Proof of stake (PoS) is a type of consensus mechanism used by some blockchain networks to validate transactions and add new blocks to the blockchain. It is an alternative to proof of work (PoW), which is the most widely used consensus mechanism in the cryptocurrency industry.
One way in which PoS is similar to issuing securities is that it involves the allocation of ownership or decision-making power within a blockchain network. In PoS, network participants (called “validators”) are chosen to validate transactions and create new blocks based on the size of their stake in the network, which is typically measured in the native cryptocurrency of the network.
This allocation of ownership or decision-making power is similar to the way that securities represent an ownership stake in a company or a claim on part of its assets or earnings. For example, when a company issues stocks, it is essentially allocating ownership of a portion of the company to the stockholders, who are then entitled to a share of the company’s profits and assets. Similarly, when a blockchain network allocates ownership or decision-making power based on stake size, it is essentially giving validators a say in how the network is run and how its resources are allocated.
Another way in which PoS is similar to issuing securities is that it often involves the sale of tokens or other digital assets to raise funds for the development and maintenance of the network. In some cases, these tokens may be considered securities under certain circumstances, depending on how they are structured and marketed. For example, if the tokens are marketed as a way to participate in the profits or assets of the network, or if they are marketed as an investment in the future success of the network, they may be considered securities.
In conclusion, while PoS is not a security in and of itself, it does have some similarities to issuing securities in terms of the allocation of ownership or decision-making power and the potential sale of tokens or other digital assets to raise funds. However, whether or not a particular PoS-based project is considered a security would depend on the specific facts and circumstances of the project, and would need to be evaluated on a case-by-case basis by the relevant regulatory authorities.
The inevitable already happened. Ethereum is a captured project by the US government: Tornado Cash, 45% of the Ethereum validators now follow the US Sanctions, and more to come.
The Fall of Ethereum’s Tornado Cash
A few weeks ago, the U.S. Department of the Treasury’s Office of Foreign Assets Control – also known as OFAC – sanctioned Tornado Cash. This cryptocurrency mixer mixes cryptocurrencies together to make it hard to track their history. Unfortunately, Tornado Cash is easy to suppress because its developers are known and its frontend servers are hosted on US soil.
Let’s Not Pretend It’s Not A Security
Ethereum is a security based on the Howey Test. It’s like a company because of proof-of-stake. The more you have, the more influence you have over the network. It’s the recreation of the current system. The more shares you have within a company, the more power you have over a company’s direction or decisions. If you have no problem with that, it doesn’t matter if Ethereum is a captured project just as it doesn’t matter if you buy one or two TSLA stock or a stock market index like QQQ or VTI.
So I’m a Bitcoin Maximalist… Did that stop you from reading further? Good. Move on.
Digital Scarcity Only Happened Once
Bitcoin is one of a kind. It’s special. It can never be replicated. Everyone knows the game when it’s revealed. And now… anyone can issue their own token to… let’s be real: make money. Who doesn’t want to make money? Or fund projects that would otherwise be annoying to go through via traditional means (like going public). At the end of the day, it’s all fugazi, and that’s OK. Because the stock market is all fugazi too.
Less Red Tapes
Altcoins simplifies funding by removing the red tapes that governments created. While they are not as decentralized as bitcoin, altcoins are harder to censor, unlike stocks that can be halted every hour if it goes viral on r/wallstreetbets. Altcoins are traded 24/7, and that’s a good thing in a connected society. Productivity never sleeps, and that’s only going to advance humanity to the next level.
Why Regulation Is A Good Thing
Everyone sees the SEC as the enemy, but regulation is a good thing especially when scams & rug pulls are rampant. “Crypto” and “Blockchain” will only bring more harm than good if these bad actors are left unchecked. It should be obvious that altcoins like Ethereum are securities. They pass the infamous Howey Test, but it should be viewed as a compliment.
Conclusion
The Ethereum Foundation, Vitalik, and other huge VC stakers can work with governments. For example, Cardano’s Charles Hoskinson, the African Nations – their Identity Problem, and how blockchain can solve it. Imagine if there’s a person, an idea, a company, or a group of people out there that has a revolutionary idea that can change the world but cannot get the funding they need because they live in the slums. Altcoins as securities levels the playing field.
Bitcoin and other cryptocurrencies have captured the attention of investors and the general public alike. These digital assets are not tied to any country or government and are not subject to any central banking authority. Instead, they are decentralized virtual currencies that operate on a peer-to-peer basis without a central authority, such as a bank or clearing house. Investors who are new to cryptocurrencies or who are looking to diversify their portfolios can consider adding a small percentage of their savings to a cryptocurrency investment portfolio. There are a variety of ways to do this and even fewer require that you own a particular cryptocurrency. Here is an overview of how you can invest in a cryptocurrency portfolio.
The Basics
There are a few basics that you’ll want to keep in mind when it comes to investing in cryptocurrency. First, keep in mind that these investments are extremely risky. The prices of cryptocurrencies can fluctuate widely, and sometimes unpredictably, making it difficult to predict how your investment will perform. It’s important to remember that the value of cryptocurrencies can go up and down, and past performance is not indicative of future results. These investments are highly speculative, and you could lose your entire investment.
Pick An Allocation To Your Portfolio
The second basic is to pick an allocation to your portfolio. This is an important step because some investors incorrectly believe that you can simply invest in cryptocurrencies 100% of your portfolio. This is not a good idea, and you’ll want to pick an allocation that is small enough to be manageable while still having an allocation to your portfolio that has high potential returns.
Centralized Cryptocurrency Exchanges
The most popular way to buy cryptocurrencies is through centralized cryptocurrency exchanges. You can find a list of cryptocurrency exchanges here. These exchanges provide a variety of services to investors, including the ability to buy and sell cryptocurrencies, create investment portfolios, and manage your portfolio. There are a number of popular cryptocurrency exchanges:
Each of these exchanges supports a variety of different cryptocurrencies, and you can trade a variety of different assets on these exchanges. If you want to buy a specific cryptocurrency, make sure you pick a cryptocurrency exchange that supports that asset. You can store your cryptocurrencies on any type of cryptocurrency storage service, including a digital wallet, a hardware wallet, or a software wallet. Most cryptocurrency exchanges provide you with a digital wallet. If you’re looking to store your cryptocurrencies offline (which we recommend), a hardware wallet like Trezor is best way to go.
Centralized cryptocurrency exchanges have been the target of hacking attempts. If this occurs, all of the cryptocurrency funds on the exchange would be at risk of being stolen. Centralized cryptocurrency exchanges are often highly regulated and are subject to regular audits by government authorities.
Decentralized Cryptocurrency Exchanges
Decentralized cryptocurrency exchanges are similar to p2p exchanges, such as LocalBitcoins. However, instead of operating like an exchange that holds funds and then matches buyers and sellers, decentralized exchanges act as a marketplace where buyers and sellers create market orders without the need for a third-party intermediary, such as an exchange. The advantage of decentralized exchanges is that there is little to no risk of hacking or theft. These types of exchanges do not hold funds and simply connect buyers and sellers. When a trade is completed, the marketplace returns the funds to the buyer and seller, resulting in no funds being held by the exchange. Investors who want to purchase cryptocurrencies on a decentralized exchange should keep the following things in mind:
Decentralized exchanges are not as widely used as centralized exchanges, so you may be paying a premium when you trade.
Decentralized exchanges don’t offer as wide a selection of cryptocurrencies as centralized exchanges do.
Decentralized exchanges don’t have the same level of regulatory oversight that centralized exchanges have.
Buying Bitcoin
Bitcoin is the most popular cryptocurrency and has the largest market cap. It is the blue-chip of cryptocurrency, so it is the “safest”. We recommend 50% allocation of bitcoin to your cryptocurrency portfolio. It can be purchased through a number of different methods, including through exchanges and through a number of peer-to-peer exchanges. It can also be purchased using a number of different payment methods, including credit cards, gift cards, and PayPal.
Final Words
Cryptocurrencies are an extremely new and exciting investment vehicle. While they are still in the early stages, they have the potential to radically change the financial landscape. Also, cryptocurrencies are completely decentralized, and there is no central authority that can shut them down or regulate them. This makes them a very attractive investment option from diversification point of view. The best way to get started with investing in cryptocurrencies is to pick a cryptocurrency exchange and pick a small allocation to your portfolio.
