Century Old Laws Clash With Digital Code as Disruption Faces the Stock Market – Trustnodes

Century Old Laws Clash With Digital Code as Disruption Faces the Stock Market


The millennial generation is learning of an astonishing fact which has gone under the radar for so long and yet may be the root cause of perhaps all economic problems.

As information awareness has increased for the past two decades, we have begun to learn of an aristocracy (both old and new) which controls much of the old media and acts in a kleptocratic manner by rigging our laws and rigging our political system in their favor and to the disadvantage of the middle class, the professional class, and effectively all but the rich. Here are the symptoms of political regression:

“A study by the World Institute for Development Economics Research at United Nations University reports that the richest 1% of adults alone owned 40% of global assets in the year 2000.

The three richest people in the world possess more financial assets than the lowest 48 nations combined. The combined wealth of the “10 million dollar millionaires” grew to nearly $41 trillion in 2008…

A January 2014 report by Oxfam claims that the 85 wealthiest individuals in the world have a combined wealth equal to that of the bottom 50% of the world’s population, or about 3.5 billion people…

A 2016 report by Oxfam claims that the 62 wealthiest individuals own as much wealth as the poorer half of the global population combined…

Oxfam’s 2017 report says the top eight billionaires have as much wealth as the bottom half of the global population, and that rising inequality is suppressing wages…

In 2018, the Oxfam report said that the wealth gap continued to widen in 2017, with 82% of global wealth generated going to the wealthiest 1%.

According to PolitiFact the top 400 richest Americans “have more wealth than half of all Americans combined.”

According to The New York Times on July 22, 2014, the “richest 1 percent in the United States now own more wealth than the bottom 90 percent”…

There is a significant difference in the measured wealth distribution and the public’s understanding of wealth distribution.

Michael Norton of the Harvard Business School and Dan Ariely of the Department of Psychology at Duke University found this to be true in their research, done in 2011.

The actual wealth going to the top quintile in 2011 was around 84% where as the average amount of wealth that the general public estimated to go to the top quintile was around 58%.”

Keeping the population ignorant is of great benefit to those who gain significantly by rigging the laws in broad daylight.

The chief culprit is none other than the Securities Act 1933. Here is SEC, in its own words, explaining why they’ve just shut down an exchange which appears to be facing no substantial criticism except that they didn’t ask SEC for a permission slip:

“1Broker and Brunner did not determine whether account holders met certain discretionary trading thresholds. The unregistered sale of security-based swaps is legal when the sales are limited to ‘eligible contract participants’—which are high-net-worth individuals and certain types of sophisticated and/or regulated entities. The sales of 1Broker CFDs were not so limited.”

In other words, they had opened access to the stock market to all and had not limited their service to only the rich or banks which for some reason get to enjoy different laws under the same court.

For this transgression they have to pay as they should have applied for permission to SEC, permission which may take years and may still be denied.

Tons of applications have been made to the Securities and Exchanges Commission (SEC) to list a bitcoin/crypto ETF. All have been either rejected or denied.

If you are rich, however, you don’t need such permission. The law says you can do whatever you want as far as these investment aspects are concerned.

Thus if a smart and industrious 20-30 year old wanted to invest in an innovative start-up, they can’t because the Securities Act prohibits them. The rich however can pick and choose whatever company they want, whatever investment they like, whatever platform they find convenient.

In broad daylight, in black and white, with no ambiguity, it has thus become clear that the rich are above the law as far as the matter in question is concerned.

Yet unfair laws are not laws. Discriminatory laws are not laws. They can be excused if there are good reasons, but where this exception for the rich is concerned, there appears to be no reason whatever.

Rhetorically one can argue any point, and here one can say the rich can afford to lose while the smart 30 year old needs “protection.”

Yet looked at it neutrally it is quite clear that this law prohibits everyone from taking advantage of value creation and limits this aspect of wealth generation to only the rich who can so enjoy the incredible reward and thus can keep increasing their wealth to now astonishing levels.

An easy example is investing in Facebook when it was a startup – prohibited for all except for the rich – and investing in Facebook when it became a public company – allowed for all. The difference in gains for an investment worth as little as $1,000 is billions of dollars.

Even in public stocks, there are restrictions which apply to all, while the rich get their own laws. That was brought to prominence today by SEC’s action against this exchange which allowed bitcoin investment in stocks derivatives.

The effect of this becomes very clear when you look at trading volumes in stocks and cryptos. The difference is astounding.

Global stock companies with a market cap of half a trillion are currently handling less volumes than some third or fourth rate cryptos. Ethereum tokens are handling 5x more trading volumes than the trillion dollars Apple.

The reason is obvious. Accessing stocks is difficult. Accessing actual stocks, the paper certificate, is almost impossible, but even through third parties and brokers, the process is clunky.

Innovation, moreover, is clearly hampered with the effects of these rigged laws being the creation of monopolies. Turning investment, overall, into a sport for bankers primarily, four of which effectively control the market.

Such banks have been able to carve themselves and their rich clients exemptions, while locking out the rest from the engine of value creation, forcing everyone – by the carrot of convenience – into worthless savings accounts where their money is inflated away by central banks while the rich reap the rewards of the ingenuity of many.

In the face of such injustice, technology has always been the tool of the common people. Mythologized as magic in the metaphorical tales of old, it is often the case that only by the invention of new things can power be regained.

That newest thing is the invention of smart contracts, code based programs which can digitize stocks and can turn Wall Street giants like CME, CBOE, and even investment banks like JP Morgan, into just some code that runs by itself on ethereum’s global network where the people are in control.

By such magic they have coded decentralized exchanges, decentralized bank like functions, decentralized etf-like index funds, and there is no reason why they can’t code decentralized stock markets.

That’s because SEC can lock up a 26 year old Austrian, but they can’t lock up code which runs on a global network without having any care whatever about SEC or its century old law.

This 1broker platform, therefore, can be put into an open source smart contract which can be forked a thousand times or can even be launched by someone in China or in Russia or in Germany where SEC has no jurisdiction.

Once the code is pushed to the global network, SEC and their discriminatory laws instantly become powerless, with the people able and free to invest conveniently in stock derivatives, in commodities, and in all else.

Their prohibition on investments in start-ups can likewise be checkmated by the design of a Decentralized Autonomous Organization (DAO).

We are now learning unhackable code is a thing for smart contracts, so the opportunity here can be immense for a smart coder who could be incentivized by taking a small transaction fee just as centralized exchanges do.

Such coder does not even need to be known. He or she can push the code anonymously or give it to someone in a jurisdiction outside of SEC’s reach.

The DAO is operated by eth holders who maintain complete control over the pooled funds which can only move if the majority of token holders vote in favor of moving them.

SEC has said the DAO is a security, but as it is a Decentralized Organization, there would be no one they can take to court. There would be no issuer of securities. They could argue the ones that accept money from the DAO are in breach, but that would only apply to Americans as London, Germany, and much of the rest would only be too happy to see their companies being invested in.

Moreover this would never hold in court because investors in a DAO set-up would have complete control over the funds and they would be the ones managing them. Plus, they can make investment in batches so they can easily limit it to just $1 million per investment, thus fall within Securities Act exemptions.

These new worlds wouldn’t come without their own problems, but a big one would be solved: trust. In this decentralized stock exchange, we wouldn’t have to trust the exchange which can easily manipulate the price if it pleases. We wouldn’t need trust them with securing funds, and we wouldn’t need trust them with not abusing their position.

What we would need to trust is the code and that it is bug free, which is quite a challenge. But now three years on since ethereum was invented, some code keeps running without being hacked. Which means writing unhackable code is challenging, but is possible.

As the above can be conceptualized and many benefits are easy to see, it will probably become a reality. If or when it does, one problem we may have to face is how to enforce reasonable, fair, and “good” laws.

As a “light” example, we wouldn’t want a thief to easily be able to run with the loot. Yet it would all be in the public blockchain, so there would be a trace, with the police able to follow it alongside other information they can gather.

This would turn upside down the current preventive approach whereby you are prohibited from engaging in what is a perfectly legal activity – such as entering into a contractual arrangement to buy/invest in something – and are prohibited only because someone might cheat or steal or scam.

It would instead return the law to being more reactive, by punishing offenders after the event, rather than by proactively prohibiting perfectly fine actions just in case someone misbehaves, as is currently the case.

We have already seen the skills of law enforcement do operate even in our digital world with some hackers, thieves and scammers, arrested.

As such, good law, which is necessary and is what allows us to enjoy many things, can still be enforced, while unreasonable and discriminatory laws ought to have no place in the 21st century.

Criminals deserve prison, honest men deserve freedom, the rich and the rest deserve equal treatment. Whatever the law may say, law which is ultimately based on consent, such principles should be engraved in code for this generation and many more to come.

For the digital revolution won’t come from congress, SEC, or any other servant of the people. The revolution will be coded, for the benefit of all, even the bankers, so as to return meritocracy and that American dream of progress.

Copyrights Trustnodes.com


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