Data: the U.S.’s Opportunity to Decentralize & Acknowledge The End of a Single Reserve Currency World
Data: the U.S.’s Opportunity to Decentralize & Acknowledge The End of a Single Reserve Currency World
1. New Werk! Endowment needs legal & venture help, 2. Brian Scherer & the Legal Toolbox for Founders, 3. Max Moncaster & Eli Kamerow on Data Decentralization as a crucial path forward for the U.S.
Available Werk / Opportunities
Endowment needs some help getting set up (legal, venture)
Endowment is building crypto fundraising tech for nonprofits where the transactions fees from the network are redistributed amongst our native token holders. Endowment is looking for legal support in the creation of a for-profit entity (or entities) that would protect the founders from legal liability and prepare us for outside investment. We will also need help with the creation of key documents like fundraising agreements, cap table, etc.
Apply by: 5/6 Estimated Project Length: 2 weeks
And here’s the master list of all open werk.
To apply for any opportunity, comment in #🧳 werk "!apply (recordID) [your Twali profile link]”.
From the Community
On the legal battlefield of NFTs
DeFi Defense Lawyer (Carlo) Fair Notice to NFT Projects: The legal battle that is coming soon to this space is over whether an NFT project's failure to register a digital asset as an "investment contract" is a violation of Section 5 of Securities Act. A common defense is the "Fair Notice Defense."
More on NFTs
“Can you truly own anything in the metaverse? A law professor explains how blockchains and NFTs don’t protect virtual property” by João Marinotti, Associate Professor of Law at Indiana University
From Legal Toolbox for Founders
This week, we introduce Brian Scherer, founder and CEO of Heycounsel and writer of Legal Toolbox. At Legal Toolbox for Founders, Brian publishes quick, actionable insights into legal issues that founders have seen before or will see in the future.
Micro-advisor programs and overcoming the myth of messy cap tables is part 1 of a series on demystifying micro-advisor programs, long cap tables, and the legal mechanics behind both. Part 1 covers:
what a micro-advisor program is.
the types of objections lawyers and investors might have to the idea of a micro-advisor program.
and what questions the following articles will answer.
Data: the U.S.’s Opportunity to Decentralize & Acknowledge The End of a Single Reserve Currency World
Last week I sat down with Twali Experts Max Moncaster and Eli Kamerow for a general conversation on the intersection between decentralization and politics.
While many things were discussed, the most important theme threaded through the discussion was the cataclysmic tensity between progressing decentralization — in tech as well as on a geopolitical scale — and the U.S.’s (understandable) investment in its own financial system.
Time and time again, the conclusion was reached that the U.S. must acknowledge, and take the lead on, global decentralization, or else the economic fallout for a lot of Americans will be catastrophic. And data may be the way for the U.S. to do it.
Using previous economic development models to forecast crypto’s job creation.
Max: A lot of the previous economic development models that we've relied on have been top down type of suggestions. For example, a state government or national government decides on a specific industry that they want to target. They then pour resources into developing that industry. The whole point of decentralized finance and crypto, generally, is to be more of a grassroots process of job creation and job development. It is already such a different production model that I don't know if there is going to be a good, previous model to follow. There are certainly things to learn from different industries in terms of development skills and capacity building. Local governments really care about tax revenues, so this is a safe bet to consider. But I feel like the old models of economic development of job creation are already dying so, in my mind, it'd be good to rethink how we do this as a society, not just within crypto.
Eli: I'm inclined to agree with Max. I really agree with the need for this push to be grassroots. Because, if you think about it, if you're in favor of decentralization, that inherently is going to take power away from the centralized entities—i.e., legislators, regulators, and their lobbyists. No one is ever going to vote to take power away from themselves. That’s part of the reason why this needs to be grassroots.
In terms of models to understand levels of job creation, there are certain technologies, namely mobile and internet, that could be used as heuristics or proxies for thinking about growth and the the levels of job creation that came from there. You could also look at things like Bitcoin mining. There's this trend now where Bitcoin miners are funding green energy projects. That's going to create really important, quality jobs for the future of the American infrastructure.
The most optimal scenario for U.S. regulation regarding crypto
Max: Regulation is going to be a reality, whether we want it or not. A few weeks ago, I saw the news that the FBI had seized a bunch of Bitcoin. I don't know the mechanics of how they traced it, and how they ended up seizing it. Regardless, the fact that that capability already exists means that crypto is already being regulated to some degree. What there is to decide are the types of regulations that we want to be treated similar to the regular financial system, and where we want to distinguish them. For example, are all crypto tokens a security by definition of US security law?
I think Singapore has a really interesting model that carved out a space for crypto companies to experiment outside of general financial security laws. They've provided an open sandbox for these companies to experiment in, do different transactions, and take on investors. I'm sure there's still some baseline level of requirements that you need to meet, but I think there are ways of kind of letting people experiment within a regulatory framework.
Eli: I agree with you, Max. The best case scenario that we can hope for right now is a framework that would allow for regulatory experimentation. There are some people I know who are making the bet right now that all tokens will be regulated as other securities. While I agree that will probably stifle innovation, we need to protect consumers as we think about onboarding the next 10s and 100s of millions of users here. The dream scenario is the SEC says, “Okay, we're gonna open up a cryptocurrency division.” But I mean, Max, correct me if I'm wrong, I'm not gonna hold my breath for that to happen in the United States.
Max: Yeah, certainly not anytime soon. As much as I would love to see the US be at the forefront of regulatory experimentation, there is too much interest in the current financial architecture for the US to lead the charge there.
While there are ways to incentivize innovation through tax breaks and deferred taxes or things, I don’t know if that is the right way. It will certainly help encourage people to take risks without fear of having to pay for it too much in the immediate term. Questions like these though are why our space needs the DeFi Education Fund. We need people thinking about these issues and spending real time thinking about how it comports with the older financial architecture that we have, too.
Is decentralization inherently a vote against the US government or could it be used for their advantage?
Max: The US benefits immensely from dollars being the world’s reserve currency. I do agree that the rise of Bitcoin will probably mirror the decline of the US as the world's reserve currency. I understand the skepticism and fear that this probably strikes in the heart of policymakers. But if, as a country, we can find a way to manage the next chapter gracefully, we can come out of it still ahead and still in a world leadership position. I don't think decentralization is happening just online, also. Post-COVID, it is also happening in manufacturing. People are thinking about how to distribute systems better and are recognizing the risks arising from the centralization of our food supply. With what might happen with food production in Ukraine and Russia, these risks could become very real within a year or so. So I think decentralization and that move kind of slightly away from globalization is happening. And it's happening across all the areas and arenas where the US competes, and finance isn't going to be any different. So I would love to see a foreign policy that kind of understands and accepts that, and tries to find a way to march forward.
Eli: That pretty much sums up my thoughts as well. The dream scenario is the US comes out and says, “hey, we’re probably entering an era where there's not going to be one dominant reserve currency as there has been for the last four or five centuries.”
The US has benefited tremendously since Bretton Woods when they became pretty much the global reserve currency that was pegged to the dollar. The challenge is that this transition is going to be incredibly rocky and painful. A lot of people are going to feel real hurt. People who did nothing wrong. People who worked hard their whole life. Who saved their money. When this shift happens, their dollars are going to be worth less.
I'd love, as Max said, for the US to come and lead with grace and say, “hey, we see this shift happening. Here's how we're gonna get through it together, at the forefront of the changing world. We won’t be the dominant superpower, but maybe first amongst equals or biggest amongst a set of peers here.” The reality though, is this unleashes so many policy quagmires and problems: the schoolteacher in Des Moines who worked hard her entire life and now can't retire because the US announced that it's holding Bitcoin and the dollar has just dropped 30%. This is why it feels like an impossible problem that I can't imagine any policymakers want to act on. The dream situation, to say it once more, is the US proactively comes out and says, “hey, the world is changing. We put Bitcoin on our balance sheet, and we're going to figure this out together.” But that is easier said than done.
Data as the path for the U.S. to lead decentralization.
Eli: Decentralization is not just crypto finance. It is also data. I think we're going to look back in 20, 30 years at data laws the way that we look back now on child labor laws, like wow. We let that happen?
Maybe where the US can lead, from a decentralization policy perspective, is by advocating for people owning their own data. This does not undermine the financial ecosystem in the same way that DeFi and Bitcoin does. It is easy to forget decentralization is situated within the broader context of computing technology, information, technology, data. So I appreciate you bringing that to the table. I was talking with Cokie earlier today. She wants people's professional identities to be composable, meaning they can take it with them wherever they go online. Why does this matter? Because then they are not stuck with Twali. The idea is if people can have their data be composable, it empowers them more. That may be an actual, realistic policy ask. Obviously it will not look like the US government starts running on Ceramic. But we can start thinking what are the actual policy asks we can make around decentralized data, and the messaging behind it. Maybe it’s about creating jobs, empowering individuals, not being beholden to the state or federal government. I think that is pretty friendly across the aisle as well—the idea of decoupling the individual from things out of their control. It is also consistent with the ethos of web3 that we all love so much. This is actually a really good conversation. I had not thought about it this way before.
Strategies for bipartisanship and what industries can we learn from.
Eli: I think the lowest and most realistic lift is accounting and government transparency. If you can put government spending on chain, then that's a way we can, at least to the public, make it easier to see what is going on and hopefully cut out redundant, or wasteful, expenditures.
Everyone on the right certainly likes the idea of small government cutting out waste. The left also likes the idea of transparency, watchdog, if you want to call it that.
Another issue that would be something relatively bipartisan would be something with agtech. No politician is going to come out against corn subsidies because, in the current political system, we need Iowa right now.
Max: I think it will come down to a matter of different communications for different groups. There are industries out there—the military, the oil and gas industry—that do a great job in terms of bipartisanship and don’t have necessarily one unifying message. It has to be more granular than just one message for Republicans and one for Democrats. I hadn't thought about the government transparency and data one yet. I like that one, too. The other thing I was thinking about was digital education. This may be a way to unite parties. There are debates about the best tactics for youth education, but everyone agrees that youth education is important. Everyone wants their children to have a good education that prepares them for success in the world. Perhaps the disruption caused by blockchain and other emerging tech will spur a broad rethink of how we implement educational programs in the US. Could we get Democrats and Republicans on the same page about the basic need for digital literacy (and maybe even financial literacy)?
Local, small town battlegrounds will be the most important for crypto.
Max: The battleground will be how to get local governments onboard with the system. How do we get them to adopt, and I think it's also a broader question of how do we decentralize and distribute technology talent and cryptocurrency talent as well? It's great that there are hubs. I think there always will be. But what about the rest of the country? All the countless cities in between the coasts.
Eli: Let me add one thing onto that, Max. I think you're right. Local towns will be where the battle will be fought. A buddy of mine is working on this project now where he's going to talk to the small town mayors around New England, the Berkshires, and say, “Hey, you have these old dams, take these dams for defunct mills, and go mine Bitcoin. It will cost this much to set up but, since they’re hydro dams, going forward you will generate this much Bitcoin and have this much revenue.”
So, all of a sudden, you have this scenario where there are these small towns, no longer as prosperous from an economic perspective, with residents who might not even know or care what the blockchain is, but know and care that there are two new teachers at the high school. It will be those folks who, if the state or the federal government comes in and tries to limit the use of blockchain, will be the loudest. It comes back to the very start of the conversation about the grassroots. These may not even be policy battles, but they will be the battleground.
