISCLOSE2019 (Free)

When: Thu, October 17, 2019, 4:00 PM – 8:45 PM

Where: Pepper Hamilton LLP at the New York Times Building – 620 Eighth Avenue, 37th Floor New York, NY 10018

#DISCLOSE2019 will feature expert panels covering major topics such as modernizing financial reporting and disclosure frameworks for issuers of digital assets and exchanges. The DCARPE Alliance is a global consortium of members of the accounting, audit, financial reporting, legal, blockchain, investment and regulatory community. The goal of the Alliance is to provide education, drive technology innovation and open source engineering, and promote the adoption of continuous audit and real time financial reporting using the DCARPE Assurance and Disclosure Protocol.

Upcoming events

Blockchain LatinX October Community Gathering at NYC Blockchain Center (Free)

When: Tue, October 22, 2019, 6:00 PM – 8:00 PM EDT

Where: NYC Blockchain Center, 54 West 21st Street, Suite 1001, New York, NY 10010

Do you have #FOMO from DevCon5? Devcon is an annual gathering held by the Ethereum Foundation for Ethereum Developers and community members. The conference this year will take place 10/8 - 10/11 in Osaka, Japan. If you're a ETH fan or a crypto-newbie, don't miss this meetup. Join us this month to catch up on the latest news and updates from Osaka.

Q&A with Jehan Tremback from Althea (Free)
When: Tuesday, October 22, 2019, 6:30 PM to 8:00 PM

Where: CoinShares, 101 Fifth Avenue Suite 605 · New York, ny

Jehan Tremback will speak about Althea, which allows people to bring faster, cheaper internet to their communities. Small antennas on rooftops spread the signal, while their owners earn money. Jehan will cover some of the technical details of the system, and go over learnings from running it in production in the past 6 months, supplying a small town in Oregon with internet access.

The story of a blockchain startup: inspiration, insights & the future ($6)

When: Wednesday, October 23, 2019, 6:00 PM to 8:00 PM

Where: Axoni, 156 5th Avenue, 7th Floor · New York, ny

In this session, you’ll hear the story of a blockchain startup from female founder, TongTong Gong - the inspiration, the successes & challenges raising capital and building technical teams, and the insights she's gleaned from her experiences in growing the company. TongTong is the co-founder of AmberData, a Blockchain and Digital Asset Data company. As she tell's the story of AmberData, she'll be sharing broader insights on how distributed systems benefit from blockchain, what's now possible that wasn't possible before, and her thoughts on the future of blockchain.

BitDevs: Socratic Seminar 97 (Free)

When: Thursday, October 24, 2019, 7:00 PM to 9:00 PM

Where: NYU Stern, 44 West 4th Room 1-70 · New York, ny

Discussion topics: Please see our link aggregator for a list of potential discussion topics. Feel free to make suggestions in the comments section below. A final topic list will be posted the day before the event.

https://www.zotero.org/groups/691739/devsny/items/collectionKey/TLHMLG8R

Crypto: Blockchain, Bitcoin and Beyond (Free)

When: Fri, October 25, 2019, 12:00 PM – 2:00 PM EDT

Where: U.S. Securities and Exchange Commission, 200 Vesey Street in Brookfield Place, 4th Floor Hearing Room, New York, NY 10281

A talk about crypto, blockchain, and beyond with the U.S. Securities and Exchange Commission.

The Dawn Of The Enterprise Token (free)

When: Monday, October 28, 2019, 6:00 PM to 9:00 PM

Where: Rise New York, 43 W 23rd St · New York, NY

A speaker and panel series focused on the exploration of enterprise tokens like the JPM coin, Libra, & the Walmart patent, what it all means, where it is headed and how you might position for it.

NYC Blockchain Center Member Demo Showcase (Free)

When: Tue, October 29, 2019, 6:30 PM – 8:30 PM EDT

Where: NYC Blockchain Center, 54 West 21st Street, Suite 1001, New York, NY 10010

Join us for a showcase of new products from four of our member companies. BTBlock, Milligan Partners, and others will demo recent work ranging from identity and cybersecurity to enterprise transactions and tokenization.

BlockchainWeekend NYC ($39)

When: Thursday, November 7th - Sunday, November 10th

Were: TBD

BlockchainWeekend is a city-wide inaugural initiative supported by New York City Economic Development Corporation (NYCEDC) and the biggest tech ecosystem players in New York. It will take place on Thurs., Nov 7 to Sun. Nov 10th, with 50+ blockchain-focused events to take place across all five boroughs. With events covering in all industries of blockchain, you will experience the latest blockchain technology and how the technology is used. Browse and discover what you like!

Consensus Invest: NYC (Free for Qualified Investors, $899)

When: Tuesday, November 12

Where: New York Marriott Marquis located at 1535 Broadway New York, NY 10036.

Invest: NYC is an annual forum focused on delivering discussions on the trends and investment opportunities for cryptoassets, the fastest-growing alternative investments in history. Invest brings together global investors across asset management, commercial banks, hedge funds, pension funds, mutual funds, insurance companies and service providers, all with unique perspectives and experiences to underline the current sophistication of digital securities and commodities.

Notable Conferences

Nothing written in RelayNode NYC is legal or investment advice and should not be taken as such. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.

David Gogel https://www.definancier.com
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