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DAO regulation in Australia: Issues and solutions, Part 3

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DAO regulation in Australia: Issues and solutions, Part 3

Lawmakers in Australia want to regulate decentralized autonomous organizations (DAOs). In this three-part series, Oleksii Konashevych discusses the risks of stifling the emerging phenomenon of DAOs and possible solutions.

Crypto anarchy is unlikely to be the future that the majority of people support. Company regulation, in its essence, has a lot of positive aspects or at least, a good intention, albeit one often embodied in a red tape that stifles business. Nevertheless, nowadays, corporation rules and regulations are formalized to the extent that they could be put in the machine code. So, the role of the government is to establish mandatory standards for those DAOs that would like to operate in the Australian market.

Non-digital

There are cases when a written legal text is necessary. These are situations where the legal interaction goes beyond the program’s code and requires integration with the real world. In this case, there must be formal legal documents and a liable person responsible for delivering business promises to consumers and investors.

There can be two types of events in a blockchain network: 1. Internal. For example, the transfer of a token in exchange for a cryptocurrency payment. It can be completely automated because both elements — the token and the cryptocurrency — are internal digital elements of the system. 2. External. But if something is external to the network, it will require human interaction and interaction with the real world.

For instance, if a businessman issues tokens pegged to a flock of sheep, this legal condition must be written somewhere in a human language, as sheep are not digital objects, the legal condition is not a part of the network. Therefore, the digital rights of investors (let’s call it so) can and should be automated in a DAO. Hence, they don’t require any written legal terms. Non-digital rights and obligations must be intermediated by a liable person and described in a legal document. And I would say that many DAOs will have both: the digital on-chain part and the off-chain part.

Related: DAO regulation in Australia: Issues and solutions, Part 1

Let me show one example. Suppose it is promised that token investors can vote and the voting is electronic on the blockchain, and the smart contract automatically executes the decision in a decentralized manner. In that case, it will not need any human assistance and does not require a formalized legal document. This does not mean it will not be described in a human language. This means the description will not prevail over the machine code on the blockchain.

As a lawmaker, I would adopt rules that would reduce the ways of misinforming DAO investors. A businessman may not promise DAO investors something that is not encoded in the smart contract. To do so must be interpreted as a deception.

When the digital world touches reality and cannot operate autonomously, all those cases will require a complete, legally binding disclosure.

Blockchain immutability

There is a common fallacy about the issue of immutability. In a blockchain, you cannot retroactively change passed transactions and the deployed code of a smart contract. That’s right, but you don’t need to. The system must be properly designed.

Instead of changing the existing records, you need to be able to add new records. All transactions are strictly chronological (because no one can change the order of blocks), so if any legal circumstances change, you don’t change the past, you add a new record to your application. And in the sequence of records, only the latest will reflect the current state of affairs. In this way, you can resolve legal disputes and correct mere mistakes. And I explained how to properly design legal relationships in the video below.

In my academic papers as well as in this video, I also described the issue of an “emergency brake” — the need to reset the system if something goes wrong. The proposed technical standard will allow the redesign of an application on blockchain and introduce new rules to a DAO.

Related: DAO regulation in Australia: Issues and solutions, Part 2

A sustainable DAO solution will need to rely on third parties in governance to some extent as well as in day-to-day operation. And there are many situations when undeniably we need a trusted third party. For example, how will a person transfer an inheritance after death? You won’t develop a mature application on a blockchain, the question is how to make intermediaries accountable, whether it is a state registrar or an authorized professional (lawyer, custodian, broker, etc.). Their operations will require regulations and technical standards.

I should note one important thing. Transactions with cryptocurrency, as a native unit of a blockchain, are immutable, and there is nothing you can do about it. This is not addressable or at least, it is not that easy without compromising the technology. Everything I said about the proper design is about crypto tokens, smart contracts, DApps and DAOs, which reside on top of a cryptocurrency.

To step into the era of the digital economy, governments need to rethink their role and approaches to regulation. The DAO portrays the struggle to create a fundamental shift from old-fashioned bureaucracy and red tape to automated procedures facilitated by smart laws and smart contracts, generally known as the paradigm of Code is Law. Such a shift requires questioning established institutions: the role of public registries, licensing and other ways of conventional regulation.

Some countries have already stepped into the race of regulating innovations and having good intentions is not enough, because they end up with red-tape, which is one of the reasons why DAOs appeared in the first place.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Oleksii Konashevych has a Ph.D. in Law, Science, and Technology and is the CEO of the Australian Institute for Digital Transformation. In his academic research, he presented a concept of a new generation of property registries that are based on a blockchain. He presented an idea of title tokens and supported it with technical protocols for smart laws and digital authorities to enable full-featured legal governance of digitized property rights. He has also developed a cross-chain protocol that enables the use of multiple ledgers for a blockchain estate registry, which he presented to the Australian Senate in 2021.

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Miami’s Mayor Remains Unfazed by Crypto Crash, Still Receives His Paycheck in Bitcoin

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Miami’s Mayor Remains Unfazed by Crypto Crash, Still Receives His Paycheck in Bitcoin

Despite the tragedy of TerraUSD (UST) de-pegging and the subsequent chaos that plagued the cryptocurrency markets, Miami’s mayor remains resolute in receiving his salary in Bitcoin, but it seems he has other streams of income.

At the World Economic Forum (WEF), Miami Mayor Francis Suarez told attendees of a panel that he was still receiving his paycheck in Bitcoin and has no plans to stop. Suarez’s comments are coming on the heels of plummeting cryptocurrency prices over the last few months with Bitcoin down by over 30% in the last 2 months.

The Mayor told the audience that he remains unperturbed by the mayhem in crypto streets and will continue accepting his salary in Bitcoin. A reason for his cool, calm, and collected nerves is because of his multiple income streams that might serve as a buffer during volatile moments.

“I will note, for the record, that it’s not my only salary,” said Suarez. “It’s a different decision than if a person was deciding to take their salary in Bitcoin if it was the only source of income for them.”

Mayor Suarez drew the attention of cryptocurrency enthusiasts last year when he announced that he will begin taking his entire paycheck as Mayor in Bitcoin. Before the announcement, Suarez publicly announced his desire to pay government employees in Bitcoin as part of efforts to improve crypto adoption in the city. 

Making Miami the crypto capital of the U.S. 

Mayor Suarez has been making moves to make Miami a leading crypto hub since his assumption of office. The city has been receptive to cryptocurrency miners, and there have been conversations about allowing citizens to pay bills and taxes with crypto.

“I want us to differentiate ourselves as a crypto capital of the United States or the world,” he said in an interview with Bloomberg.

Suarez has been backing his claim with actions, with the city famously launching MiamiCoin which netted the city over $5.2 million. In November 2021, there were plans for the city to distribute $21 million to Miami’s citizens through the ambitious plans to create a digital wallet for each citizen.

Miami was the center of attention after successfully hosting the Bitcoin 2022 conference. Major players in Bitcoin’s ecosystem like MicroStrategy’s CEO Michael Saylor, ARK Invest CEO Cathie Wood, billionaire Peter Thiel, CEO of Strike Jack Mallers, and others. Nayib Bukele, El Salvador’s pro-Bitcoin president, was scheduled to make an appearance but pulled out due to unforeseen circumstances.

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Billionaire Investor Ray Dalio Says ‘Cash Is Still Trash’, Prefers ‘Digital Gold Bitcoin’

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Billionaire Investor Ray Dalio Says ‘Cash Is Still Trash’, Prefers ‘Digital Gold Bitcoin’

Billionaire investor and hedge fund manager, Ray Dalio, has reiterated his previous call that “cash is trash”. Dismissing equities as “trashier”, the Bridgewater Associates founder said he preferred “a digital gold like bitcoin” instead.

“Of course, cash is still trash,” Dalio said. “Do you know how fast you’re losing buying power in cash?” He was speaking on CNBC’s Squawk Box during the ongoing World Economic Forum (WEF) meeting in Davos, Switzerland.

“When I say cash is trash, what I mean is all currencies in [relation] to the euro, in relationship to the yen,” he explained. “All of those currencies like in the 1930s will be currencies that will go down in relationship to goods and services.”

Dalio is the founder of the world’s biggest hedge fund firm, Bridgewater Associates, which manages around $223 billion. In January 2020, the 72-year-old American investor advised people to diversify their portfolios by “getting out of cash”, which he called “trash”.

Bitcoin as ‘digital gold’

At Davos, Dalio spoke about a range of issues including stocks, the global economic outlook, and the U.S. central bank’s efforts to combat inflation. He said stock markets had become too crowded, and that compared to cash, “equities are trashier”.

“Everybody is long equities, and everybody wants everything to go up,” said Dalio. “The more they hype it the more it becomes somebody else’s financial asset they’re holding. You can’t have that, so you’re going to have an environment of negative real returns.”

For the billionaire, bitcoin (BTC) is a preferred form of investment at a time of worldwide economic uncertainty. His list of safe-haven assets also includes real estate and precious metals such as gold.

“I think blockchain’s great,” Dalio stated. He touted cryptocurrency’s potential as a fix to what he expects to be a tough year for the U.S. economy, marked by high inflation and a lack of real returns on investments. Continuing, he said:

“But let’s call it a digital gold. I think a digital gold, which would be a bitcoin kind of thing, is something that – probably in the interest of diversification of finding an alternative to gold – has a little spot relative to gold and then relative to other assets.”

Bitcoin’s inflation-hedge credentials under spotlight

Dalio’s comments come against the backdrop of rising disillusionment in the credentials of bitcoin as an inflation-hedge asset. Proponents have argued that bitcoin is a gold-like store of value.

In 2020, many people believed BTC was now poised to transition from a risk-on speculative asset to the crypto market’s version of the metal after its correlation to gold jumped to an all-time high.

But that argument may have started to fall apart with the massive decline in crypto markets this year. Bloomberg data shows that BTC’s correlation to gold dropped to almost zero earlier in January, and as bitcoin prices fell in later months, gold continued to rise.

In April, the 50-day correlation coefficient for BTC and gold was around minus 0.4, the lowest since 2018, Bloomberg said. A reading of 1 implies assets are moving in lockstep, and minus 1 is the reverse.

Crypto markets have become more tied to the stock market instead, particularly to blue-chip technology stocks such as Apple, Amazon, and Microsoft. More than $1.5 trillion has been wiped off the face of crypto markets so far this year.

Dalio forecasts ‘squeeze on demand’

Dalio, the Bridgewater Associates founder, painted a gloomy picture of the global economy in 2022. He expects inflation in the U.S and elsewhere around the world to erode the purchasing power of money, saying:

“We are in an environment that we are now going to ask ‘what is the new money?”

On bonds, he said: “The Federal Reserve is going to sell, individuals are selling, foreigners are selling, and the U.S. government is selling because it has to fund its deficit. So there’s going to be a supply/demand problem, that means that it produces a squeeze.”

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Polkadot parachains spike after the launch of a $250M aUSD stablecoin fund

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Polkadot parachains spike after the launch of a $250M aUSD stablecoin fund

Crypto prices have been exploring new lows for weeks and currently it’s unclear what it will take to reverse the trend. Despite the downtrend, cryptocurrencies within the Polkadot (DOT) ecosystem began to rally on May 24 and have managed to maintain gains ranging from 10% to 25%, a possible sign that certain sub-sectors of the market are on the verge of a breakout.

Here’s a look at three Polkadot ecosystem protocols that have seen their token prices trend higher in recent days.

Acala launches a $250 million aUSD ecosystem fund

Acala (ACA) is the leading decentralized finance (DeF) platform on the Polkadot network, primarily due to the launch of aUSD, the first native stablecoin in the Polkadot ecosystem.

Following the collapse of Terra’s LUNA and TerraUSD (UST), traders were searching for “safer” stablecoin options.

On March 23, ACA rallied after the project announced the launch of a $250 million “aUSD Ecosystem Fund” that aims to support early-stage startups planning to build strong stablecoin use cases on any Polkadot or Kusama parachain.

— Acala (@AcalaNetwork) March 23, 2022

Acala also announced the launch of a kickoff rewards program that has set aside 1 million ACA tokens as rewards for LCDOT/DOT, LCDOT/aUSD, ACA/aUSD and aUSD/LDOT liquidity providers.

Following the aUSD ecosystem fund announcement, the price of ACA spiked 31% from a low of $0.364 on May 23 to a daily high of $0.478 on May 24.

Astar rallies after revealing a partnership with Microsoft

The Astar (ASTR) network is a smart contract hub for the Polkadot community that supports Ethereum (ETH), WebAssembly and other layer-two solutions like zk-Rollups.

Since the Polkadot relay chain doesn’t offer Ethereum Virtual Machine (EVM) support, Astar was created to become a multi-chain smart contract platform capable of supporting multiple blockchains and virtual machines so that they can integrate with the Polkadot ecosystem.

On May 24, it was revealed that AstridDAO, an Astar-based protocol responsible for minting the collateralized BAI stablecoin, had signed a partnership with Microsoft to become part of Microsoft for Startups, an initiative “which removes traditional barriers to building a company with exclusive access to technology, coaching, marketing and support.”

— AstridDAO – No.1 native stablecoin on Astar (@AstridDAO) May 24, 2022

If successful, the partnership should accelerate AstridDAO’s go-to-market speed and maximize its market influence. It also includes up to $350,000 worth of benefits through Github Enterprise, Microsoft Teams and Azure credits.

Following the partnership announcement, the price of ASTR spiked 61% from $0.055 to a daily high of $0.0888.

Related: Polkadot vs. Ethereum: Two equal chances to dominate the Web3 world

Uniswap v3 to deploy on Moonbeam

Moonbeam (GLMR) is an Ethereum-compatible smart contract parachain on Polkadot that streamlines the use of Ethereum developer tools to build or redeploy Solidity projects in a substrate-based environment.

Interoperability with the Ethereum network is a highly sought-after capability since a majority of decentralized applications currently operate on Ethereum along with a majority of the value in decentralized finance.

The benefit of EVM interoperability was demonstrated with the May 24 announcement that a proposal to deploy Uniswap (UNI) v3 on the Moonbeam network passed, meaning that the top decentralized exchange in the crypto ecosystem will soon be accessible to Moonbeam users.

— Uniswap Labs (@Uniswap) May 23, 2022

Following the announcement, the price of GLMR climbed 29% from a low of $1.15 on May 23 to a daily high at $1.48 on May 24 as its 24-hour trading volume increased 106% to $75.3 million.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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