senator loomis credits you as being pivotal in the loomis-gilbran responsible financial
innovations act and based on the language in that bill ethereum is seemingly a
commodity what do you think you know i didn't have any input into that she's too kind to me
but but that's not me right unless unless some uh unless they referred to some publicly available
uh comments i made i didn't offer any private comments with regard to that act
um with regard to ethereum you know i think ethereum's a security i think it's pretty obvious
it's a security it was issued by an ico there's a management team uh there was a pre mine there
uh there's a hard fork there's multi you know there there's continual hard forks
there's a difficulty bomb that keeps getting pushed back the difficulty bomb is going to wipe
out the entire eth mining industry it's going to obliterate it murder it okay the fact that
somebody is able to murder an entire industry and then they keep changing their mind every
six months about whether to do it or not do it is in disha that it's a security and not a commodity
for it to be a commodity there can't be an issuer and the truth is you can't really make decisions
i mean one of one of the fundamental insights in the crypto industry is is the fact that you can
change it is what makes it a security so if you look at most of these cryptos where they have hard
fork after hard fork after hard fork the problem with a hard fork is it changing the protocol
means that some development team is making a decision and and if you can change the protocol
in a material way you can change the monetary protocol right a hard fork can change the issuance
pattern or can change the value of something and so that makes an investment contract under under
securities law and that means it passes the howie test so what you want is is a
completely decentralized protocol where nobody can change it even if they wanted to change it
so fundamentally the problem with ethereum is they keep changing it right from a securities law
point of view right and there's a team of people that make recommendations and and if you if you
want to establish yourself as a digital commodity
then you're trying to create something like gold in cyberspace so for example
no gold miners in the world could change the the physical characteristics of gold
right if a government passed a law i mean they wouldn't send an email saying oh gold is now
steel or steel is now aluminum right you can't if you can change the characteristics of it right
then it's not a commodity it's a security and securities have a place in the world but they
need to be sold to the general public pursuant to a disclosure full and fair disclosure you want to
take the company public you have to disclose who owns the the company what are the risk factors
and that way people can make a decision the problems i see right now it's like you know
you've still got the ether locked up and will the merge take place will it not take
place and then after it takes place then the question is how long is your eth locked up
and then what's this is there a staking reward and what is that and if it if there is a staking
reward it's probably a security the head of the sec is said on six different occasions that if you
generate staking uh off of a crypto asset network it it makes it a security you can't generate yield
and not be a security so i mean in theory you can create another digital commodity but
uh you can't leave on you can't leave questions uh unanswered oftentimes people
in the crypto industry they think well we'll just resolve this by taking a vote
taking a vote doesn't make something decentralized if 51 of the people vote to double the supply
or like if you look at this solana thing salend last two weeks ago the fact that you
can vote on something is is proof that it's a security for example my company votes on things
shareholders vote on things when you take a shareholder vote it doesn't make you gold
right there's no way that the gold owners or the gold miners could take a vote and convert
gold into aluminum you see and if i owned a bunch of lumber i couldn't take a vote and
turn the lumber into steel right so ultimately the challenge with these things is the ability
to do anything if it's truly decentralized then you have to release at least the protocol
into the world and not change it not even not even contemplate changing it in fact you know that one
of the big problems with all these proof-of-stake networks is in order to get them to work they
have to keep doing hard fork after hard fork and the reason they're doing it is because they're
they're putting the security into the software instead of into the hardware or into the physics
if you're relying on the physics of of the network with proof of work
then you don't have to keep upgrading the software if you keep upgrading the software then then
someone's got to write the software and when you write the software you end up with this exploding
complexity and then you have to you know you have to keep changing it and so this this pursuit
of functionality and performance via continual upgrade that's that makes you a software company
and there's nothing wrong with software companies i have a software company i have more experience
writing software than anybody in the crypto space i've been in the software business since 1989 so
i've actually seen what happens when you upgrade software every year 25 years in a row right
and you know it makes you a company you and uh and if you're a company and you want to go public and
you want to sell your shares to the general public you have to do it with a registration statement
so that i mean that's the challenge in the crypto space that um that uh
really they're just all securities and and the problem with it is they're all securities trading
on exchanges that don't have a license to trade securities and they're being traded by management
teams that haven't issued a registration statement which means they're non-compliant
securities so what will happen nobody knows what will happen i don't know what'll happen
but what i know is there's a lot of uncertainty so you're either a speculator or you're a venture
capitalist and you're waiting and to see what'll happen and and uh bitcoin is different because
it's proof of work based and ultimately you know there was no ico there was no pre mine
nobody could change it nobody wants to change it it doesn't need to be changed right and so
you would you would generally think you got to think more like genetically you know like
something that got released into the wall 300 million years ago and the dna is the same
that's that's what you're trying to do with a crypto asset network you're trying to release
a protocol and not change it and uh and so i think that that it's one more point i'll make here which
is from from an institutional investor's point of view the point at which you consider trusting a
crypto network is somewhere in the range of five to ten years after people stopped changing it
i mean i would say is after after a hard if there's a hard fork
to fix a fatal bug maybe that's okay if you're fixing a fatal bug or or if you're if you're
improving the network against a fatal security threat right then then maybe you can get past
that but if you're hard forking to change the functionality or change the performance
you know change the block size anything like that where you're changing it it resets the lendi clock
and you have to wait for five to ten years after five years it's risky
after 10 years you think well maybe all that combination of protocols is going to work
right and if you look at bitcoin well they had the 21 million coins and the and the monetary protocol
it was set january 3rd 2009 and on pizza day around may 2010 it's the still the same protocol
the things traded for nothing and then it starts to monetize and if someone you know if someone
changed materially that monetary protocol you know it it calls into question is the thing robust
is it lindy right and uh so if you keep changing the thing every six months
i mean you can do it but but the problem is a someone changed it and somebody voted on
it or did it and that makes it a security and they've got if they've got a vested interest
in it right you've got a management team and an issuer and that means you can't be a commodity
and then b you have to wait five years to figure out whether or not it's robust
right and so you keep restarting the clock every time you push that back