POS is a scheme for illegal unregistered securities

It is my position that all POS systems categorically are illegal unregistered securities, which will ultimately be found to fall under the jurisdiction of the American SEC and other securities regulators around the world.

In substantial essence, POS systems—all POS systems behave as enterprises in which shareholders, under the transparent ploy of so-called “stakeholders”, are accorded rights, interests, and votes substantively commensurate to capital contributions of paid-in equity. They have the key attributes of securities. On the flipside, they lack the key attributes of gold or Bitcoin.

Governments tend to move slowly. I believe that it is only a matter of time before they catch up and catch on to the whole POS fad. And like ICOs, and like some de facto securities issued under the rubric of “NFTs”, it does not matter what you call it. Semantic games present a palpable sham. In the real world, arbitrary self-interested opinions expressed on the Internet are meaningless.

Before a judge, the most powerful argument in the world is: “It looks like a duck, it walks like a duck, and it quacks like a duck.”

When the SEC Chair claims that Bitcoin is a “commodity” (thus effectually disclaiming SEC jurisdiction), but he leaves an ominous question mark hanging over all other cryptocurrencies, I would think that altcoins should be trying to make themselves more like Bitcoin, not less.

Bitcoin is very clearly not a security. There is no Bitcoin enterprise. BTC buyers and hodlers have zero equity paid-in to the nonexistent Bitcoin enterprise. They make no capital contribution, and have nothing to contribute capital to. They have no shares, no “stake”, no shareholder “stakeholder” or “coin holder” votes.

They have money: A virtual currency with an exchange rate that freely floats at market. After market demand first developed from zero, the valuation of BTC has ranged between 0.0002 unit pizza per BTC,[1] to an ATH thus far as of 2022 of >$67,000—a range of 26,800,000x (assuming an approximate cost in May 2010 of $25 for two deluxe pizzas to trade for 10k BTC; IIRC, the actual cost was around $25).

This, in turn, raises the question of whether or not BTC is a commodity. The same question as to gold evokes considerable controversy; however, it is widely claimed that gold is a commodity with special properties, distinguishable from other commodities. As a practical matter most relevant to Zcash’s U.S.-based entities, in the U.S., the CFTC sometimes regulates some types of gold trading (e.g., leveraged trading of precious metals); in some other jurisdictions, gold is free of any similar regulations.

Either way, BTC investors have only a virtual monetary thing—a thing which arguably may be a durable, fungible monetary commodity, only in the sense that gold is sometimes called a commodity—with a market value set by supply of and demand for that thing. Indeed, the BTC market may be analysed as the purest abstraction ever yet developed of supply-and-demand pricing.[2]

Note: I view BTC trading as forex—not as commodities trading; and I strongly advocate this “forex” view of cryptocurrency. From the perspective of buyers, holders, and sellers, trading BTC/USD is not substantively different than trading EUR/USD; and I myself have always treated ZEC/BTC, ZEC/USD, ZEC/EUR the same way. But that is not the topic here. I also view XAU trading as forex, so my model of this is fully consistent.


Zcash or Zstock?

I urge that Zcash should strive to make itself more like BTC. Focus on growing ZEC value as money: Private digital cash.

Are you a shareholder “stakeholder” of the cash in your wallet? Do you press a button in your wallet that pays you more cash just to lock your cash up so that you can’t use it? Do you use the cash in your wallet in votes or other “governance” mechanisms that look suspiciously an awful lot like corporate stockholder votes? Or do you use the cash in your wallet as a store of value and a medium of exchange?

Forget about plutocratic “coin votes”. In addition to all of the arguments that @tromer has repeatedly raised, they are de facto shareholder votes for governance of an unregistered security.

Yes, true, indeed. And furthermore, shareholder “coin holder” voting is a wide-open invitation to securities regulators.

Instead of growing the awful labyrinth of Zcash governance structures, decentralize—decentralize—decentralize! The issue here is that the more you build these governance structures, the more it looks like a sort of a joint stock enterprise with shareholders “stakeholders”.[3]

And don’t fall into the POS trap.


Did nully go legalist?

Anyone who knows me may raise here a legitimate question: I am technically an anarchist. Why am I making legalistic arguments? Although I am not actually against governmental systems in the abstract, I usually have the utmost contempt for legalistic arguments within the structures of systems that I deem irredeemably corrupt.

My reasons here are several:

  1. As a matter of Realpolitik, I choose my battles. I can see the writing on the wall here: I believe that securities regulation is a systemic risk for POS, a probable eventuality, and perhaps even nigh inevitable. And I assuredly will not fight for POS, when I am very strongly against POS for other reasons. What I will do instead is to try to protect things that I care about, such as Zcash.

    POS is now eating the world of so-called “crypto”. As a Bitcoiner, I will be laughing and munching popcorn if/when the SEC runs like a wrecking ball through POS-land. I anticipate that some rich VCs will probably flex their lawyers and their lobbying connections to try to protect their POS gravy-train for ripping off retail newbies, and there will be salty tears shed by the paid shills on “crypto Twitter”, and the SEC, et al. will just say, “LOL, no, you can’t issue de facto securities without our expressing our authoritative, enforceable opinions about it.” Quite a show!

    I won’t be laughing if Zcash runs itself down the path to perdition here.

  2. As a matter of Realpolitik, I don’t mind seeing corrupt VCs and other financial mass-manipulators play Pied Pipers leading their part of so-called “crypto” to eventual destruction.

    My harsh words against POS are directed at the system, and at a subset of its promoters. One of the worst aspects of POS is how it misleads many well-meaning people. Some of my friends have become deeply involved in POS, based on what started as a sincere belief in its promises—before eventual disillusionment at the rampant financial corruption of those who are not well-meaning. I think that a significant proportion of those who want POS are probably so sincere. I myself have bought into POS coins; I never believed in POS, but I previously saw it only as a minor foible.[4]

    Whereas in and of itself, worst of all for how it misleads many people with sincerely good intentions, POS is an intrinsically unethical meta-scam. It is plutocracy and financial mass-manipulation. It is an existential threat to the freedom for which I embrace the concept of cryptocurrency. This must stop.

    Although I generally dislike the SEC and other regulators, I even wouldn’t mind helping them here—for the same reason that I may sometimes call the cops, regardless of whether or not I am fond of the police in my neighbourhood. Something bad needs to be stopped. I may personally lack the power to stop it myself. Whether I like it or not, the metaphorical cops will be getting involved here anyway—sooner or later. So, better sooner than later!


The foregoing states a point that has long been obvious to me. I began to write this post about it for this forum a few weeks ago. A part of the problem with POS is that there are so many reasons to oppose it, it is difficult to reduce it all to a concise argument; at some point, I hope to build an entire website on this subject.

I decided that I had better finish this up, when I saw the below quote in a discussion that was not even about POS, but about peremptorily changing the economics of ZEC in an attempt to pump it; however much this applied in that context, it applies a thousandfold to POS:

Good point! And another problem is that “treating the coin like a share of common stock” is in itself a blatant violation of securities laws in numerous jurisdictions around the world—including the jurisdiction to which both ECC and the Zcash Foundation are subject.[5]


  1. I am ever-fascinated by the fact that in May of 2010, an ask order to sell BTC at a rate of of 0.0002 unit pizza was sitting on the book for four days before someone bothered to fill it. :laughing: ↩︎

  2. Perspicacious observers will note that at the time when BTC was where ZEC now is on its issuance curve, BTC was around 1%–2% of its current market value. ↩︎

  3. Moreover, it bears repeating everywhere: Never forget that centralization was what killed DigiCash—an otherwise excellent concept, and another @zooko project, with cryptographically enforced privacy comparable to Zcash. Bitcoin was designed to be robust against DigiCash’s failure; Zcash can attain the same decentralized systemic robustness as Bitcoin, although it certainly does not have it now. ↩︎

  4. At this point, any of my continuing involvement in POS is simply me trying to be a ruthless mercenary capitalist like everyone else. If everyone else is just greedily grubbing for profits, then until the music stops, why shouldn’t I take advantage of the game according to its established rules? ↩︎

  5. With due apologies for what may seem to be an excessively U.S.-centric post about cryptocurrency, the jurisdiction of Zcash’s centralized legal entities is of disproportionate importance here. ↩︎

An article that weighs in on this:

I am not saying the author is right on all counts; just bringing more info to this discussion…

Observation: it’s no secret that there appears to be a bit of a rush going on to establish jurisdiction between the SEC and CFTC; and Gensler of the SEC appears to have thrown a bone to the CFTC and said BTC is the “only” currency he can think of as a commodity.

Well…how many forks of bitcoin do we have? And none of those are commodities, but bitcoin is?? Either Mr.Gensler didn’t research the situation before weighing in on it; or he meant to say: “only bitcoin [and its various derivative forks] can be considered commodities.”

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Well, this POS advocate is making my argument for me—I will save this and quote it in the future, for it succinctly explains something that I have been trying to get through to people:

Compare what I said here, among other places:

To understand why Glidden, in defending POS, argues that POS is not profitable, see Part I of the same series (the link is broken on Medium):

I had tried to focus on the obvious substance, and to avoid Internet argumentation over technicalities. But now that you bring up an essay on the Howe test, why not.

Please ty reading it not with Hopium or a pro-POS bias, but rather, with a coldly objective view of how an American judge will probably see it. Better yet, try playing (from your perspective) Devil’s Advocate: Try to argue why a POS coin is an unregistered security. I myself do the same thing in the opposite direction; I believe that I have examined all sides of the argument.

Whatever POS system Zcash tries to design, do ECC and the Zcash Foundation really want to risk someday arguing in court, not on the Internet that their POS system doesn’t fit all four prongs of the Howe test? (The relevant case is Securities and Exchange Commission v. W. J. Howey Co., 328 U.S. 293 (1946), for those so inclined—and who have case law search access, which is dominated by the West/Lexis duopoly in America. Reading a case in isolation is how pro se parties and Internet pundits fall flat.)

I observe that the combination of developer-seigniorage and POS fits prong 4 even more clearly than some other POS systems.

The same factor, plus the community governance structures and centralized entities (ECC and ZF), clearly fit prong 2.

For prong 3, Glidden’s best argument, quoted at length above, is that POS is not profitable, or may not be profitable. I partly agree with his argument; in parts of it, he hit the nail on the head! But POS is sold to retail as profitable to them, while only the whales have sufficient capital to benefit. This is one of the reasons why I call POS a scam per se.

Glidden’s argumentation about prong 1 lacks merit so badly that I think any judge would give it short shrift. If you don’t believe me, try it in court—at your peril.


They are scams, so I don’t see how that is relevant. Now that you bring it up, I think that Mr. Gensler’s identification of Bitcoin without mentioning any of the scam-forks shows that he may be unusually clueful for a regulatory official. Bitcoin forks are trivial to make, but Bitcoin itself cannot be duplicated. As my personal text on the Bitcoin Forum has said since 2017, “There is only one Bitcoin.” The SEC implicitly agrees here.


P.S., the type of rapid-fire argumentation that resulted with you in another thread, q.v., tends to be unproductive and unreadable to others. Please try to avoid peppering the thread like that; I will try to avoid same.

Lawyer, here, and, while some POS tokens may be unregistered securities, your position that all POS systems are categorically securities is incorrect. The Howey case lays out a four-part test, each of which must be met, for the government to prove that an offering is an unregistered security.

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Just to clear the air where I am coming from on Stake [seeing as how this was hotly debated on another thread we were on…] I am not so much pro-Proof of Stake as anti-Proof of Work [NOW; not in the early years of 2010-2017 when we were struggling to establish an ecosystem of sustainable reciprocal use…]

If bitcoin gets marginalized for use by many retailers because it’s not factors more energy-efficient than it presently is, that’s not a concern for bitcoin. It’s digital gold, and hedge funds and third world countries will continue to use it as a financial instrument, much like they did with gold when South Africa had a boycott imposed on it over apartheid.

But what about if you’re not bitcoin; if your focus is to be a money for the Internet? Such marginalization by eco-boycotts marginalizes your use; the infant gets killed in the cradle.

So I see a contradiction here between striving for universal payment standards and meeting green ones if you are going to stick with PoW. If you come to advocate for another practical alternative to PoS that is equivalently energy efficient, I’m all ears. But if you are arguing for a payments coin to be used by much of the planet will have to remain PoW -I just can’t buy it. It’s not going to fly, especially now that we have raging fires going on all over the planet.

If ECC finds PoS to be the most practical alternative, I’ll back them up. But before that gets cut in, please do suggest an energy-efficient alternative if it’s practical, before Stake gets cut in…

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Thanks; I am aware of the Howey test, but I wished to avoid opening with technical argumentation that tends to skirt the obvious and unavoidable substance.

I think that all POS systems categorically meet prongs 1, 2, and 4. Prong 3 is arguable—but as stated in my prior post, arguing that POS does not meet prong 3 admits my argument that POS is a flat-out scam. Do you argue affirmatively that POS offers no reasonable expectation of profit?


@zlawyer, just in case I or others may lack West/Lexis access as I mentioned in my prior post, I request in the open-source spirit some relevant annotations, especially as to this passage at 328 U.S. 293, 300:

That sounds to me very much like an arrangement where ECC and ZF manage, control, and operate an enterprise in which POS stakers seek profit. (Whether or not they will get it is another question.) However, I will not make the n00b mistake of quoting one paragraph out of a 76-year-old case without a West/Lexis check on subsequent history.

Also, from the looks of it, OP assumes that all POS tokens as on-chain governance tokens. Which is a categorically false statement.

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So…litecoin is a scam. Never mind the fact that many turn to it when fees are high on btc transactions, there’s a lot of spot volatility in btc at a given moment, it has support at ATMs, or when the bitcoin blockchain is choked.

Truly decentralized”…“they are all scams”…

Are you completely blind to the extremism in your viewpoints?
Everything is black or white for you…

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In this case, the technical is the substance as the security designation is a purely legalistic determination.

If stakers are a dispersed community of unaffiliated users – the coin can’t be a security.

EDIT: @nullius, Here’s a link to Howey

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Litecoin is a codefork of Bitcoin, just like Zcash is a codefork of Bitcoin. Not a chainfork! From where do you get the notion that LTC is some sort of a forked coin?

That’s just a cheap ad hominem which evades the substance of my arguments. And yes, I am an “extremist”—and proud of it! If there is anyone who cannot be bullied with the rhetorical shut-down trick of accusations of “extremism”, it is an uncompromising activist who takes the label as a compliment.

The substance: When I point out that POS centralization empirically results in such scenarios as the Steem hostile takeover and the Terra centrally-commanded hardfork, whereas POW Bitcoin empirically resisted years of multiple hostile takeover attempts by powerful miners such as Bitmain, the only counterargument is to accuse me of “extremism”.

By the way, when I declare that the current crop of the most popular Lightning Network light wallets are “not truly decentralized”, will you accuse me of being “blind” to my own “extremism”? :thinking: (I think that LN has some excellent use cases. But it has problems that some Bitcoiners refuse to acknowledge; and the current crop of popular light wallets are pretty grossly not-truly-decentralized, in my opinion. Run your own LN node if you want decentralization there.)

And yes: As a veteran of the Fork Wars, I categorically declare that all actual, attempted, or threatened fake-Bitcoin chainfork tokens are scams. XT, BU, BCH, BSV, S2X, “Bitcoin Diamond”, “Bitcoin Super”, “Bitcoin Gold”, or similarly as I quipped in 2017, “Bitcoin Ultimate With Ponies”. Anyone can make a chainfork, practically for free. There is only one Bitcoin. Pretenders are just trying to rip you off.


The highlighted portions are clueful.

Someone alleged to be me recently got into an argument with someone who annoyingly called gold a “shitcoin”. Mention of the little-known history of political undercurrents in gold’s extended bear market was unproductive there.

The remainder of this post is addressed below.


POS is intrinsically a plutocratic on-chain governance system, in which financial wealth directly translates to a governance position of validating the ledger.

(Aside—note that as I have repeatedly explained, in POW, miners have only one well-defined security function. In POW, miners are not the network’s validators. At least half of the arguments over POS result from a severe technical misunderstanding of how POW works.)

Moreover, I reasonably dismiss any suggestion that ZEC would do no shareholder “stakeholder” governance votes under POS. When Zcash is POW, there are already numerous proposals to have shareholder votes coin votes for governance. Needless to say, I think that is ill-advised for many reasons—only one of which is unnecessary and significant legal risk.


In actual courtrooms, especially appellate courts, judges analyze the substance of the matter in accord with binding precedents, persuasive precedents, statutes, etc., etc. That is, after all, how the law slowly adapts to new situations and novel scenarios.

Hypertechnical arguments that mechanistically apply tiny snippets of the law are often propounded by uneducated pro se litigants, who believe they have ingeniously discovered a magic trick for outsmarting every lawyer on Earth. Judges hate that. They are also displeased when lawyers do it; it is when they start to bandy about such phrases as “palpable sham”.

Some ICOs and, more recently, “NFT” projects have gotten into real-world, non-hypothetical trouble this way. Some of them used arguments similar to yours:

On an Internet forum, you sound sure. If necessary, would you be ready to litigate that position against the SEC? Potentially for years? With the viability, and even existence of Zcash on the line—over an issue that could be easily avoided by staying POW?

Thanks; I already read it. Indeed, I quoted from it in one of my posts supraq.v.

I was asking if you would be so kind as to provide some annotations for subsequent history, which are not free. The case from United States Reports is in the public domain (Wheaton v. Peters, 33 U.S. (8 Pet.) 591 (1834)). In isolation, the text of the case is not very useful.


I sense a sort of a bizarre disconnect. I mean that generally—not specifically as to this argument here. In Bitcoinland, I see that the ecosystem is thriving. Then, I go to altcoinland and see people talk as if Bitcoin is dead for the thousandth time. Not to strawman you: You recognized that, in substantial essence, Bitcoin is an asset that big money will keep (per the above quote here elided to avoid redundancy). However, I dispute that it is “marginalized”.

Some people who excel at making noise, have made lots of noise on social media.

Some organizations with an axe to grind have loudly proclaimed that they will no longer accept Bitcoin; and the mainstream media has run some hit-pieces. How is that different in substance than when some anti-privacy exchanges delisted Zcash, and the mainstream media ran scare-stories about that?

The reality is that the Bitcoin ecosystem is fine. BTC is still by far the most widely-accepted cryptocurrency. From my view, the problem holding back point-of-sale adoption much worse than “eco-boycotts” is that, although it is an excellent technology for some uses, and it has more usage than you may realize, Lightning Network is overpromising and underdelivering in practice. (See above.)

Zcash lacks the scalability to compete there. No, bigger blocks are not the answer—not by orders of magnitude of TPS throughput. However, recursive zero-knowledge proofs could maybe let Zcash do on L1 what Bitcoin (and Ethereum) are trying to do on L2. If done right, it could also facilitate truly decentralized light-wallet implementations.

Back at you: If you come to advocate for a practical alternative to POW that has equivalent security, decentralization, and honest economics, then I’m all ears.

It’s funny that you characterized yourself as not pro-POS, but anti-POW. I am the reverse here. I have no past or present financial interest in POW. I have never mined (though I would like to in the future—on principle here, to support Bitcoin against this type of attack). I don’t think that POW is some sort of a theoretical ideal. I am against POS: I was weakly against it a few years ago, then became strongly against it after I experienced it and re-examined the matter.

Years ago, I tried to think of POW alternatives myself. Instead of convincing myself that I had discovered something, I eventually admitted that I had no ideas that could compete with POW.

I have a sufficient technical understanding to know how POW works—what it really does. POS does not replace it.

POW provides objective security. Following the highest proof-of-work chain is simply a matter of counting zero-bits in blockhashes.

POW provides a single well-defined security function: Setting the order of transactions. POW miners are not the network’s validators. IMO, it is a non-negotiable requirement that validation must not be entrusted to the rich.

POW has no financial manipulation. So clean! So honest! No fooling people with a mirage of “passive income” into locking up their money, in an ultimately futile attempt to pump the coin’s price. No letting whales who can afford to lock up huge amounts grow their dominance of the supply, while everyone else’s proportionately shrinks because the little people cannot afford to lock up money like that.

POW is fair. Coin issuance via POW mining forces the initial recipients of coins to divest, so that they can pay their bills. “Miner dumping” is a feature, not a bug: Electric bills prevent miners from hoarding their new coins, as POS whales can easily do!

Could you please suggest a POW alternative that meets these design criteria, and many others? POS obviously does not.

Lol there is little point to discuss why POW is better. I still wonder when BITMAIN will launch their POS is bad POW is good campaign or if they have already done so. They got billions at stake.

Anyways I invested into ZEC heavily because it is going POS. It was the final decider.

I live in an apartment with electricity prices at close to 1 USD. I can not run ASIC miner because it’s too loud. I can not waste/burn electricity because it’s too expensive.

I will not invest into a dirty POW system. It’s a huge waste. It goes against my values.

In short. With POS everyone can participate. With POW you need to buy expensive hardware and can only be profitable if you live in a country with cheap electricity.

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That’s a nonsensical conspiracy theory—and pretty much backwards, when VC-backed projects are actively shilling for POS everywhere for a reason.

For my part, I have a long record of extreme hostility to Bitmain’s corruption, and hostility to Jihan Wu personally (reference for those who don’t know the background to that one). I condemned Bitmain earlier in this thread—on this very page, which you evidently did not read:

I am likewise hostile to the corrupt financial manipulators who profit the most from POS.


This is how you participate in validating a POW blockchain:

Zcash needs similar guidance. I recently discussed this in a post here; and both here and on Github, I have started actively to protect poor people’s access and ability to run nodes. (I need that.)


That’s just an argument seeking free money. There is no free lunch. POW miners run on razor-thin profit margins in a hypercompetitive business. POS is by the whales, for the whales, of the whales—but it promises you a mirage of somehow getting something for nothing.

Great: it’s a fork. So do you now concede that Gensler was wrong to say bitcoin was the ONLY coin that merited treatment as a commodity??

You recognized that, in substantial essence, Bitcoin is an asset that big money will keep (per the above quote here elided to avoid redundancy). However, I dispute that it is “marginalized”.

Yes; no disagreement there. Big money will keep bitcoin; but we disagree about the tense: I said bitcoin WILL BECOME marginalized; not presently IS marginalized. Who will continue to use it? <rush>Big Money.</rush> But once it starts getting blacklisted for use more and more by prominent retailers, it will get marginalized by regular Joe’s wanting to purchase goods and services -conventional payments- in a much more energy-efficient way.

Bitcoin has the digital gold/Big Money use case covered; zcash has no burning use case to replace it. The tremendous need now is for coins that accomplish day-to-day payments by non-Big Money users. For that use case to fly, you have to have a more energy-efficient consensus algo. It doesn’t have to be Stake; but please: propose a practical alternative before Stake gets cut in. PoW is not going to coexist with a payment coin used by many people to do day-to-day purchases (as opposed to a much smaller community of hedge fund and third world users who will not feel as duty-bound to reduce energy consumption…)

Back at you: If you come to advocate for a practical alternative to POW that has equivalent security, decentralization, and honest economics, then I’m all ears.

I already said: absent a better proposal, I’ll take Stake. Change my mind if you have a practical consensus algo to suggest that’s about as energy-efficient.

You list a bunch of fine reasons why PoW was enlisted; but they all sidestep the fact that it will become more and more marginalized for widespread adoption for payments. My read is you think the technology tail should wag the user that’s the dog. People need a relatively energy-efficient coin for payments -something the equivalent of digital cash in nominal amounts, as opposed to digital gold in bazinga amounts that gets the volatility it does due to excessive hodl speculation (much like gold gets from time to time…)

Gensler, the SEC broadly, do exactly what they’re paid to do. Carry water for the old-guard.

Until a tangible legislative or regulatory action is taken, all theories about how everything will shake out in the future is speculation.

For a good snip about commodity as a concept:

Not an expert by any means, but something tells me both POW and POS together, is some soft of linear combination, may be the most accurate approximation of what is needed in the future. Appreciate everyone’s thoughts.

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I’m always happy to help with newbie questions, but please don’t present them in such an argumentative way. Of course, Mr. Gensler is entirely correct on this point.

A codefork is what developers outside the cryptocurrency space simply call a “fork”. It means copying source code. The resulting product can be quite different, and it can have radically different policies. For instance, Microsoft has copied some BSD source code for Microsoft Windows.

A codefork of Bitcoin can be used for many different purposes. I could easily create a codefork of Bitcoin, and use it publicly to offer shares of common stock. Although I am not an SEC lawyer, I am guessing that Mr. Gensler would probably classify that as a “security”.

Namecoin is a codefork of Bitcoin, used to offer decentralized domain names in a design partly inspired by efforts to square Zooko’s triangle. (@zooko has been doing this stuff for awhile.) A dot-bit domain on Namecoin is an asset that I believe is clearly neither a commodity nor a security. The nature of a dot-bit domain is totally irrelevant to the legal status of the BTC currency—and vice versa.

Litecoin copied Bitcoin’s source code, made some significant changes, and thereupon offered the LTC token. Zcash copied the source code of Bitcoin Core v0.11.2, added a shielded value pool, made some other changes, and thereupon offered the ZEC token; thereafter, Zcash has continued to copy (“merge”) selected (“cherry-picked”) source code improvements from the upstream Bitcoin Core software project.

Besides being a different token, the ZEC token has some drastic differences from BTC in its monetary policy and its economics. Most obviously, it has a “Founder’s Fee” allocating what is, in substantial effect, seigniorage from the issuance of new supply. I never had a problem with that—indeed, I have sometimes actively defended it to Monero users; but it is a significant difference in monetary policy. And it is quite notable here: It is a fact that speaks directly to prongs 2 and 4 of the Howey test.

As it was originally designed, ZEC also has some similarities to BTC that were attractive to me and to many others. If ZEC keeps the economics and the monetary policy, especially the issuance schedule and the POW mining issuance policy, to which it committed itself in its beginning, then I would argue pretty strongly that it is not a security. Notwithstanding, ZEC is a different asset which cannot automatically claim BTC’s characteristics and BTC’s legal status.

In contradistinction to a codefork, a chainforked coin creates a new token by copying and diverging the existing ledger of an existing token. (It is also possible to do a chainfork without creating any new assets; for instance, Zcash Network Upgrades are technically chainforks.) A chainfork is not necessarily a scam; the ability to create a chainfork is an important protection against corruption and central authority in a blockchain ecosystem. However, I do categorically declare that all currently-existing chainforks of Bitcoin are scams.

That is relevant here, because the most infamous chainfork scam was a hostile takeover attempt by powerful miners, worst of all Jihan Wu/Bitmain, deceptively marketed as so-called “Bitcoin Cash” (BCH). By available evidence, among other wrongful motives, Bitmain was trying to protect its profitable exploitation of a Bitcoin security flaw, covert ASICBOOST, which fixed by Segwit. Although I am aware that there are some BCH bagholders on this forum, I cannot reasonably avoid discussing the matter when it is directly relevant to the debate about POW versus POS.

The loudest BCH promoters explicitly claimed that miners controlled the network, and that non-mining nodes were powerless. Their theories were empirically disproved, and my theories were empirically proved, when wealthy, plutocratic miners attempted “flippening” Bitcoin in November 2017. They tried to kill the BTC mainnet, and to force everyone to switch to BCH as the “real Bitcoin”.

I was there. I saw what happened. By suddenly yanking their terrifically high hashrate away from Bitcoin, the hostile miners moderately degraded Bitcoin’s performance for a short time. Then, everything went back to normal.

Bitcoin users wanted to stay with Bitcoin, i.e., BTC. Bitcoin users got what they wanted. Jihan was defeated, and he lost a lot of money from his attempt to usurp Bitcoin! Bitmain bet big on their BCH strategy—whoops. :rofl:

In May of 2022, I was also there when a diametrically opposite event occurred: With the backing of a small, colluding group of high-capital parties, Do Kwon centrally commanded a contentious chainfork of Terra against massive community protests—to the detriment of all UST holders and a disfavoured subset of LUNA holders. In POS, big stake does rule the network. POS is patent plutocracy.


This post is getting too long; and contrary to popular rumours, I may not actually be a robot. (Maybe.) I need a break from writing. Insofar as may be warranted, I may later address other things said here.

The upshot, the key point here, is that POS is not an alternative to POW. It does not replace POW. It is not equivalent to POW in any significant way. It does not do what POW does—not in means, and not in ends. It is fundamentally different. For a coin to change from POW to POS is essentially a bait-and-switch that drops economic promises and network consensus characteristics for which people bought into a POW ecosystem.

That’s shifting the burden. If you want a switch away from POW, it’s up to you to suggest something which adequately replaces POW.

Reductio ad absurdum, would you accept a proposal that everyone should just use a bank with a central database? An old-fashioned RDBMS is much more efficient than any distributed consensus that even attempts Byzantine fault-tolerance; it is certainly more efficient than POS. More economically efficient (and by the way, POW is more economically efficient than POS). More energy-efficient, too. If you optimize for efficiency at the expense of all else, then just use a bank!

Absent a better proposal, I’ll take Proof-of-Work.

That’s a lot of typing to try and evade the point that bitcoin is NOT the ONLY commodity coin; I go back to my point: either Mr.Gensler meant to imply that other forks are included, or he was wrong: there ARE other coins besides bitcoin that can be classified as commodities, using his functional definition…

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I never claimed that Bitcoin is the only “commodity” coin—and neither did Gensler. The Axios article linked in OP is explicit about this. Please don’t strawman me.

Forks are a red herring here, which you introduced. A Bitcoin-like coin with (IMO) legally similar characteristics could be created from scratch—neither a codefork nor a chainfork. Whereas forking of any kind does not automatically confer the characteristics of BTC—not in and of itself. The only relevance of forks to this argument—a very significant relevance is the contrast between Bitcoin and Terra stated in my prior post.

Why do you keep talking about forks? I explained the concept at length, and I explained several different senses of the word “fork”, because that is important information that you are missing here.

That is a very good point! You can’t put it past them to try and bang square pegs into round holes. But all we can do is lay out best legal arguments to counter rules that attempt to make it up as they go along. It’s a fight; we have to fight it…

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