Polkadot Complete Nature Transformation No longer a security

Three years ago, in November 2019, the Web3 Foundation made a decision that changed its trajectory and changed business processes, people management, and public communication. We chose to accept the “Come in and Talk” proposal from the U.S. Securities and Exchange Commission (“SEC”). Today, we’ll tell you why. The Web3 Foundation is pleased to announce a milestone on the road to Web 3.0: the Polkadot blockchain’s native digital asset (DOT) has undergone a transformation, no longer a security, but software.

Web 3.0

In 2014, Dr. Gavin Wood, founder of the Web3 Foundation, coined the term “Web 3.0” to describe the decentralized, trustless, serverless internet. In Web 3.0, users are in control of their data, identity, and destiny.

He proposed this new vision because he believes that the current Internet infrastructure, known as Web 2.0, encourages and facilitates the consolidation of power in the dominant group of for-profit corporations, many of which have played a major role in building the current Internet infrastructure.

In Dr. Gavin Wood’s view, the failure of the Web 2.0 Internet to meet basic human expectations of privacy and authenticity was not accidental, but intentional. Many, if not most, well-known companies that are critical to the Web 2.0 experience for the average person rely on advertising as their only means of monetization. In addition, powerful online tracking and data mining can confuse the truth, which is also closely related to advertising. Web 2.0 is far from a utility, it’s a business. Users seeking an online experience can unknowingly become a product, even if they don’t know they’re being monitored and influenced.

The Web3 Foundation’s vision is to build a network that eliminates conflicts of interest between creators and consumers of online content and apps. The goal of Web 3.0 is to create a new Internet infrastructure that provides citizens with a reasonable alternative to Web 2.0 – a new Internet that will continue to provide the features and benefits that everyone would expect from the Web 2.0 world, while adopting a more secure, decentralized form of privacy protection. Ideally, Web 3.0 will give individuals, not just a group of powerful, for-profit, ad-driven companies, control their own personal data, including home addresses, mobile phone numbers, medical history, and many other forms of personally identifiable information.

One way to create this decentralized internet is to use blockchain technology, with polkadot as the best design. Polkadot’s vision is to contribute a vertical, usage-agnostic, coordinated software base layer that will ultimately help create a viable Web 2.0 alternative for citizens. Just as HTTP provides a channel for communication in Web 2.0, blockchain interoperability and cross-chain communication can be implemented in Web 3.0 once Polkadot is developed. However, instead of triggering the famous “blockchain trilemma,” the Polkadot team set the bar higher, making it clear that decentralization and security are non-negotiable while seeking scalability.

Our focus is high because that goal is crucial. Interoperability and cross-chain messaging are not marketing gimmicks. They are integral to the implementation of Web 3.0.

Over the past few years, the blockchain industry has evolved into a diverse ecosystem with many communities of independent value, each with different cultures and goals. However, various elements of the blockchain industry still lack a more mature, collaborative system. In other words, one plus one is not greater than two. Since blockchain is still largely siloed rather than being an accessible online world, it still has a zero-sum side.

Come in and talk

In November 2019, three years after the release of the Polkadot white paper, the Web3 Foundation was still six months away from starting the Polkadot network launch process. The go-live process began in May 2020 and finally went live in December 2021. Looking back, however, we are at a crossroads of choice.

Just a few months ago, in April 2019, staff at the SEC’s Center for Innovation and Financial Technology Strategy (“FinHub”) released the Digital Asset ‘Investment Contracts’ Analysis Framework (the “Framework”). The elements of the framework indicate that almost all digital assets offered and sold for fundraising purposes will initially most likely constitute securities in the hands of the initial purchaser. However, other elements of the framework also include evidence that there is such a compliance path that allows digital assets initially offered and sold as securities to be re-evaluated later. This path suggests that under U.S. federal securities laws, digital assets can cease to be securities under certain circumstances. In other words, a qualitative shift can occur.

Beginning in 2017, prior to the SEC’s landmark 21A Investigation Report: The DAO (the “DAO Report”), the Web3 Foundation raised funds under U.S. federal securities laws, but as of November 2019, we have not delivered any digital assets to initial purchasers. While Polkadot’s vision does not contemplate that the blockchain’s native token will become a security, we understand that the SEC does likely identify the token we are to deliver as a security, at least at the time of delivery.

As we have seen, the costs are high and there is little room for error. In order for DOT, the native token of the Polkadot blockchain, to be recognized (or later become) non-security, whatever the cost, we are willing to do it. So we decided to try and accept the SEC’s FinHub employee offer to “come in and talk.”

November 2022 marks the third anniversary of our partnership with the SEC. For three years, we have met regularly with FinHub employees. In doing so, we take a similar approach to compliance as our approach to technology development: immersion, focus, and setting high standards. From the beginning, we have tried to break new ground in our interactions with the SEC by complying with U.S. federal securities laws, including the offering and sale to initial purchasers, and the marketing and delivery of tokens as securities, as well as the treatment of retail purchasers, all largely consistent with public company standards.

Our experience has been positive. The SEC welcomes the meeting with the Web3 Foundation and has always maintained a spirit of open communication and dialogue. These ongoing interactions have given us a deeper understanding of some of the SEC’s concerns and helped us develop a plan to address them.

Over the years, we have developed a set of theories that we believe are feasible about how to achieve a token-like transformation for increasingly decentralized projects such as Polkadot and a digital asset that does not itself have security-like properties other than being originally offered and sold for fundraising purposes. We have shared this theory with the SEC many times.

At the same time, we are entering the third year of our first engagement with FinHub and nearly a year since we completed the Polkadot go-live process, which includes a truly decentralized governance mechanism and on-chain vault. In line with our shared views and those of the SEC staff, we are pleased to announce that the Polkadot blockchain’s native digital asset, DOT, has completed a transformation. We believe that the current offering and sale of DOT is not a securities transaction, DOT is not a security, it is simply software.

Disclaimer: Nothing herein constitutes an offer or sale of any digital assets or securities. Similarly, nothing herein is intended as legal, investment or tax advice.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/polkadot-complete-nature-transformation-no-longer-a-security/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-11-07 09:47
Next 2022-11-07 09:48

Related articles