2017-18: a year in marmots

Why are you writing a retrospective of the last year?

It’s been awhile since I’ve written anything here on the blog. There is a reason for that – yesterday I finished taking the bar exam, so I’ve spent the last ten weeks huddled over a kitchen table, memorizing black-letter law.

As it happens, today is a pretty consequential anniversary: one year ago today, I handed in my notice at the startup I co-founded, Monax, to move back home to (a) take care of an ailing parent and (b) attain a professional goal I’ve had ever since I was admitted as a solicitor in England and Wales in 2011: getting admitted as an attorney-at-law in the USA.

Since then, Monax has gone on to do some really interesting work in both the private and public blockchain arenas. Of particular note is a project I helped to negotiate back when I was still at the company, the fusion of Monax’s implementation of the Ethereum Virtual Machine and IBM’s  Hyperledger Fabric blockchain software. Monax has since integrated its EVM, known as Hyperledger Burrow (note marmot-themed name), with Intel’s Sawtooth blockchain software as well.

This is great because it means that there’s finally an Ethereum implementation with backing from big enough companies that there’s a chance the Ethereum ecosystem may yet escape total domination by a serial ICO-issuing company some of my friends call the “Evil Empire,” a company that shall go nameless at this juncture.

Recap

But that was my old life. What have I been up to this year? Well:

August 2017: I leave Monax and pass the NYLE.  At the urging of my friend Jonathan Mohan, I get back into blogging with a vengeance and start writing my “ICO Mania” blog post series, which would go on to rack up more than 320,000 hits over the next twelve months.

My opening salvo was about beavers, or as I prefer to call them, “swamp marmots.” My follow up, Thoughts on the SAFT, criticised the “Simple Agreement for Future Tokens,” or “SAFT,” ICO issuance documents – endorsed at the time by Cooley LLP and, if memory serves, a couple of lawyers who are no longer at Debevoise – as falling foul of U.S. securities laws.

tl;dr, I said that every ICO I’d ever seen was a security, a view I’ve held since 2014.

Nobody listened.

A mysterious blogger named @Bitfinexed starts writing about potential issues with wash trading and the cryptocurrency, Tether.

Nobody listened to him, either.

September 2017: The UK FCA decides to bury its head in the sand re: ICOs. I enroll at UConn Law on an LL.M. (Master of Laws) program. I write the Bear Case for Crypto. My thesis is that when the regulators finally get it together and take out a sufficiently major piece of infrastructure for regulatory transgressions, there will be a massive, rapid, and inescapable price collapse as offices are raided and servers are seized.

Note for the record, I still stand by this thesis, and consider that Tether/Bitfinex present a high risk of being a future source of systemic problems in Bitcoinlandia.

October 2017: Cooley LLP  publishes the SAFT White Paper, arguing that “utility token” ICOs are kosher as far as the federal government is concerned. I dissent. A partner from Cooley who gets paid far better than I do tries to dunk on me in Forbes, saying “the SAFT doesn’t become the token. There is no existential metaphysical continuum where this pdf file become[s] an entry on a decentralized ledger. That’s not how the world works. And frankly, that’s not how the Howey test works.”

We’ll see about that,” I think to myself at the time.

In October I also stumble across a nascent “stablecoin” scheme nobody had heard of called Basis/Basecoin. I excoriate it in writing because there is absolutely no way the scheme can work without bots manipulating the market for the token. 8 months later, Basis goes on to raise $130 million, pre-product and pre-revenue, from Andreessen Horowitz, Lightspeed and Bain.

November 2017: I pass the MPRE. I propose that the Bitcoin/altcoin market is getting sufficiently out of control that it will almost certainly become a systemic risk if regulators continue to fail to intervene.

Nobody listened.

December 2017: MakerDao/DAI dares me to write about them. I oblige. Estonia proposes launching a national Ponzi scheme. Venezuela actually launches one. Sadly, my father passes away after a six-year struggle with cancer.

January 2018: The MakerDAO/DAI stablecoin breaks when a market-manipulation bot supporting its price is accidentally switched off.

The Securities and Exchange Commission sends out the first batch of ICO subpoenas. Around the same time, Jay Clayton, Chairman of the Securities and Exchange Commission, dunks on at the SAFT, calling the structure “disturbing.”

I can barely contain my smug satisfaction at being right, about both DAI and the SAFT. Bitfinex and Tether receive a subpoena from the CFTC.

I do @Patrick_Oshag’s “Invest with the Best” podcast. He calls me “the most consistent skeptic in crypto,” a badge I wear with pride.

February 2018: Jay Clayton, Chairman of the Securities and Exchange Commission, ups the regulatory rhetoric when he tells the United States Senate that every ICO he’s ever seen is a security.

March 2018: I team up with Nouriel Roubini to call shenanigans on the Bitcoin bubble.

April 2018: @Hasufl and I discover some irregularities in the Ethereum ICO from 2014 (my post, and his post) which show that ICO was likely organized and funded, in large part, by one person or a small group of people working in concert.

May 2018: 9x exams and 1x 50-page paper later, I finish at UConn, having made some fantastic friends along the way, and am awarded an LL.M. in U.S. law. Meaning I have two law degrees, which is one more than most. Gary Gensler says that an Ether token is  probably a security, and I concur. The DOJ launches a criminal probe, in conjunction with the CFTC, into Bitcoin price manipulation.

June 2018: SEC Director William Hinman says that Ether – which was created by ICO – is not a security. Despite the fact that Jay Clayton said, in February, that every ICO he’s ever seen is a security. As usual, I point out that the grown-up lawyers are a little behind the curve when it comes to “blockchain,” and dissent.

On the Bitcoin front, an independent report claims that Tether – a central point of failure for the ecosystem if ever there were one – was mostly responsible for Bitcoin’s rise.

July 2018: I lock myself indoors to study, and only occasionally step outside to take pictures of the marmots that live in my yard and eat my plants.

Yesterday: Attempt to jump over the final hurdle: the UBE (Uniform Bar Exam). I’ll find out the scores in a couple of months.

Today: It transpires that ICO capital raising was 50% of IPO fundraising for Q2 2018. Remember that fuzzy marmot who told you nine months ago that this stuff was going to become a systemic risk if the regulators didn’t bring it under control? Well…

Tomorrow: who knows?

2017-18 was a crazy year. Now that I’ve got some room in my head to think again (bar exams are really the worst), I’m glad to have a little time to sit down to plot my next move.

I want to thank everyone who’s stuck around for the ride, read my blog posts, and chatted with me on Twitter during that time. You’ve made the last year incredibly personally rewarding, even though I’ve been “off of the field,” so to speak, while sorting out my professional qualifications.

Given how interesting the last 365 days have been, I can only imagine the next 365 are going to be even better.

Finally, here’s an obligatory picture of the marmot who lives in my back yard.

-PJB

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8 thoughts on “2017-18: a year in marmots”

  1. Thanks for the update and thanks for writing some of the best objective analytical commentary on cryptocurrency law that I’ve ever come across. The number of people who understand the law, the technology and the “industry” as well as you are few and far between. The fact that you obviously appreciate and care about the potential for the technology and aren’t afraid to put on your critical thinking cap when you talk and write about it has been a significant inspiration to me.

    Like

  2. >There is a reason for that – yesterday I finished taking the bar exam, so I’ve spent the last ten weeks huddled over a kitchen table, memorizing black-letter law.
    That’s great, mate! We’re glad to have you back and to hear your Ideas.

    >My thesis is that when the regulators finally get it together and take out a sufficiently major piece of infrastructure for regulatory transgressions, there will be a massive, rapid, and inescapable price collapse as offices are raided and servers are seized.
    Do you think they will shut down fiat-to-crypto on-ramps anytime soon?

    >Note for the record, I still stand by this thesis, and consider that Tether/Bitfinex present a high risk of being a future source of systemic problems in Bitcoinlandia.
    I agree. Although I also believe Tether will outlast every other Stablecoin out there being created. I think Tether (the company) could eventually start using Bitfinex Daily Trading Revenue to prop up the peg…if things start getting hairy.

    >In October I also stumble across a nascent “stablecoin” scheme nobody had heard of called Basis/Basecoin. I excoriate it in writing because there is absolutely no way the scheme can work without bots manipulating the market for the token. 8 months later
    I used to be Bullish on Basis. Now I understand that Non-Backed Stablecoins can only work if there are always more Dummies buying into the Ecosystem. Since it is trivial to ‘exit’ one Stablecoin ecosystem and ‘enter’ another, Non-Backed Stablecoins are guaranteed to fail. Thanks for giving me that Information, mate.

    >Sadly, my father passes away after a six-year struggle with cancer.
    Sorry about that, mate.

    >The MakerDAO/DAI stablecoin breaks when a market-manipulation bot supporting its price is accidentally switched off.
    I’ve thought about this. My personal rule is now “More than 10% off the peg, for more than 1 day” and I will declare the peg ‘broken’. I think your interpretation is fair based on what their website said.

    >I can barely contain my smug satisfaction at being right, about both DAI and the SAFT.
    Nice

    >and am awarded an LL.M. in U.S. law
    Great job mate!

    >and only occasionally step outside to take pictures of the marmots that live in my yard and eat my plants.
    Haha

    Welcome back mate!!

    Like

  3. Interesting Developments in the Dai Ecosystem: MakerDAO has decided to raise interest rates 5x (from 0.5% to 2.5%) with only a 1 month notice to the community before the vote.

    View story at Medium.com
    >As a result, on August 26 the Risk Team will hold the first executive vote for a Stability Fee adjustment done for the sake of balancing Dai supply and demand.

    A few comments from reddit:
    >i have noticed DAIUSD consistently trading I have to agree. Seems I am being penalized for being an early adopter. This will be a significant cost to me.

    >(Rune) Right now it is not very apparent that there is an imbalance on the public markets, but if you look at e.g. that chart on coinmarketcap it can be seen that recently there has started to be more severe downward swings that aren’t just oscillating around the target price.

    The second half of Rune’s comment is true. If you look at Dai on CMC, it looks like from June 23-Today Dai has been oscillating around $0.99, instead of the $1 they intended.

    Like

  4. Looks like I keep messing up the Reddit comment section.

    Here is my last try:
    >i have noticed DAIUSD consistently trading Seems I am being penalized for being an early adopter. This will be a significant cost to me.

    >(Rune) Right now it is not very apparent that there is an imbalance on the public markets, but if you look at e.g. that chart on coinmarketcap it can be seen that recently there has started to be more severe downward swings that aren’t just oscillating around the target price.

    The second half of Rune’s comment is true. If you look at Dai on CMC, it looks like from June 23-Today Dai has been oscillating around $0.99, instead of the $1 they intended.

    Like

  5. Ok it looks like WordPress keeps merging two copy/pastes after that is not what I submitted.

    HERE is my Last Try:
    Comment 1: https://www.reddit.com/r/MakerDAO/comments/9250ou/increasing_the_dai_stability_fee/e34rhk5

    Comment 2: https://www.reddit.com/r/MakerDAO/comments/9250ou/increasing_the_dai_stability_fee/e339uzf

    Comment 3: https://www.reddit.com/r/MakerDAO/comments/9250ou/increasing_the_dai_stability_fee/e33bbbq (Rune)
    The second half of Rune’s comment is true. If you look at Dai on CMC, it looks like from June 23-Today Dai has been oscillating around $0.99, instead of the $1 they intended.

    Like

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