Bitcoin is the world’s most secure and decentralized cryptocurrency – but its fair launch is perhaps one of the most misunderstood aspects of its history and one of the things that makes it so decentralized and unique.
Many altcoins will typically use a launching mechanism called “premining,” which involves creating an amount of blockchain-based tokens or coins before a cryptocurrency is made public. This is common practice in the world of centralized venture capital projects and initial coin offerings (ICOs).
Bitcoin had no premise
The launch of Bitcoin was not premature, and its pseudonymous creator, Satoshi Nakamoto, orchestrated a carefully planned exit that helped ensure that Bitcoin was seen as a commodity in the eyes of regulators. The U.S. Commodity Futures Trading Commission (CFTC) even published a brochure on Bitcoin, which states that it is a regulated commodity.
On October 31, 2008, Nakamoto published the Bitcoin white paper on the cypherpunk mailing list. Two months later, on January 3, 2009, Nakamoto mined the genesis block of the Bitcoin network and set in motion a force that would change the world forever. On January 8, 2009, Nakamoto sent an email to the cypherpunk mailing list, announcing the public release of Bitcoin.
To the untrained eye, the genesis block may seem like a premine. However, the 50 bitcoins mined from the Genesis block cannot be used. because of the way the genesis block is expressed in the code. There is no way for Nakamoto to profit from the Genesis block.
BitMEX Research has published an analysis on the start of the Bitcoin mining era and concludes that if “someone” mined 700,000 coins, and many assume it was Nakamoto, it is officially not proven that they are the ones who extracted these parts. The person who mined this large amount of bitcoin is commonly referred to as “Patoshi”. Patoshi didn’t even “quickly mine” bitcoin – Bitcoin network analysis shows Patoshi does slowed down their miners and that suggests his miner intentionally cut himself for five minutes after mining a block.
Additionally, bitcoin circulated freely without value for months after Bitcoin’s launch. This period of free circulation, before bitcoin had any real value, can no longer be replicated in today’s speculative environment. There will never be another fair launch like Bitcoin.
Finally, Nakamoto’s pseudonym and his eventual demise meant that there was no identifiable individual or company behind Bitcoin. There is no marketing team. There is no one to watch and no one to hang out in court. Nakamoto never put his own interests first, thus avoiding this conundrum altogether.
Bitcoin as a commodity is the key
Why is this important? In the context of a mature regulatory environment, it is ideal for bitcoin to be viewed by regulators as a commodity that can be owned as property.
A group setting aside part of the token supply for its own benefit – or to give itself undue influence over the network – creates an unregistered security and legally limits its token to trading on registered securities platforms and regulated. Cryptocurrencies that are considered unregistered securities risk being delisted from unregistered cryptocurrency exchanges.
As Michael Saylor, CEO of MicroStrategy, has repeatedly pointed out, it seems Nakamoto was well acquainted with securities law and monetary ethics when he created Bitcoin.
“Founder’s equity is a security and should be sold to the public in accordance with relevant securities laws with disclosures. Pre-mined tokens held by a founding team committed to the pursuit of profit would likely cause regulators to view all tokens as property… “
“You are authorized to compensate the founding team and the early investors, but you are not authorized to represent these tokens as property or money. You should treat them like securities subject to the same limitations and obligations as traditional equity. “
Gary Gensler, who chairs the U.S. Securities and Exchange Commission (SEC), and his predecessor, Jay Clayton, echoed this sentiment, as both said every ICO is security.
“I’m not going to go into just one token, but I think the securities laws are pretty clear – if you are fundraising and the investing public, have a reasonable expectation of profits based on the efforts of others, which s ‘enshrined in the Securities Act.
Saylor has also underlined that public enterprises cannot hold securities as cash reserve assets. Under the Investment Company Act of 1940, a business that invests more than 40% of its assets in securities (less cash and government securities) would be considered an investment company. Holding commodities on the balance sheet does not lead a company to become an investment company. So a public company like MicroStrategy can hold as much bitcoin as it wants, as its cash reserve asset.
Over the next few months, we will likely see increased regulation of cryptocurrencies. The fair launch of Bitcoin helped make it a regulated product and made it the obvious choice as the supreme form of ownership for individuals and institutions.
This is a guest post from Level39. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.