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i agree to the automation of the dispute, should it arise according to-
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Male
..this smart contract, certain types of disputes-
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..don't want to automate. it'll have to go to a human being. and then what you could do is when it's automated-
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everybody could ratify the decision of the smart contract and just accept it. so-
A
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they came up with that solution of the buy-in, so you don't get a buyout-
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..broke my coin, for some reason they hacked into my wallet.
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..so we need to be very careful that what we're coding might look simple and easy now-
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..agree with that, and i think there's two important points that we need to consider-
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...so there will always be unintended outcome at some point with this code. and the flip side of that is remember that every time that we ask someone to-
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..to a bad actor using that same door and modifying and taking advantage of that door, right?
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and so it's this balance that i think we'll find in the law as we start to actually use smart contracts in a meaningful way-
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there are going to have to be some contracts that don't actually have quote-
H
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Female
if nothing else is moving, then certainly we can identify bugs today in a static system-
H
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..technology is fluid and full of motion-
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right? so eventually the cryptography that's in bitcoin right now that-
X
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Female
..in ether and the ethereum network right now isn't going to work anymore and-
O
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..right. so it's not about having code that we know is going to run-
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i think it's an eye towards the reality that there will always be bugs.
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but i don't think that, i hope that i'm not coming across advocating the well-
H
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..sticks up the status quo. we don't move forward because i think that the world of smart contract has a lot of promise-
H
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there is legislation that's pretty powerful in a lot of jurisdictions around the world inc [inaudible 00:00:18]
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so, i think the insolvency zone is the one we're talking about. it's pre-insolvency when you know can't pay your debts as when they fall
X
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if you start taking in new investors to try and resolve that, looks a bit like a ponzi scheme.
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this is really hard to know. with this automation of crowdfunding projects-
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... it's very hard to know when the insolvency zone, when we've entered it. and, if we set up any kind of arbitration system that resolves-
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... the problem, that is actually just letting somebody get away with having-
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... reached the rules that say you can't trade while you're in solvent. then-
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... we're all contributing to in illegal contract.
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i'd love to talk to a lot of developers about this-
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... whether the code itself is an agent.
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and the reason why i ask this is, i'm just wondering about fiduciary obligations that are owed in relation to the whatever it is that you take and hold on-
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... i think everybody's pretty much accepting that they do exist.
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i just wanted to put it out there for discussion and i think it's a hidden problem for all developers and also their advisors, their-
X
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yeah, but if you do take somebody's money and you hold it-
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if you're using bitcoin, there is multisig.
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if you're using ethereum, there are multisig contracts that you can use
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but i think it's a huge red flag-
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... if someone is in the crypto space and holding assets for other people.
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that's the entire purpose. that's the whole reason we have bitcoin either and-
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... these alternative platforms of trust, is so that we don't have to vest trust in third parties.
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and so, i'm not saying it's always bad.
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is there anything burning that we've missed out?
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the old rule is, well the rule is, don't invest anything you can't afford to lose. and so, i don't see anyone doing that.
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that's more the regulators. and the fact that no one that we know of is being prosecuted is very interesting.
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it's just very, very interesting because... and again, in the early days people were worried.
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it's absolutely fascinating and the more that happens-
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... end up in prison, unless you never want to go through there again.
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and yet, he's on the verge of... he hasn't been deported but-
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i think that one of the problems with the regulator bringing the prosecution is, of course, you've got the higher standard, you've got the higher burden of proof. they've got a prove [inaudible 00:03:03]
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and then, the other problem is, you need the information provided by the victims and they-
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... all can't come forward. they may be vulnerable in some way-
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... because most regulators, and this is actually a point from the last conversation about what's happening in new zealand-
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... in auckland. there were an awful lot of people from different government departments [inaudible 00:03:28]
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and then you can do it. and especially that thing about having the arbitration and having-
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and also, that thing of the answer to the machine is in the machine.
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right. and 90% of people want to do the right thing, want [inaudible 00:03:42]
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you can get it signed off with a little bit of good conduct and certify what that is.
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i mean obviously, i'm nowhere near up to speed on this as a technologist.
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[inaudible 00:03:53] that should work. it's really important to do that so that there can be some confidence built into the way that we're all going to move forward. and-
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... yeah alex, that momentum that's so important.
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and we focus on the public policy issues that are generated through the availability of these new technologies.
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they allow people to do things that they weren't able to do before-
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... existing legislation.sure. so it might be easier to start with securities law and then talk about the dow.
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the primary consideration here is likely going to be us securities law as a first pass.
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or british jurisdictions or former british jurisdictions and with continental law and other law.
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the thing about american securities law is that the securities act has this laundry list of things that are securities-
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... [inaudible 00:04:48] but that's not good enough to determine when something is or is not eligible to be regulated in such a heavy duty fashion as securities regulation is. and-
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... [inaudible 00:04:57] basically deferred to the federal courts in order to come up with some sort of flexible test for determining when something is and is not an investment contract.
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it's got many acres. he invites rich new englanders down to visit florida and the orange grove and-
H
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.. let's move here. and he'll say something like, "oh well-
H
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... it's funny you should say that. the orange grove is for sale."
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it turns out that the orange grove is not profitable.
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there's a lawsuit inevitably against howie from some of these new englanders-
N
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... just generalizing, stereotyping. i like new englanders.
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which isn't a security. and then, you hired someone to farm your land, which-
N
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.. that's a security. so fast forward to 2015-
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... which is already sketchy, because guess who owns those nodes?
H
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it's josh garza. josh garza also has a history of being a scammer. before paycoin he-
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... [inaudible 00:06:00] from how nothing ever freaking changes.
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turns out, it didn't even matter whether that is a security, that cloud mining operation because he didn't even have the hash [inaudible 00:06:11]
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financial scams. so he's the serial scammer.
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he does all sorts of silly things like promise that amazon is in talks with him to accept paycoin as their digital currency, that there's going to be a [inaudible 00:06:25]
U
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effectively, everybody realizes that there's going to be no development here. that this thing is not going to have amazon integration or a minimum $20 price floor, price plummets.
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but that's what you could say about people who bought these orange trees in florida.
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super good deal. so you have investment of money [inaudible 00:06:48]
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this is really just a couple people in a dark room somewhere forking purecoin.
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so therefore, are all cryptocurrency securities?
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but we've worked at coin center to develop a framework that helps answer that question. hope [inaudible 00:07:04]
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could narrowly apply to the specific facts of this particular case.
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basically. so, recognizing that this is a looming issue, and [inaudible 00:07:14]
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just a statute or a regulation with enumerated categories-
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... you're going to potentially be subject to us regulations and-
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... if that country has extradition, which most friendly countries do.
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so we have this looming threat-
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... and the summer of 2015 was present a framework to the sec that we felt would be helpful for them in first understanding how these technologies work.
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it was a small group of people developing this thing and promising these integrations.
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it's a common enterprise, but not the kind of common enterprise that we regulate as a issuer of securities. and-
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[inaudible 00:07:55] thing. so the way bitcoin does it, the way ethereum does it, the way paycoin did it.
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and you can map them to the howey test.
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say, this amount of decentralization in mining and in software development makes it look like we don't have a common enterprise.
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