Ether's New 'Staking' Model Could Draw SEC Attention (wsj.com) 28
Ethereum's big software update on Thursday may have turned the second-largest cryptocurrency into a security in the eyes of a top U.S. regulator. From a report: Securities and Exchange Commission Chairman Gary Gensler said Thursday that cryptocurrencies and intermediaries that allow holders to "stake" their coins might pass a key test used by courts to determine whether an asset is a security. Known as the Howey test, it examines whether investors expect to earn a return from the work of third parties. "From the coin's perspective...that's another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others," Mr. Gensler told reporters after a congressional hearing. He said he wasn't referring to any specific cryptocurrency.
Issuers of securities -- a category of assets that includes stocks and bonds -- are required to file extensive disclosures with the SEC under laws passed in the 1930s. Exchanges and brokers that facilitate the trading of securities must comply with strict rules designed to protect investors from conflicts of interest. Cryptocurrency issuers and trading platforms face strict liabilities if they sell any assets that are deemed to be securities by the SEC or courts. Staking is one of two ways in which cryptocurrency networks verify transactions. Used by some of the largest cryptocurrencies -- including Solana, Cardano and, as of this week, ether -- it allows investors to lock up their tokens for a specified amount of time to receive a return.
Issuers of securities -- a category of assets that includes stocks and bonds -- are required to file extensive disclosures with the SEC under laws passed in the 1930s. Exchanges and brokers that facilitate the trading of securities must comply with strict rules designed to protect investors from conflicts of interest. Cryptocurrency issuers and trading platforms face strict liabilities if they sell any assets that are deemed to be securities by the SEC or courts. Staking is one of two ways in which cryptocurrency networks verify transactions. Used by some of the largest cryptocurrencies -- including Solana, Cardano and, as of this week, ether -- it allows investors to lock up their tokens for a specified amount of time to receive a return.
control (Score:5, Insightful)
All of these crypto projects have replaced a central bank or government with themselves. Yet these projects are full of pitfalls and leave you with no recourse when you stumble. Its still a rich-get-richer scenario where the people with the money to have control win. Crypto achieved a public ledger and nothing else new or improved.
Re:control (Score:5, Funny)
Which is why I'm sticking with Dogecoin, with it's trading ratio of 1 Dogecoin for 1 Dogecoin. Most stable coin ever!
Re:control (Score:5, Funny)
Time for my new coin: Tautologycoin!
Re: (Score:3)
In order to mine Tautologycoin, you must mine Tautologycoin!
Re: (Score:1)
Crypto doesn't replace a bank. A crypto bank would replace a bank. Crypto is more like replacing cash with digital cash with a public ledger of transactions. Mining is like doing work to mine new metal from the Earth's limited supply, and proof of stake is like getting together with a bunch of homeowners in the area and all coming to an agreement that a newly created coin is valuable.
Re: (Score:2)
No they haven't. Not all blockchain projects hold their tokens up as a currency. Ethereum certainly isn't one of those projects. It isn't like Bitcoin was supposed to be.
Good luck SEC (Score:2)
Solana and Cardano are one thing, as they are somewhat centralized - but there is no central authority for Ethereum that the SEC could even go after if they decided that ETH counts as a security. Who the hell is supposed to file the disclosures?
Re:Good luck SEC (Score:5, Informative)
Who the hell is supposed to file the disclosures?
Probably literally everyone staking coins.
Re: Good luck SEC (Score:2)
Good luck with that... it's everyone.
Re: (Score:2)
It really isn't everyone though.
Most coins sit within the wallets of the major trading markets, Coinbase and the like. You may personally keep your stash elsewhere, but most people are too lazy for that.
Re: (Score:2)
That isn't really how staking works & the community is actively discouraging it.
https://ethereum.org/en/stakin... [ethereum.org]
Re: (Score:2)
Did you read that link you posted?
First sentence:
Staking is the act of depositing 32 ETH to activate validator software.
Do YOU have 32 ETH sitting in your wallet ready to stake? Most people don't. Every active trading market most certainly does, and pooling coins into their own wallets is how they keep their trading fees "low" (this way they don't pay actual network fees for balance transfers within their platform).
Re: (Score:2)
Very likely.
How can there be no Central authority (Score:5, Insightful)
Not too long ago ethereum forked after a disastrous scheme (I think it was a bizarre lending scheme if I remember correctly but don't quote me on that). The owners of ethereum forks the chain to undo the damage they did and a whole bunch of people kept using the original chain and called it ethereum classic. The classic version now sells for about $35 a coin versus the 1600 that the main line chain from the owners sells for.
The point is ethereum is very much centralized. This isn't to say people running the proof of stake nodes aren't also going to have to file disclosures because they are effectively investors. But this is very much not just some sort of a commodity being created and traded around. It's an investment scheme.
Also really looking forward to the next fork when inevitably somebody finds an exploit. The over-under seems to be 180 days
Re: (Score:1)
You mean, just like the bankers and the Fed Reserve? haha
No I agree it's a pyramid, and none of us are at the top.
Re: (Score:2)
You still don't understand the DAO hack or the miner driven fork that undid it. But hey keep carrying water for the Bitcoin Maximalists and other cryptoanarchic libertarians.
Re: (Score:2)
Why don't you explain it to us?
Re: (Score:2)
Re: (Score:2)
Me neither but google showed me a bunch of stuff [google.com] including https://www.gemini.com/cryptop... [gemini.com]
Skimming it, it sounds like someone convinced many other people to swap ETH for their own coin ("token") and fucked it up somehow in the security department (or maybe that was just a rumor, I'm not interested enough to read multiple articles, and this whole article might be bullshit for all I know) and in order to fix it, the Ethereum devs had to build consensus with other groups including miners.
Re: How can there be no Central authority (Score:2)
rsilvergun should already know better. For your benefit, here's a decent summary with technical analysis that follows:
https://blog.chain.link/reentr... [chain.link]
A few key points that need to be added:
The "code is law" crowd arguing against the hard fork were in the same camp as the anti central bank libertarian "build your own offshore country" crowd. They are the ETC backers. Take a look at ETC's txn count per day/hour/s vs. Ethereum sometime and see for yourself how well ETC has flourished under their stewardshi
Re: (Score:2)
> The point is ethereum is very much centralized.
Exactly this. And it's controlled by a cadre of programmers and investors who answer to nobody but themselves. The US government may be all kinds of fucked up but at least it still has laws and elections.
Re: (Score:2)
Cardano decentralized itself:
https://www.yahoo.com/video/ca... [yahoo.com]
Yup (Score:5, Insightful)
Under proof of stake cryptocurrency becomes the Ponzi scheme it has been accused of in the past. It eliminates the continued risk for early stakeholders and trades it for automatic profit at the expense of new investors.
With the possible exception of something like Monaro with a privacy ledger these forks and knockoffs are just scams. Either scams by miners invested in certain types of equipment or scams by others upset they failed to recognize the potential of and support BTC early on.
That's not how staking works (Score:1)
Staking amounts to a dividend payment. If you buy into a blockchain based on a belief in the tech and its roadmap, staking is very good for anyone holding coins on that chain. Your argument is as stupid as saying that 3M offering a nearly $6 dividend is a sucker's move for new investors because somehow it benefits old hodlers of 3M more than new shareholders. That's demonstrably not tru
Re: (Score:2)
"That's demonstrably not true in either case."
First, 3M is a business so your analogy isn't analogous. Second, You haven't demonstrated it for either case. There is business in ETH with gains from which to derive these 'dividends', merely a payout scalped from new users of the technology and transfers to early investors who acquired the bulk of all ETH at little or no expense and the dividends get paid whether the blockchain is successful or not so long as it still exists.
"Yes, there are very good reasons t
with staking it's your own effort (Score:2)
Next.