Now, a draft of two Litecoin Improvement Proposals to implement MimbleWimble through Extension Blocks has been proposed on GitHub.
The LIP introduces opt-in MimbleWimble (MW) as a new transaction format through extension blocks. These blocks run alongside the main chain blocks at the same interval of 2.5 minutes. Inside the EB is where MW transactions occur.
Initially, it would be opt-in, meaning it’s up to users to use MW by using coins in and out of the EB through an integrating transaction.
MW with EB, the proposal states can be soft forked in via version bits. Old clients won’t be aware of the EB side but will only see the coins ending up in the anyone-can-spend address.
Due to the fact that transaction history can be publicly traced, it hinders Litecoin’s fungibility. The private transaction is one solution to the problem that provides financial privacy and allows for plausible deniability. But such transactions can be selectively disclosed and validating them requires processing the entire history of transactions.
The team looked at other options like Confidential Transactions and Zk-Stark as well but decided to not go with them because while the former one would have been very expensive with large transaction sizes, the latter came with an estimated 20kb transaction size.
So, they decided to go with MW, which not only hides the amount being sent but also deletes the transaction history from the ledger.
However, it has its own disadvantages in the way that transactions must be built interactively, impossible to implement as a typical soft fork and makes private Litecoin attractions BOLT incompatible. Also, it’s currently unsuitable for the Lightning Network.
But it can be implemented without a hard fork through extension blocks.
As such, Litecoin will be using MimbleWimble protocol whose two components, Transaction Kernels and Transaction Cut-Through the team will be leveraging.
This new privacy protocol will be activated with BIP8. One year from the day the implementation is released, the soft fork will be activated, reads the proposal. The miners will be able to activate it “early with a 75% signaling threshold.”
The messaging app Kik was sold to MediaLab this week. Now, the holding company, which also operates another product called Whisper, is set to manage Kik as well. This happened because Kik Interactive, the company behind the messaging app, decided to shut down last month.
Kik’s CEO Ted Livingston announced just last week that the company would be sold and the sale was made soon after that. According to him, MediaLab believes that Kik is still to see its “best days” and it is willing to bet on this. Now that the product was acquired, Kik will change in several aspects. One of them is the integration of ads to acquire more revenue.
Crypto Ecosystem To Continue
Kik Interactive is currently in a legal battle with the U. S. Securities and Exchange Commission (SEC), which accuses it of violating the securities law with its Initial Coin Offering (ICO). The whole fight, which has been expensive for the company, is one of the reasons why Kik had to shut down.
This does not mean that the crypto plans of the company are dead, though. The Kin ecosystem will continue to exist if it depends on Livingston. He affirmed that he would continue to build on the ecosystem and that the messaging app would also continue its plans to provide crypto transactions.
MediaLab’s goal is to improve the app by reducing the number of bugs and glitches and collecting feedback from users in order to discover the features that could be interesting. This way, the service would continue to be useful and to offer what its clients need the most. They added;
“We are fans of Kin and believe in its long term potential. We are excited to further partner with Ted and his team on expanding the Kin integration and have plans to further support the project. We’ll have more to share on that front soon.”
The decentralized exchange rolled on by crypto exchange giant Binance earlier this year is now offering it’s clients a new service to purchase and sell Binance’s new USD-pegged stablecoin with BNB.
On Oct 17, on its official Twitter platform, Binance DEX announced a new listing on its platform, BNB/BUSD Trading Pair. the pairing means that traders will now have the option to buy and sell BUSD using the Binance Coin (BNB).
BUSD Gets Regulator’s NOD
In the recent past the crypto space has witnessed a significant growth in the number of stablecoins. These are assets which are pegged or backed by physical or touchable assets and, in most cases, the US dollar, the world’s reserve currency. Some of the most popular ones include Tether (USDT), USD Coin (USDC), Gemini Dollar (GUSD), among others. Recently, Binance joined the fray as one of the coin emitters with its Binance USD (BUSD).
Recently BUSD was approved by the New York State Department Of Financial Services (NYDFS). According to Binance, the launching of BNB/BUSD trading pairs will help in adding liquidity in the market to the advantage of the customers. At the moment BUSD is ranked number 287 among the most popular cryptos in the market.
Binance Burns More BNB
Meanwhile, Binance CEO Chaopeng Zhao popularly known as CZ, has announced that the company has burned 2,061,888 BNB worth about $36.7 million. This is the ninth BNB burn and represents about 1.1% of the total BNB supply.
According to U Today, coin burning can be described as the permanent removal of coins from circulation, thereby reducing the amount of coins in circulation. Binance burns BNB coins on the basis of the volume of trades made within its exchange over the last 3 months. Therefore, in every quarter, the crypto exchange giant burns some BNB coins.
According to CZ, the high amount of BNB burn shows significant growth and he credits it to the launching of fresh services like margin trading and futures trading.
Binance plans to keep on burning BNB within its possession until there are only 100 million left.
French Economy and finance minister Bruno Le Maire attacks Libra again this time claiming that Facebook’s led stablecoin will intrude on one of the most important national government mandates, issuance of currency.
In an op-ed to Financial Times, Le Maire stated if Libra was allowed to take off it will take away the sovereign power of states to issue and control their own currencies which will have unprecedented repercussions to the world’s economy and financial system.
Le Maire’s opinions are similar to his German counterpart, Olaf Scholz who has maintained that Libra should not be allowed in Europe as it will infringe on the sovereignty of the countries.
Le Maire stated that he can’t imagine one of the most powerful tools of a state, monetary control, and policy, being taken over by private companies that are not subjected to any democratic control.
The finance minister explained that after the creation of the euro in 1999, the EU member states gave up some aspects of their sovereignty to a more powerful European project. He pondered whether states are ready to allow Facebook together with other members of the Libra Association to provide private currency and undermine the effort made by EU member states.
Le Maire reiterated his sentiments in a tweet claiming that sovereignty, both political and monetary, can never be shared with private companies.
France has been one of the harshest critics of Libra which is facing intense pressure from policymakers around the globe. Politicians and regulators have been raising concerns with the Libra project fearing that Facebook will have immense power on money issues around the world.
In the past, Le Maire has categorically stated that France will never allow Libra to operate in the country as it is a threat to the EU’s financial systems among other risks.
According to CoinDesk, Le Maire, the EU needs to move faster and come up with innovative cross border payment systems as well as central bank-issued digital money to counter Libra’s threat. He explained that China should not be left to be the only player in the market on the issue.
Bermuda’s blockchain identification system recently kicked off. This project is currently under development with the main partners being Perseid and Shyft Networks.
The blockchain i.d ecosystem is set to leverage decentralization in keeping records for the citizens of Bermuda. This small Island nation joins Catalonia who is also creating a digital ledger for i.d record keeping.
Both Shyft and Perseid Networks are experienced with smart contracts and blockchain technology. The two firms will work together in designing efficient e-ID’s which can prove other data requirements as well. According to Shyft Network, the initial phase involves creating the Perseid base layer. This is in turn expected to allow for the deployment of smart contracts such as the Financial Action Task Force designed by Shyft to oversee compliance.
Perseid’s CEO, Bruce Silcoff, noted that the integration of e-ID’s with the smart contract regulatory intelligence would allow for efficiency in data authentication. In addition, data sharing within Bermuda’s ecosystems is expected to grow given the ease of verification. Perseid will oversee the base layers that facilitate integration by external stakeholders to enable Bermuda’s government to get maximum utility from the project.
Shyft, on the other hand, will be handling the blockchain technology designs involved in this project. Joseph Weinberg, the current chair of Shyft, added that his firm will provide its public key infrastructure for identification. Furthermore, the company will also provide other blockchain features to entities and individuals on-boarding the ecosystem once the project is complete.
The Prime Minister of Bermuda, David Burt, said that Perseid’s infrastructure is a good example to highlight the value of blockchain. He noted that modern technology is without a doubt a pacesetter in achieving global compliance standards at ease. This efficiency also reduces the cost of governments and firms incur in implementing compliance standards and procedures.
So far, the island nation has been welcoming to digital currencies with it’s latest being the USD Coin (USDC) in tax payments. A step towards a blockchain pegged nation is, therefore, a strategic move in line with modern Tech payment solutions.
Bitstop has recently installed a Bitcoin (BTC) ATM machine on the Miami International Airport. This marks an important milestone as the airport has never had such a machine before, despite how common they are found across the U.S.
According to the company, this was a strategic location to set up a BTC ATM. This is one of the busiest airports in the whole country and it has a lot of international traffic, meaning that people may need to buy Bitcoin, as not everybody wants to buy fiat currency to use somewhere else.
The airport is also known as the largest airport between the US and Latin America, which makes it very important for business in general.
Doug Carrillo, the co-founder and current Chief Strategy Officer at Bitstop has talked about the situation, the new ATM will be very useful for travelers. A lot of people are choosing to use Bitcoin instead of fiat currency these days, especially because more places are accepting it and they are very convenient when traveling abroad.
This is set to be the 130th ATM that Bitstop installed in the United States. The goal of the company is to have at least 500 Bitcoin ATMs in the country before the end of 2020. When we look at the numbers worldwide, there are over 5,750 Bitcoin ATM machines all over the world. The number is set to more than double within the next few years.
Next time you are at the Miami Airport and want to check it out, or if you are there now, the new machine has been installed in Concourse G right next to Gate 16.
This will surely spark some fires amongst the cryptocurrency as the Bitcoin maximalists and XRP army are going head to head over a recent list of the top differences between Bitcoin and Ripple, the #1 and #3 cryptocurrencies in the market.
Here is a breakdown of the BTC vs XRP debate at the height of the bull market in 2017 and beyond. Of course, these are all up for argument and may not be factually true but here was the initial firestarter list of each coin.
The original poster also added this brief commentary regarding the lists of BTC and XRP.
“Bitcoin under performs in ever aspect that possibly exists. Notice how BTC maximalist will never argue fundamentals. They just call names and say scam, shitcoin, blag blah But never fundamentals lol = Bitcoin is clearly the real shitcoin.
Now, this definitely sparked a community-wide debate as dozens of contributors chimed in.
Let’s review a few of the opposing or agreeing comments that flooded in on the forum:
1) nod in bitcoin’s favor
In terms of “fundamentals” please understand that a technology like xrp can be replicated in a few weeks; either by myself, our Chinese friends, anyone with access to a 32/64 bits processor and an Ethernet link. The “PROBLEM” is with who it is hosted and ran by, it will simply never work for that simple reason. Sorry man
2) nod in XRP’s favor
Of course any open source network can be replicated. What makes a network successful is the liquidity duh. So good thing Ripple has sold billions and billions of coins to governments, central banks, institutions, remittance companies, payment providers, credit unions ect ect. For this exact reason…You get the point.
3) more commentary on the points
Oh I (we) get the point, no sweat bud. In fear to offend you at this point with what I’d really like to disclose here, about the activities of the owners and developers, its perhaps best for me to remain quiet and let you believe what’s best for you. Although I’m sure you and others knows what I’d like to disclose. For another time, maybe.
In terms of “fundamentals” you’ve kindly/bravely asked about, I still believe my answer was 100% accurate. That said, let’s hope for you that the Central Banks Digital Currencies does not annihilate your XRP too severely-quickly, sort of leaving you guys sell-off before they go LIVE. Will hurt, no doubts there. GL
4) debating the history
Our understanding is that the xrp ‘plot’ has too much power at a political level therefore temporarily immune from judicial or formal procedures (SEC, District, Federal, all). Most of the distribution/ownership of their cap is dedicated to a very few. You can picture who with some imagination. Greatest official-robbery in the history of humanity, if you ask me.
5) the future of both
More concerned about its instant death 1) when/if bitcoin dips to 2k, 2) Federal Reserve Digital Currency issued in 24 months (official) 3) worldwide Central Banks Digital Currencies, which also plans to go live at about the same time-frame (also official). In other words there is just nobody stupid enough to ‘invest’ in this Clan-Ripple, other than well, folks here perhaps. Sad ending coming up for that tech & company unfortunately and that’s possibly one of the main factor why the SEC has some sort of mercy at the moment.
6) defending bitcoin
Tried to find any lawsuit against Satoshi Nakamoto. Damn hard, looks like google removed/censured all the links to those news :/ Now THAT’s a crypto currency living up to its purpose and glory my friend. Zero Point of Failure, the ONLY one, unique. Don’t ever bloody try to come here and call Bitcoin shit ever again, dearest rippies & other alties fanboyz
7) heated exchange about centralization
Statement: U r proof that common sense is not common. Zero point of failure? China controls over 50% wtf r u even saying. Clearly delusional and short minded. Goodbye
Reply: There are no dumb fuck anywhere in this world or others who will spend $1.4 billion trying to 51 Bitcoin without knowing if this is going to be successful at the first place, most likely failure. I might be delusional but I’m no f n ignorant. Have a nice day – And please don’t give us that Chinese bad-bad western brainwashing bullshit, China have ZERO incentives to carry out whatever you’ve been told by the adults you are listening too, zero/nada #wtf. Grow up man…
8) XRP shills
Of course you dont like Bitcoin. You shill a scam coin that is a centralized load of toss for banks that Bitcoin will likely destroy. I hope you didn’t bet the family jewels.
9) different categories of crypto
Federal (or Central bank) Reserve Digital Currency will still be controlled by feds or central banks and will be inflation coins backed by FIAT (USD, Euro, JPY, KRW etc.) probably regular ppl will not have access to this mantra and will be use ONLY for trans-bank transfers or government contracts. So this will have no harm for BTC. As you know private banks controls central bank and all of them control country governments. All this ppl will never stop the oxygen for their filthy business.
10) XRP is most centralized, not bitcoin
– 51% attacks are not the big thing, in fact very little can be done to the network. Because to maximize the damage to Bitcoin you don’t just have to control 51% of the hashrate, you have to keep it for a while and that is very, very expensive.
– The main problem of XRP is that ALL clients trust the UNL by default that dynamically sets Ripple. I know some users who changed it, but the vast majority use the default one. That translates into that you are under constant threat of a 51% attack but with Ripple having 100% voting power (the equivalent to hashrate) at a 0 cost.
When they have solved that, you can say that XRP is the most decentralized network of all.
Oh, btw, I almost forgot, the UNL by default is made in such a way that the network only works if Ripple agrees with the proposed tx. Ripple has always controlled just over 20% of the validators so that nothing happens in their network that they don’t want.
Seriously, solve that first and then you can criticize the centralization (or not) of Bitcoin freely
11) bitcoin wins
those upcoming CBDC will increase/force knowledge and literally accelerate the ‘trend’ of digital money and means of transfer by magnitude of 1000X. That’s is in fact a good thing for Bitcoin. Not necessarily good for xrp/ripple where I see it going completely devalued if not dead-redundant by that time. On another positive note about CBDC, some expect an incredible amount of personal & corporate information being required in that upcoming digital money trend, gigantically much more than anything else we’ve seen before. Therefore you can clearly imagine how Bitcoin will gain massive popularity, if not take over the digital front-stage in that respect, I actually wouldn’t be surprised.
12) blockchains and centralization
The ways of solving the centralization in a blockchain is something that has always attracted my attention, and in the end many developers do the same: hide it under layers of buzzwords, new consensus algorithms or other features, so you end up getting used to detecting it.
What does the larger cryptocurrency community think about the heated debate on Bitcoin and Ripple? This sure was entertaining to cover and one thing is for sure, this war of the words between BTC and XRP will wage on as the cryptocurrency market tries to climb back to its all time high in market cap of over $830 billion.
And, just because its too funny not to include, two days ago a crypto user put it:
“If Ripple exceeds the bitcoin in two years, I publish a video while in the street I kiss an unknown old lady. What bet do you make? Forward with comments! HAVE FUN”
Then, another user added:
“To Bitcoin maximalists: If Bitcoin could settle transactions in 4 seconds at low fees and had low power consumption XRP would never have been created and Ripple could have leveraged Bitcoin for their xRapid or On-Demand Liquidity solution.”
Also, check out the latest interview between Ripple’s CEO and Bitcoin Bull Anthony Pomp:
We also covered this in a post you can read here too.
For more information like this, make sure to subscribe to ZeroNoncense’s Telegram and follow them on Twitter.
As noted in their previous post outlining the fundamentals of the press release by the SEC, the actual pdf for the order, which was submitted by the SEC to the Manhattan Supreme Court today can be found here:
In this follow-up to the original story detailing the order against Telegram, we’re going to conduct a thorough analysis of all information contained within the SEC’s order against Telegram.
Reason for the Emergency Action
According to the filing by the SEC, they have credible reason to believe that Telegram will be launching their token (i.e., distributing it to the initial buyers of their token sale), relatively soon — citing October 31st, 2019, as the date given by Telegram for when investors in the token sale would receive their tokens.
This seems to be corroborated by articles that were published this month by numerous outlets, such as CoinDesk:
Of course, the post referenced in the excerpt above, also makes it clear that TON was planning on launching in October.
A screenshot of the post is provided below:
Thus, there appears to be more than enough credence to the SEC’s claim that the token was going to be launched imminently.
The Issue the SEC Has With Telegram Moving Forward
In the ‘Summary’ portion of the filing, the SEC states:
“Unless enjoined, Defendants will go forward without filing a registration statement for the Grams as they are required to do under the Securities Act of 1933 (‘Securities Act’). In other words, Defendants plan to sell billions of securities that will quickly come to rest in the hands of U.S. investors without providing those investors important information about their business operations, financial condition, risk factors, and management.”
In relation to the last part of the SEC’s statement, even that seems to be corroborated by public statements about the TON token offering that have been made by various individuals and entities in the cryptosphere.
Below is an example from the most popular and well-respected authority on ICO/IEOs on Telegram:
As noted in that post, there truly are many unanswered questions that prospective investors and spectators have about the overall plan for the TON token.
Which is not to say that there hasn’t been a wealth of information posted in regards to the token (specifically on https://test.ton.org)
Further Claims by the SEC
Moving forward in the court filing, the SEC goes on to state that:
“As of October 11, 2019, Telegram has not filed a registration statement with the SEC for this planned offering of securities.”
“Once Telegram delivers the Grams to the Initial Purchasers, they will be able to resell billions of Grams on the open market to the investing public. Telegram and/or its affiliates will facilitate these sales on digital-asset trading platforms. Once these resales occur, Telegram will have completed its unregistered offering with billions of Grams trading on multiple platforms to a dispersed group of investors.”
The filing goes on to cite Section 5(a) and 5(c) of the Securities Act, which we found, extracted, and posted below for your review:
Request for Telegram to be Permanently Barred From Selling Securities
This part of the filing has the most far-reaching consequences for Telegram (shown below): ‘
As one can see the SEC is asking for Telegram to be permanently restrained and enjoined.
So, despite the temporary and immediate nature of the restraining order, the SEC is using this as a placeholder until they’re able to get a more permanent order against Telegram sustained.
This is made clear in section 12 (1), where the Commission states that they are seeking, “A temporary restraining order and a preliminary injunction against Defendants prohibiting them from participating in any offerings of unregistered securities…including but, not limited to, by distributing Grams to any persons.”
However, as noted in the statement above, these are just the temporary injunctions that the SEC is seeking.
Ultimately, the SEC is seeking a ‘final judgment’:
A) “Permanently enjoining the Defendants from engaging in the acts, practices, and courses of business alleged herein” [herein = the court filing]
B) “Order Defendants to disgorge their ill-gotten gains and to pay prejudgment interest thereon”
C) “Prohibiting Defendants, pursuant to Section 21(d)(5) of the Exchange Act [15 U.S.C. § 78(d)(5)], from participating in an offering of digital securities; and (d) imposing civil money penalties on Defendants pursuant to Section 20(d) of the Securities Act [15 U.S.C § 77t(d)].”
Translating the Above
As you probably got the gist from what’s written above, Telegram may be in some hot shit, but just to summarize:
This order that you’re seeing today by the SEC is the ‘temporary restraining order and preliminary injunction against Defendants’ (Defendants = Telegram, obviously)
The purpose of the restraining order is to pretty much stop Telegram in its tracks while the SEC continues their investigation
Ultimately, the SEC is looking for a permanent injunction against Telegram, which means that:
They want to bar Telegram from any future token sales
Force Telegram to “disgorge their ill-gotten gains” ; that means forfeit ALL $1.7 BILLION (that’s what they reference earlier in the filing as ‘ill-gotten’, specifically)
impose civil money penalties on top of the forfeiture of said gains
The Court Filing Names Pavel Durov, Nikolai Durov, and the TON Foundation
The filing specifically names Pavel Durov, Nikolai Durov, and the TON Foundation.
Both Pavel Durov and Dr. Nikolai Durov (both Russian citizens), are the co-founders, CEOs, and figureheads at the top of the messenger app, Telegram.
As noted by the SEC in the court filing, Telegram is, by far, the most popular messaging application for the cryptocurrency/blockchain community.
Below are some screenshots from the court filing in reference to the information provided above:
Skipping Through a Few Parts
From this point, there are a few parts in the intermediate that do not necessarily need to be included in this write-up.
For the most part, we’re just going to skip past:
Background information about Telegram (who created it, when, why & what communities it serves)
What a ‘digital asset’ is
How ‘ICOs’ work
The framework of the Securities laws that the SEC alleges Telegram breached with the TON token
Let’s move forward to #45 on the court filing, where the SEC provides more information about the offering as well as some of the deficiencies that led them to summarily declare the entire token sale, illegal.
Qualms that the SEC Had with TON (and Other Relevant Information)
Details of the Token Sale
Round One purchasers paid $0.37 / Gram
Round Two purchasers paid $1.33 / Gram
‘Reference Price of Grams at launch was supposed to be $3.62
The token sale began in early 2018 (January, specifically)
Telegram sold approximately 2.3 billion Grams in the first phase
From the 2.3 billion Grams sold in ‘Round One’, Telegram raised $850 million
Telegram sold another 639 million Grams in the second phase
From the 639 million Grams sold in ‘Round Two’, Telegram raised another $850 million
In total, 2.9 billion Grams were sold
According to the SEC, more than 1 billion of the 2.9 billion Grams sold (total) were to U.S. investors, totaling $424.5 million / $1.7 billion total that Telegram raised
Qualms That the SEC Had With Telegram Regarding Their Disclosures
In paragraph #46–48, the SEC alleges that:
Telegram did not prepare or file any registration statement for the Grams that it offered or sold, “intends to offer or sell in the Offering”
Telegram’s Gram Purchase Agreements, ‘did not contain information about Telegram’s financial history or ability to generate profits’
“Purchasers who may buy or receive Grams will not receive any document containing information about Defendants’ [Telegram] operations, financial condition, or other factors relevant in considering whether to invest in Grams.”
“Nor will they receive information about how the Durovs are being compensated as a result of the Offering.”
“Because Telegram did not register the Offering, investors in Grams will be deprived of material information relating to their investment. “
“Defendants essentially seek to obtain the benefits of a registered public offering without assuming the disclosure responsibilities and legal structures designed to protect the investing public.”
“Telegram has taken the position that the Gram Purchase Agreements were investment contracts, i.e., securities, and placed a restrictive legend on the Gram Purchase Agreements.”
“The legend warned United States residents that ‘the offer and sale of this security has not been registered under the U.S. Securities Act of 1933’ and ‘may not be offered, sold or otherwise transferred…except pursuant to an effective registration statements.’”
“Telegram, however, claimed that Grams, the heart of the Gram Purchase Agreements, without which the agreements have no value or purpose, were not securities but rather currency.”
“Telegram thus placed no restrictive legends on any Grams, nor were purchasers advised that they may not sell Grams in the United States absent a registration statement.”
“Purchasers of Grams are not restricted from selling them to others, other than as provided for by certain contractual lockups placed on some Grams sold to Initial Purchasers.”
The SEC goes on to claims that Grams, by themselves, constitute ‘investment contracts’.
The SEC also notes that the Round One purchasers were subject to a smart contract enforced ‘lock-up period’ that limited the amount of Gram tokens that could be sold to ‘tranches’, which subsequent Round Two purchasers were not subject to.
This was followed up by the denial of the idea that Grams were a currency with the SEC’s statement that, “Grams are not a currency because they have no realistic currency uses at this time.”
SEC Alleges That Funds Raised by Telegram Exceed What They Will Need to Develop the TON Blockchain
In paragraph #55, the SEC states that Telegram stated in their offering documents that the funds raised in their TON token offering would not only be used for the development of the TON Blockchain, but for the Telegram Messenger as well.
Specifically, it is states that Telegram estimated they would spend approximately $520 million of the $1.7 billion raised from the token sale on the Messenger alone “between 2019 and 2021”.
SEC Claims That Some of the Funds Have Been Used Already
According to the SEC in paragraph #56 of the filing:
“As of January 31st, 2019, Defendants had used approximately $218 million of the $1.7 billion raised to support the development of Messenger and the TON Blockchain.”
The filing is careful to note that investors have zero ‘say’ over how the funds raised by Telegram would be spent and that Telegram also possesses ultimate and sole control over decision making as it pertains to the spending of said funds.
SEC Further Claims That Telegram Has Led Investors to Believe That They Will Profit Based on Telegram’s Efforts
In Section ‘C’ of the court filing by the SEC, they elaborate on Telegram’s marketing to prospective investors and how certain statements by the company were designed to entice investors based on the perceived profitability of the token offering.
Below is an excerpt from the court filing, outlining some of the statements that the SEC outlined:
SEC Alleges That Telegram ‘Intentionally Leaked’ Information About the Token Sale
Under the same section (‘C’), as the one covered above, in paragraph #59, the SEC alleges that:
“The Whitepaper, Primers, and Teasers subequently were intentionally leaked as a part of the Offering and currently be found on the Internet.”
The SEC also mentions that they have evidence that Pavel Durov, specifically, had sent information about the token sale to individuals in the United States in both California and New York, specifically (among others).
They also state that Pavel, “marketed the sale of Grams himself, using business and other contacts to solicit investments and spread the word about the impending Offering.”
SEC Knew About Telegram’s Conversations With Exchanges As Well
In paragraph #79, the SEC states that, “Telegram itself is currently in conversations with at least four digital-asset trading platforms, some of which are U.S.-based, to discuss listing Grams on their platforms.”
This seems to be corroborated by Coinbase’s recent announcement that it would be providing custody for Telegram’s token in anticipation of the token’s release this month (October 2019):
Today we’re announcing support for the secure storage of GRM, SOL & OXT from each network’s respective launch. We have a track record of providing seamless custody solutions at launch as both the first & largest custodian for both Blockstack & Algorand.https://t.co/LwNzh5NVl4
Before the tweet above (which came just two days before the SEC’s emergency order), Coinbase had indicated interest in adding Telegram’s token to their exchange (curiously, well before the announced launch of said token), back on September 19th, 2019:
SEC Claims That Telegram Had a Pump and Dump Planned
In paragraph #87 of the filing, the SEC states:
“Under Telegram’s Formula, Defendants would price the first Gram at $0.10, and every subsequent Gram at an amount one-billionth higher than the prior sales price. As such, Telegram designed the price of Grams to increase ‘exponential[ly].’ Indeed, Telegram sold Grams to Initial Purchasers at a deep discount to an expected market price of $3.62 at launch.”
The figure shown in paragraph #89 drills the point home on this as well:
SEC Outlines How Telegram Would Have Held Unilateral Control of the Telegram Token’s Development
In paragraph #92, the SEC notes that the, “Telegram development team is also needed to complete the TON Blockchain to allow Grams to achieve the value Telegram touted in the Offering Documents.”
It is alleged that the ‘Whitepaper’ also made it clear that the Defendants would “remain in control of the development of the TON Blockchain”, also noting that the TON Blockchain team would have enough votes to ensure that decisions (particularly development ones) would have to go in the direction of Telegram’s choosing.
Why This Part is Important
This is essentially the SEC subtly claiming that Telegram is a largely centralized blockchain, given the fact that its development would be (and was planned to be) entirely contingent on the Telegram Blockchain dev team.
Obviously, with such unilateral control, it is hard to argue that a blockchain structure is anywhere near decentralized or distributed — and it certainly is not trustless.
SEC Claims the Tokens Had ‘No Significant Use’ Other Than ‘Uses Calculated to Increase Investor Profit’
In paragraphs #96 and #97, the SEC makes it clear that there was no apparent use for Telegram’s token beyond ensuring that investors in said token would achieve a profit.
Thus, in that way, the SEC essentially defines Telegram’s token as a ponzi of sorts.
The SEC does acknowledge that Telegram listed a number of future plans and potential implementations for the token, but also that none of these solutions were in place at the time that Telegram was soliciting investment.
Specifically, in paragraph #98, the SEC states:
“The TON ‘ecosystem’ did not exist and does not exist today. There are not now and have never been any products or services that can be purchased with Grams. The TON functionalities as pitched by Telegram were (and remain) entirely dependent on the funds provided by investors. Meanwhile, the principal means by which investors would reasonably expect to profit is through their resale of Grams.”
SEC Continues to Pick Away at the Concept That Telegram’s Blockchain Idea Was Decentralized at All
From paragraph #104 and onward, the SEC makes some cogent points about why the blockchain was far from decentralized, even going as far as to state that, “Telegram engaged in a coordinated, centralized effort to create the Durovs’ vision of a new, scalable blockchain.”
The filing goes on to state that:
Defendants [Telegram] knew in order to deploy their blockchain, they would have to create some sort of sense of decentralization
The filing goes on to state that, “The TON Blockchain can only become truly decentralized if Grams holders other than the original Grams purchasers actually stake Grams and, thereby, act as ‘validators’ of transactions on the TON Blockchain.”
The filing goes further to explicitly state that, “If the original Grams purchasers alone all immediately staked their holdings, the TON Blockchain would be centralized rather than decentralized and, therefore, subject to misuse and majority attacks.”
The SEC uses the facts above to conclude that, “This fundamental need for additional Grams holders demonstrates that the TON Blockchain was designed fron inception to require the Initial Purchasers to immediately distribute their holdings to the public.”
TON Foundation Would Be Centralized as Well
As noted in paragraph #109, the ‘TON Foundation’ was (or is) to be created by the Durovs, directly. Thus, in addition to holding unilateral control over the blockchain (via majority ‘votes’), they would also hold complete control over the actions of the Foundation as well.
Conclusion (Penalties Sought)
“An Order temporarily and preliminary, and a Final Judgment permanently, restraining and enjoining Defendants, and each of their respective agents, servants, employees, attorneys and other persons in active concert or participation with each of them who receive actual notice of the injunction by personal service or otherwise, from any ongoing and future violations of Sections 5(a) and 5(c) of the Securities Act [15 U.S.C. § 77e(a), 77e(c)], including, but not limited to, by delivering Grams to any persons, or taking any other steps to effect any unregistered offer or sale of Grams.”
“An Order temporarily and preliminarily enjoining and restraining Defendants, and any person or entity acting at their direction or on their behalf, from destroying, altering, concealing or otherwise interfering with the acess of the Commission to relevant documents.”
“An Order providing that the Commission may take expedited discovery; and may effect service of the Complaint and the Order to Show Cause moving papers by alternative means, namely by email service on Defendants’ U.S.-based legal counsel.”
“A Final Judgment directing each of the Defendants to disgorge all ill-gotten gains, including prejudgment interest thereon”
“A Final Judgment prohibiting Defendants from participating in any offering of digital asset securities pursuant to Section 21 (d)(5) of the Exchange Act [15 U.S.C. § 78u(d)(5)]”
“A Final Judgment directing the Defendants to pay civil money penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)]”
“Such other and further relief as the Court deems appropriate and necessary for the benefit of investors.”
This was a massive piece put together by ZeroNoncense and we felt it needed to be shared in full to the entire crypto audience and world!
Block.one, one of the EOS developers, has announced the launch of EOSIO 2.0. According to the press release, this is a new version of the famous smart contract protocol that was used by the company to host dapps and to use its delegated proof of stake system.
The company affirms that the new version of the program comes with several new improvements. For instance, it has a new WebAssembly engine that was created especially to enable the resources to be used in a much more efficient way as smart contracts are processed.
According to the company, the newly upgraded platform offers a performance that is around 16 times better than EOSIO 1.0. This, Block.one affirmed, can greatly change how useful smart contracts are.
Another important improvement that this version will have is the adoption of a new authentication standard called WebAuthn. It will allow the system to use a hardware device to sign and authenticate transactions via browser without needing any EOSIO apps. This, it is believed, will improve the security of the users.
The last improvement is that the developers created a new system that can securely sign blocks using a permission layer that will allow this without sharing any kind of sensible data.
Security is an important aspect in the EOS network, as recently a hacker stole over $110,000 USD from EOSPlay, an EOS gambling app.
Some new tools for developers were released together with this update. They include the EOSIO Quickstart Web IDE, which is currently in Alpha testing phase, a software developed to decrease the complexity of creating apps.
This week has been an exciting one for Ripple and XRP as the company announced a number of partnerships and other developments.
While Ripple (XRP) is currently trading at $0.25 cents with a market cap of $11.01 billion, many are eager to see what the coin has in store for it in quarter 4 of 2019.
First, as many saw the news regarding a possible XRP bull run in order (click the image to read):
Next, let’s recap some of the latest ripple news about the advancements in the XRP world
One of the big news has been of Samsung Electronics America teaming up with the UK-based payment platform Finablr, a RippleNet member.
An early supporter of crypto assets and blockchain, Samsung is adding a new feature called Money Transfer to its Samsung Pay mobile app that will allow people to send money to 47 countries through different payment options.
Ripple’s investment arm, Xpring made headlines with Xpring Developer Platform, Logos network acquisition, investment in Vega Protocol, and partnership with BitPay to boost XRP development and adoption.
Cryptocurrency exchange Coinbase is also discussing the possibility of hiring the engineering team of Ripple-backed Omni Rentals.
This week, David Schwartz, Ripple CTO detailed what does XRP Ledger has in store for the future. In this blog post, he talked about consensus algorithm, performance, and features like XRP-collateralized stablecoin.
In terms of the consensus protocol, Schwartz proposes a change in design because currently when servers lose sync with the network, they are forced to resynchronize and then fetch all the missed ledgers simultaneously.
Furthermore, he wants to upgrade from one to two separate consensus layers where one will focus on advancing the ledger and the other on the fee.
After such a spectacular week, next week Ripple CEO, Brad Garlingouse will be providing answers to some hard questions, in an interview with Morgan Creek Capital’s Anthony Pompliano.
The interview will drop for Pop’s “Off the Chain” paying members on Tuesday and Wednesday for non-members.