The other day on Twitter @Theycallmedan Challenged anybody to prove HIVE is a security. Well I intend to give this a thorough attempt. I mean free 10K USD is free 10K USD. Right?!
How we got in this mess.
It all started a long, long time ago on a moderately flourishing Social Media site called SteemIt that used the Steem Blockchain as its backend for storage of said social media. It was ruled by a group that had divided the spoils of success before they even succeeded. They expected they would make even more money once they had.
With hard work, they had in fact made no small amount of success, but they knew they had a long way to still go before the site could be brought to its full success. They distributed rewards to the bloggers, loyal, uncaring, assholes and the fanatics in equal measure so long as they used the system.
One day the noble SteemIt team was approached by a dark sorcerer that would call itself His Excellency, but we will just call him Justin Sun for now. Mr. Sun made an offer too good to be refused. It went like this. "I'm going to make you rich. Not in 20 years, not in 10, not in 5, but right now. All you have to do is hand over your secret little pile of coins." Whether it was because they were tired and exhausted from all the work they had done or they were just greedy, they thought it was a good deal.
No one on Steemit was sure at first maybe this was a good thing. Mr. Sun was well known for making people money, but they had been given promises that those secret coins were going to be given to a DAO and disturbed to grow the Steem Blockchain. Mr. Sun refused to do what was promised. They were his coins now. He didn't have to do anything with them, he didn't want to. And he didn't want anyone but him to be in control.
Just like that the Dark Days had come to SteemIt.
Meanwhile, a band of what Mr. Sun would call thieves, knaves, and crazies decide that they had in fact had had enough. They were powerful wizards and Robinhood types if thieves at all. If they couldn't get what they had been promised they would just have to start anew. To that end they create a new blockchain. They decided that they would just copy the old chain and dubbed it Hive. Which they already had pre-mined coins for why start over completely from scratch? They put the secret coins in a DAO. They expected to make a small fortune from the now freed up coins by making proposals to improve their new blockchain.
These powerful founders whether known or unknown set forth the expectation to the great populace that Hive would grow on its new path and be worth more overtime. If you had some coin the number would go up, cause everyone else would do the work and it did overtime. Then these wizards went further and advised that everyone convert their old SteemIt coins to the new Hive coins. Which is in some cases doubled users holdings convert their loss in on to gain on the other.
The Howie Tests
The Supreme Court has established four criteria to determine whether something is a security and thus regulatable.
- An investment of money
- In a common enterprise
- With the expectation of profit
- To be derived from the efforts of others
So let's go over them.
Steem coin was sold or traded to increase the holder's investment. Steem is still worth some amount of USD. So there was an investment. Developers (wizards) want to use common funds (DAO) to make Hive better. Which in turn would make the coins held by everyone more valuable whether they contribute or not. Profit!
There we have it the quadfecta. Worse we have founders and a massive user base with pre-mine.
Lets real talk
Everything I've talked about here is a simple re-framing of known facts. It's not even an especially creative re-framing, but when you do this it is easy to show that Hive is a security. Founders will have to be extra careful to not dox themselves or risk the government's wraith. That won't stop Hive but when have you know a government that didn't like setting examples.
Hive is a security, but there is very little they can do about it.
So, Where is my money Dan?
I know more independent contractors(also a stretch) on hive than bonafide businesses, blocktrades and splinterlands aside... they could be independent contractors to hive's enterprise... But then where is the line actually drawn? If only independent contractors produce blocks and provide API... then there is only the enterprise of writing the code, which as far as I can tell also is done by independent contractors.
Securities laws were made for securities. Commodities laws were made for commodities. I can't think of anything that happens on Hive that isn't a free speech issue.
My Replies by point.
My point is it takes very little to skew Hive into looking like a security. Especially if all you care about is winning.
P.S - Sorry maintaining the thought patterns of someone who just wants to bring Hive down is not fun.
I like your telling of the history of Hive!
Thanks. It is a nice little fairy tale.
I think if more people knew about it, it would take on the form of a
legend instead! 😄