The regulatory environment just keeps getting tighter. It is rapidly becoming evident where things are going.
In the United States, the Securities and Exchange Commission (SEC) chain, Gary Gensler, made the point clear that he feels that all financial matters come under the U.S. Securities laws, centralized or not.
"Make no mistake: It doesn't matter whether it's a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities," Gensler told the American Bar Association.
"These platforms - whether in the decentralized or centralized finance space - are implicated by the securities laws and must work within our securities regime."
Whether anyone agree with this sentiment or not is not relevant. The fact is the SEC, along with other government organizations, feel it is their right to regulate what is taking place.
Open Source Software
Uniswap is open source software that allows for currency trading without third party approval. Anyone can use the platform to trade, with no KYC required.
This caused the SEC to open up an investigation into the company behind the development of the application, Uniswap Labs. Of course, by this time, the application was forked a number of times, creating alternatives. In spite of that, Uniswap still has the most transactions.
Many feel that open source software is safe from governments and beyond regulation. From this standpoint, that is most likely correct.
However, the centralized entity behind the software is not outside the reach of the United States Government. Here is the point of vulnerability.
It also shows the crux of the matter.
If there is a door for them to knock on, they will do it. The point of vulnerability is having an address. Here is where the industry is overwhelmingly at risk.
We often discuss the fact that a lot of development in the industry, especially layer 2 solutions, is being funded by the Venture Capitalists. This is a negative because it ultimately pits the users against the VCs in terms of monetizing the application.
There is another issue with this. All of that creates vulnerability. Anything that is created in this manner can be accessible by government. They know who is doing the funding, which is centralized. There is also a clear path as to where the money is going and to whom.
Simply put, if this is the mechanism for funding this industry, decentralized applications will end up being regulated, which ultimately means in control of Wall Street.
SpkNetwork Fixes This
Many are excited for the launch of the SpkNetwork. This is one of those innovations that is designed to get around this entire problem. While we often discuss the censorship resistant characteristics of the protocol, there is something much bigger.
This will be, of course, open source. So, like Uniswap, the software is not at risk. Anyone will be able to build upon the network using the protocol, essentially duplicating the original like Matryoshka Dolls.
What is different about the SpkNetwork is that it is being set up without the same vulnerabilities that we see. This is being built with resilience from the start.
One of the key aspects to all of this is token distribution. Those who have significant stake in a platform will be seen as being able to exert influence over governance. The regulators do not care who they go after, as long as it is someone.
The SpkNetwork is going to do a claim drop to Hive token holders. This will spread the distribution out based upon the make up of Hive. That is one of the best distributed tokens, with no founder's stake or pre-mine. That is a rarity among blockchains.
We also see the idea of funding. As mentioned, the VCs are a point of vulnerability. The SpkNetwork is going to take a different approach. While it was private capital so far, there is talk that a proposal will be submitted to the Hive DHF for funding. If this takes place, the development of the SpkNetwork will be done by a DAO.
Thus, there is no company behind the project, nobody to serve papers to. Since the ownership and funding is truly decentralized, it is out of the reach of regulators.
SpkNetwork As A DEX
Many are aware of the concept of decentralized video storage. This appears to be the first area of focus when this was being conceptualized. However, it extends far beyond just that.
There are other aspects to the project that will make it "full-service". One of the big ones, taken from the light paper is the platform will be incorporating a DEX. This is vital considering the regulatory environment that is cropping up.
This is from the light paper:
Peerplays technology is built using a Graphene based protocol. The intention is to adapt the existing technology, already operating on Peerplays, to operate on the SPK Network. This makes integration and technology-transfer with Hive, also a Graphene-based protocol, straightforward.
The Peerplays team already has the following operating on its own chain, which will be adapted for the SPK Network & the Hive Blockchain:
It then goes on to list a variety of features that will be incorporated.
One of them is:
Decentralised Exchange (DEX),
The platform will allow any community to create its own token. This will populate the DEX with many tokens that can be traded. We are also going to see cross-chain capabilities meaning there will be a time when versions of Bitcoin, Ethereum and whatever other tokens people want will also exist on there.
What we see being developed is something that is fully decentralized that removes as many points of vulnerability as possible. This means that a situation like Uniswap will not happen. If the SEC wants to investigate, who are they going to look at?
The next stage of industry progression is going to require projects to start with the mindset of decentralization and distribution from the start. This is the only way to prevent the regulators from taking completely over and stamping out any efforts to create a system based upon freedom.
Fortunately, the SpkNetwork is being built in this manner. The bind Uniswap is finding itself in only reaffirms this.
It is part of the process of the industry moving to the next phase of its evolution.
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