Report Spokesperson BitShares Blockchain Foundation on Bittrex Inc. and Other Regulatory Issues.

Report Spokesperson BitShares Blockchain Foundation on Bittrex Inc. and Other Regulatory Issues

Date, December 14th 2017
By Annemieke Dirkes

General remarks

Assuming that we all agree that listing BTS on as many exchanges as possible results in more liquidity and acceptance of BTS, we made a strong effort to address the principal case with Bittrex Inc. to the advantage of our community. Over the last weeks we see, on the other hand, an increased number of exchanges that list BTS, which is a good development. Currently we are in conversation with interested exchanges on more listings.

As everyone is aware pressure from regulators and authorities has increased over 2017 on the Crypto currency market as a whole, especially in the United States. On the one hand, due to its increased size, the spectacular news one can write about it, but mostly from the core task of these institutions; mayor goal of regulators is to protect the public, or better, anyone involved with crypto currencies from misinformation and misguiding. This core task of protecting the public in the financial markets has not worked out very well in 2008 as we all know, in itself being a key factor in the growth of crypto currencies, so it is no wonder there is maximum effort to get at least this newbie technology under control.

It is a reality that all existing regulations that the world has built in the financial sector over the last 500 years will not go away and neither will they ignore the Crypto world. Still, a very tiny part (however we wish for it to be different) of the total world volume in currencies, it has already grown into a size that reached a point where authorities have no option but to pass judgement on every coin, exchange and market out there. So, they started doing just that.

Being a legitimate company Bittrex Inc. is starting to do just that; make sure that all their markets are meeting regulatory rules and laws. Nothing personal, they just did a very thorough job on it with expert leading U.S. council in this field so they are protected against the authorities finding anything inappropriate. We rather should say the opposite, thanks. Because of this process we are in the unique position that we know exactly where we stand as a community and what we need to do in order to fulfil the tremendous potential of this highly scalable, technologically superior blockchain.

BitShares Blockchain

It is one of the oldest blockchains, operational since 2014. First confusion from several sides is on the name. Back then, way before public attention it sounded pretty cool I imagine. But the term “shares“ in English implicates a financial product, which created the first step in putting question marks to BTS, the core token of the BitShares blockchain. If you were to get money just for owning BTS, it would have been a financial product that was not complying with SEC rulings and we would be in big trouble. So: unlucky choice looking back.

Secondly, where other blockchains like Ethereum formed a company to face all kinds of issues, BitShares Blockchain stayed for the “old economy”, for lack of a better word; without a face, an address or any kind of body. Automatically that resulted in, however well meant, disorganization in public information, no corrections on incorrect reports and other published material to whom we refer to, as less informed sources. Creating an unwanted, unintentional blurry image to what the BitShares Blockchain and BTS are and how they work. Again, the community might get it, but we reached a stage where everyone else needed to understand. And they couldn’t make sense out of all that was around. As an example: there never was an ICO, but where was that noted?

BitShares Blockchain Foundation (BBF)

Already in early 2016 a group of BitShares Blockchain fans felt the need coming for more information, education, self-regulation and anticipated on the fast approaching game-changer: regulators worldwide. They started to form several initiatives and institutions to be ahead of this inevitable development, all based and registered in the Netherlands. That is why the BBF was just in the right place when Bittrex Inc. started its investigation to comply with its own licensing. In itself it is unique novelty that a decentralized blockchain uses its voting to shape a spokesperson. Again the BitShares community sets an example within its own boundaries. It shows adaptational skills and foresight.

The process

In order to prevent any kind of speculation, leaking or misuse of information severe NDAs were put in place and ongoing reporting was scarce. Just the author and Fabian Schuh were involved in this process of paperwork with analysis going back and forth. Bittrex Inc. excluded all others, not by intent, but to secure a proper job and protect itself. The community is thanked for its patience and its cooperation in keeping this a tidy process when asked. We might have stepped on some toes, but it was worth it and it is much appreciated by all involved.

Our main task was exactly explaining what the BitShares Blockchain is, what BTS is, and how it all works. Some definitions have been adjusted already in this process like the introduction of the word “Working Budget” in order to be clear to the outside world. Later onwards we share the description of the BitShares Blockchain as we have found it to be exact and correct, complying with regulatory demand. This will be also our line of approach as to try later on to get an SEC ruling in the future to ban all doubt for once and for all.

Using “old economy” wording is tempting and understandable but it very rarely applies. It should be clear that every word in there is weighted to its exact meaning and specifics. We kindly ask all to keep that in mind when chatting on the subject.

The future

The BitShares Blockchain Foundation will organize and maintain a website to be the one and only source of information for a potential owner of BTS and inform and educate all authorities and bodies involved. Regulators are all about protecting the consumer by making sure laws are observed and misunderstandings avoided at all times. Simple example: no NYSE listed company has two or more “official” websites. Whether we like it or not, that is the way it has to be. It means we have to clean up documentation, organize it, shape up in instructing the public and having an address to reach the decentralized BitShares Blockchain. BBF will need to put out a disclaimer on all the rest of information in order to protect the community and the public and prevent misunderstandings. That does not mean by any way that the core in which way the BitShares Blockchain operates with its voting mechanism has to change one bit. It is only what we do to the outside world that needs to get organized and be precise in its wording. So in that respect, indoors, nothing changes. BBF has recently brought forward a proposal to establish more contact by instituting an Advisory Board from within, always in compliance with the applicable laws in the Netherlands, to which the entity is registered.

The action

The BitShares Blockchain Foundation will shape the information based on the description below. This is already set in motion. A detailed plan is being worked out. Once we cleaned it up with Bittrex Inc., we will be in the position to lift the temporarily freeze on the trade in BTS. The current situation enables the community right now to comply with existing U.S. laws. Bittrex Inc. had to make sure they were not involved with a market that was not compliant. Their strict and thorough study as matter of fact gives us the opportunity to make the BitShares Blockchain stronger towards the future.

After we make a plan and BBF executes it , we need a review and declaration from our own specialized legal counsel in the U.S. to confirm that we are compliant. We all know we are, we just need to improve drastically on the outward information.

The business on the BitShares Blockchain

New development is at full speed, both in the technical corner (as we witness every month) but also on the business side. Let us not forget it outperforms anything out there. That is slowly getting more and more attention. Many small transactions creating respectable volume. New business on a blockchain that already has proven its value for 4 years without any problems is attractive and secure. Our marketing gets more and more done. The BBF will try and do as much as possible to further that. We already have a testnet for students, universities and schools to use for free, there is the Blockchain Academy, the BitShares Foundation for multisignature security and safekeeping your keys. There are many developments that we will put up for voting in the near future to do the potential of BTS justice. As usual it is then power to the voter. There is however one thing that can never be voted on anymore: we can’t go back in time. The very bright future is ours, we just need to move on it.

We thank you all for being so patiently awaiting results.
For any comments you can reach us at: spokesperson @bitshares.foundation

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Outline of BitShares [to be renamed?] Blockchain

I. BitShares is a Blockchain managed by BTS token holders. BTS token holders collectively vote on projects to modify or enhance the Blockchain’s features, and may hire contractors to implement projects. Although there is a BitShares Blockchain Foundation and a committee controlling the Blockchain’s parameters, there is no centralized management of the Blockchain or its features. BitShares Blockchain has never issued an ICO campaign for its BTS tokens, nor has anyone else.

II. Operation of the Blockchain
A. Three billion, six hundred million BitShares were generated, which cannot be increased. Other than BitShares in the Working Budget described below, all the BitShares are currently in circulation.
B. Only a “registrar” may create a new account on the Blockchain. A “registrar” is someone with a current account on Blockchain who is a LifeTime member as described below.

1. The registrar remains assigned to the account unless and until the accountholder pays a LifeTime member fee, at which point the accountholder becomes the registrar for his or her own account.
2. If an accountholder is referred to the Blockchain by an accountholder who is not a registrar, the registrar can identify them as a “referrer” for the account. This designation also terminates upon payment of the LifeTime member fee.
   C. BTS tokens are transferred among accounts on a distributed ledger via Blockchain operations. It operates through a delegated proof of stake consensus mechanism. The steps of the transfer process are:
3. A transfer operation is signed by a user and broadcast to the nodes participating in the BitShares P2P network.
4. Eventually, the transaction will be received by a block producer (witness) who has the approval of the BTS token holders to bundle pending transactions into blocks and advance the Blockchain by that one block.
5. All block producers and all nodes verify the authenticity and validity of that transfer and only then accept the transaction for integration into a block. Blocks that contain invalid transactions are rejected by the rest of the P2P network.
6. Who is allowed to produce blocks and how many of them are up, is up for vote by BTS token holders at any time.
7. All data of the Blockchain are kept in a consistent and trustworthy state while allowing transactions to be executed after 1.5 seconds (on average).
   D. BTS token holders may also vote (weighted by their amount of BitShares staked) for the following aspects of the Blockchain:
8. Witnesses/Block Producers (see B above).
9. Worker Proposals (also called “Workers” in daily life)/Budget Items (e.g. for hiring and paying external developers).
10. Committee Members (an advisory board with individuals that control Blockchain parameters). The committee has no control over BTS tokens. The committee serves as an advisory board regarding the following matters:
    a. Blockchain Parameters (block size, block interval, and many other technical aspects), and
    b. Fee Schedule (The fee the network is asking for individual operations/smart contracts).
11. The process for electing Committee Members and conducting Committee meetings/action is as follows: The Committee constitutes a set of BTS holder-approved individuals or businesses. These can meet at any time and any place and currently talk to each other over Chat. The BitShares Blockchain Foundation offers a transparent and public mailing list for committee members to discuss. On the Blockchain, anyone can create a so called proposal that changes one or multiple parameters (or fees) of the blockchain. This proposal is pending and up for vote only by the members of the committee. The proposal will only execute (read: new parameters are installed) after 50%+1 member of the committee approved the change and only after the expiration time. Committee members can add and withdraw their approval from the proposal during almost until the expiration date. The expiration of a proposal can be defined arbitrarily but a review period at the end of the proposal lifetime is available at which BTS holders can fire (misbehaving) committee members. During this period, committee members cannot change their vote on the proposal any longer.
    E. Technical features of the BitShares Blockchain.
12. Industrial Performance and Scalability. The BitShares Blockchain is one of the oldest and among the only Blockchains that has proven to scale well beyond 3500 transactions per second - with the limits not yet tested. Current tests are limited by feeding the test at the front end and carry 100.000 transactions per second. It is operational since 2014.
13. Dynamic Account Permissions. Instead of using Addresses (like in Bitcoin and Ethereum), the BitShares Blockchain uses Named Accounts (like an email address) where people can send their tokens to. Access to the account can be set up in an advanced way with multi-signature schemes.

III. Features Available on the BitShares Blockchain that has BTS as their governance/core unit

1. Collateralized Loans. This feature allows to setup different lending systems. These systems differ in the type of collateral that can be provided and parameters that ensure loans are always sufficiently (>100%) collateralized. This is implemented in a set of smart contracts that are commonly referred to as “smartcoins” within the BitShares Blockchain community and outside of that also as market pegged assets, they are less volatile in their valuations compared to for instance Bitcoin or ETH. The Blockchain does not charge for this service outside the normal transaction fees. This has no connection to the BTS token itself.
2. Decentralized Asset Exchange. The BitShares Blockchain offers a way to place buy and sell orders for any assets maintained on the Blockchain (see 4 below) at an arbitrary price between two arbitrary accountholders on the BitShares Blockchain. The orders are then matched (according to their prices) by a smart contract for everyone to verify and validate publicly. If there is consensus the transaction is final.
3. Recurring & Scheduled Payments. This feature allows a user to give another user access over parts of his funds and is particularly useful for reoccurring payments where payment can be claimed according to the limits set by the owner of the account. Aka, automatic payments that can be stopped at any time. Convenience feature.
4. User-Issued Assets on the BitShares Blockchain. The platform has a feature to create user issued tokens. This feature compares to ERC-20 tokens on Ethereum and allows every user to setup their own token and use the BitShares Blockchain platform for account-keeping. These tokens are not BTS tokens and BTS tokens cannot be created in this way. In the essence, ERC-20 is sort of a follow-up of the much earlier BitShares Blockchain feature.

IV. Use of Transaction Fees; Operation of the “Working Budget”
A. All transactions on the BitShares Blockchain correspond to “smart contracts” that require an individual transaction fee. Twenty percent of the transaction fee goes into the Working Budget; the other 80% is transferred to the registrar and any referrer. The division of fees between the Working Budget and the registrar, and between the registrar and any referrers, is performed automatically and autonomously.
B. If a referrer is identified on an account, 80% of the transaction fees paid by that account are shared in whatever ratio to which the registrar and referrer have agreed.
C. The committee sets the amount of the LifeTime member fee, which is currently 1,500 BTS If the accountholder pays the LifeTime member fee, 20% of the fee goes to the Working Budget and 80% goes to the registrar/referrer. Thereafter, the accountholder is the registrar for the account and effectively receives an automated cashback of 80% of his or her transaction fees. Any referrer no longer shares in the transaction fees unless the accountholder agrees to do so.
D. This referral arrangement discourages pyramiding, insofar as any accountholder can, upon payment of a reasonable fee, become a registrar with the power to create new accounts without sharing any fees received from such accounts. Furthermore, this setup only knows two levels (the registrar/referrer and the new account). Accounts that have not upgraded to LifeTime Members cannot create accounts underneith themselves.
E. Disbursements from the Working Budget must be authorized by a vote of the BTS token holders. They authorize budget from the Working Budget by voting. The amount that is currently taken out of the Working Budget highly fluctuates over time but is capped at 21.000 BTS per HOUR (due to the parameters set by the committee members). For example, token holders may vote to spend on new Worker Proposals, e.g. developers that are hired through a Worker Proposal, after approval through the BTS token holders. A Worker Proposal is often referred to in daily use as “Worker.”
F. Anyone may submit proposals for consideration by the BitShares token holders. These proposals are not vetted or curated by anyone. A proposal may include a request to disburse a fixed amount of BTS to cover expenses and compensate those working on the proposal. Proposals may not include any profit-sharing arrangement.

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BitShares Blockchain Foundation
[email protected]

BitShares Blockchain Foundation
Zutphenseweg 6
7418 AJ Deventer
The Netherlands
Registration: KvK-66190169
http://bitshares.foundation

Official Public Face and sole Spokesperson of the BitShares Blockchain {more}