Tag Archives: cardano

Business, Crypto, News, Observation, Tech

Cryptocurrency-funded groups called DAOs are becoming charities – here are some issues to watch

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Above: Photo / Collage / Lynxotic

Cryptocurrency is becoming a more familiar way to pay for things.

One option is as part of a crowd, through a decentralized autonomous organization. In this relatively new kind of group, also called a DAO, decisions and choices are governed by holders of one kind of cryptocurrency token, such as ethereum or bitcoin. DAOs also use “smart contracts” that make decisions through online votes by all participants who wish to weigh in and other forms of automation.

DAOs are essentially clubs that harness both crowdfunding and cryptocurrency to operate in arenas from art to sports. They are also cropping up in philanthropy.

One good example is the Big Green DAO. Launched in late 2021, it’s tied to a decade-old food justice charity that had revenue in excess of US$9 million in 2019.

Big Green’s founder is Kimbal Musk, who is Elon Musk’s brother and a member of Tesla’s board. The DAO version of his nonprofit promises to “disrupt philanthropic hierarchies” by reducing overhead spending and shaving other expenses.

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New terrain

Based on my research regarding crypto-assets, I believe that there are several considerations that donors and charities should keep in mind as these arrangements emerge.

First, DAOs have little if any formal infrastructure. Some states simply require one individual to be designated as the agent of record. Wyoming passed a law in 2021 – the first of its kind in the United States – that legally recognizes DAOs as legal entities. It still requires the DAO to be organized as a Wyoming-based limited liability company, with an individual identified as the registered agent.

In theory, at least, when combined with the quick nature of how DAO decisions are made, this means that nonprofits can achieve more and respond more quickly to changing circumstances, while spending less on administrative staff and other kinds of overhead.

Until now, most cryptocurrency donations to charities simply provided capital to eligible organizations that operate like any other standard nonprofit.

For tax purposes, donating cryptocurrency is like giving away stocks, bonds or other property, rather than donating money. This means, typically, that cryptocurrency donations actually provide donors with a larger tax benefit versus cash donations. If a donor were to instead liquidate their cryptocurrency prior to making a gift, they would first have to pay capital gains taxes, and they would have less money to give away.

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However, it’s unclear whether funds can legally flow to, through and out of a charitable decentralized autonomous organization.

Nonprofits are subject to regulatory enforcement and need to be chartered in a particular state. So far, it’s unclear how regulators, such as the Internal Revenue Service or state charity offices, will be able to monitor or audit these groups.

It’s also unclear whether the very nature of DAOs is compatible with charitable donations.

In most, if not all, instances of for-profit DAOs – or even DAOs organized for a specific one-time purpose, such as attempting to purchase an original copy of the U.S. Constitution – cash or appreciated property that is contributed to the organization is exchanged for governance tokens. The tokens essentially represent a fractional form of collective ownership.

This could be problematic. When donors make charitable contributions, they relinquish the money or asset they just gave to the charity. A basic condition for having a donation be eligible for favorable tax treatment by the authorities is that the donor gets nothing of value in return.

The authorities may eventually determine that the distribution of virtual tokens to donors, even if those tokens aren’t used for anything outside the scope of the nonprofit, violates this precondition.

Wild rides

The clearest risk with those gifts is probably their volatility.

Overall, the cryptocurrency’s total market value sank to $1.6 trillion on Feb. 3, 2022, down from $2.85 trillion three months earlier.

Charities either need to convert these donations into U.S. dollars right away, as they do with donated stocks, or gamble regarding their future value.

Despite all the operational, financial and legal obstacles nonprofit DAOs face, I’m excited about the opportunities with these crowd-managed charities funded by cryptocurrency donations because of their potential for a high degree of transparency paired with low overhead.

Sean Stein Smith, Assistant Professor of Economics and Business, Lehman College, CUNY

Originally published from The Conversation by Sean Stein Smith and republished under a Creative Commons license. Read the original article.

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Breaking News, Business, Crypto, Elon Musk, Observation, Tesla

Elon Musk & Jack Dorsey finally agree to debate for the BitCurious

Above: Jack Dorsey & Elon Musk – Photo – various / tesla / Twitter / collage Lyxotic

Possibly staged “Twitter feud over BitCoin” leads to portentous upcoming event: “THE talk”

Although both Jack Dorsey, head of both Twitter and Square, and Elon Musk are long standing and staunch BitCoin advocates, a lot of chatter around the internet has painted Musk as having gone soft on the crypto currency.

Th narrative that has been put forth pits his loyalty to Bitcoin as somehow incongruous with his support for DogeCoin, the somewhat less serious AltCoin variant he has openly championed.

Intermingled with this straw-man charade, is the also over-hyped idea that the energy used by BitCoin mining is a factor in global warming and therefore a stain on Musk’s otherwise high profile positive sustainable energy resumé.

While many article have shown this argument to be blown out of proportion at best, apparently the whole world (China, if you’re listening) has seized on this talking point as a way to damage BitCoin’s popularity and pedigree.

The attempt to use this argument to undermine BitCoin’s adoption progress and futuristic pedigree appears to have already backfired, however. For example, at the recent BitCoin conference in Miami, Jack Dorsey announced plans to invest in a sustainable energy powered BitCoin mining facility.

Elon Musk has also stated via his twitter account that Tesla would resume accepting BitCoin payments, as soon as more miners switch to renewable energy. This coming after he had announced, to great fanfare, that Tesla would accept the cryptocurrency and then, in May, reversed the decision after backlash from those who pounced on the issue to try to tarnish Tesla’s sterling reputation as a proponent of the transition to sustainable energy.

The hype is warranted and the buzz can begin

Though not yet confirmed 100%, the Twitter exchange between the two titans implied that the “talk” would take place in conjunction with the “The B Word” BitCoin conference, which kicks off on July 21, 2021. Sponsored by Ark Invest, Square and Paradigm, the big name speakers and hype already building, along with the timing, coming on the heels of a huge peak then “crash” in the crypto markets, looks to be a watershed event for Bitcoin and cryptocurrencies in general.

Details on whether the exchange between the two will be live on stage or via video conference have, as of yet, not been revealed.

Twitter and Square CEO Dorsey tweeted Thursday about an upcoming “The B Word” bitcoin event, and Musk responded to it. It’s unclear if the event, which kicks off on July 21, will be virtual or in-person.

The potential for drama as the two discuss a topic on which they, for the most part agree, is a smart way to hype the event, both the conference itself and the monumental meeting for “THE Talk”.

Regardless of any fireworks or revelations coming out of the event and the meeting between these two incredibly influential business leaders, the upshot is that all of the above is a net positive for BitCoins progress toward more widespread adoption and acceptance.

Critical mass may already been achieved for crypto in the US

The overly manic focus on price fluctuations notwithstanding, there is a rapidly growing sense that the #1 cryptocurrency as well as all related coins and activities are reaching the point, in the US, that it will be impossible to return the genie to the bottle.

Any attempt to block or outlaw, in totality, the emerging world of crypto-finance, is likely to fail. Realizing this there appears to be a faint whisper of capitulation on the part of both the government in the US and among the “old guard” establishment, namely Wall Street.

Dorsey’s take, as quoted from his appearance at the BitCoin conference in Miami:

  • “Governments are trying to block cryptocurrency use to avoid losing hold of power”
  • “It can’t, and it never will.” — musing on the likelihood of Wall Street controlling bitcoin.
  • “That’s why we don’t deal with any other currencies or coins — because we’re so focused on making bitcoin the native currency for the internet.” — when asked about payments provider Square’s ambitions for bitcoin.

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Business, Crypto, Economics, Finance, Observation

Bitcoin and Crypto’s Crash is not the First, the Largest or the Last

Above: Photo by Michael Krahn on Unsplash with elements added by Lynxotic

Coming after a frenzied run-up the hand wringing is no surprise

I many ways it seems as if Bitcoin and Cryptocurrencies appeared suddenly in 2021 out of the head of Zeus. Protean and fully formed, with billions and trillions in market caps, and all your sisters, brothers, cousins and even the Uber driver climbing aboard.

And the FOMO blog posts, where every hour an innocent reader is assaulted by a story, perhaps true, perhaps exaggerated and certainly foolhardy in retrospect, of an innocent putting their life savings into Dogecoin and suddenly having, theoretically, huge gains at their disposal.

Meanwhile, craggy faced, ancient stock market mavens would interject famous last words that now appear to be wise. However, all that notwithstanding, this week’s crash is nothing new or unexpected.

In reality, as can be seen from the graphic below, provided by Visual Capitalist, there have been so may crashes / corrections and doomsday prognostications since 2012 in Bitcoin that it seems like a miracle the there’s any thing such as Crypto at all.

There’s a reason it’s not dead and it’s in the DNA

The resiliency, far from a shock to those that have been around more than a fortnight, is kinda the point. When Satoshi Nakamoto built the system architecture of Bitcoin and since then inspired the over 8000 new crypto entities that have been developed, it was, just like the internet itself that was build to survive WWIII, supposed to be as indestructible as possible.

Like physical gold, which is considered have been adopted as a store of value partly due to its indestructibility and immutability (alchemy notwithstanding) the volatility and sometimes violent-seeming life story of Bitcoin is a necessary adjust to its role in finance, commerce and even individual monetary survival.

Not for the faint of heart, perhaps

While the mainstream and those forces opposed to the adoption or survival of Bitcoin and Crypto are out in force pointing to the “unsuitability” of Bitcoin and other cryptocurrencies for any “legitimate” use as a trade or savings vehicle, the progress so far, in spite of the obvious fact that volatility has always been baked in to the situation, is an obvious refutation of that viewpoint.

Will the current drop in dollar values relative to Bitcoin end it’s popularity and strip it of the respect it has thusfrar earned among many? In a word, no. In essence what is happening is, as many have foretold, what happens often and repeatedly, the excess attention and dollars that were pumped into crypto by you brother, sister, cousin and Uber driver are now getting blown out, since those were more speculation and psychosis than any kind of vote for viability or permanency.

And, why not? Where was to concern, shock and hesitation by the masses when the prices seemed to only rise for weeks and even months across so many products and coins it was impossible to keep count? Why was to feeding frenzy and the mania-like piling on not ignored as an anomaly?

The herd does as the herd will do. Diamond hands and Paper hands will ebb and flow as long as the rivers flow to the sea and humans herd like buffalo. And, in all likelihood, dollars and euros and yen will be long forgotten when the last bitcoin is transferred to the final wallet in the sky.

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Lynxotic does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Business, Crypto, Economics, Finance

Elon Musk is taking sides in the ‘True Battle’ between Crypto & Fiat

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Above:Photo Credit / Unsplash / Collage / Lynxotic

If you are stuck on the word ‘fiat’ this post can help you (everyone else too)

In a single, 14 word reply to a follower (@TheRealShifo) that asked “Yo Elon what do you think about the peeps who are angry at you because of crypto?” He gave a simple answer that is the often unmentioned, yet most important, question regarding crypto vs. fiat, government issued, currency such as the US dollar.

Looking around during the ongoing frenzy surrounding crypto and digital finance you’ll see countless ‘news” stories and blog posts comparing, or pretending to compare cryptocurrencies, especially the two biggest Bitcoin and Ethereum (as coin sometimes referred to as “Ether”) and they virtually always quote the “price” fluctuations of those coins as a certain number of dollars and cents.

Interestingly I have yet to see any of these “comparisons” use the reverse valuation method, such as, “the US dollar is currently worth .00002703 Bitcoin. Can you imagine everything using that as a standard – CNBC quoting stock prices in Bitcoin, your house is “worth” 32 Bitcoins (if you’re in California, for example).

The reason this comes off sounding strange and ridiculous is that all communication related to the US dollar, which has been a fiat currency since abandoning any “backing” (such as gold) and continuing on by decree (or fiat) of the government with no backing other than than decree, also carries a decree (tacit) not to undermine it in public.

So when Elon says:

“The true battle is between fiat & crypto. On balance, I support the latter.”

Simple and straightforward and yet intentionally shrouded in mystery

Musk is directly comparing crypto, generally, and fiat currencies around the world that “float” against each other. And by inference, doing so in terms of the difference between a fiat currency like the US Dollar and a crypto currency, like Bitcoin.

A fiat currency is money that is not backed by a physical commodity like gold, but instead backed by the government that issued it. Most modern currencies, such as the U.S. dollar, euro, pound and yen, are fiat money.

from Wikipedia

The term fiat derives from the Latin word fiat, meaning “let it be done” used in the sense of an order, decree or resolution.

— common Definition

The fact that Bitcoin was created as a digital alternative to fiat money stands at the forefront of that point. The fact that it was designed precisely to counter the drawbacks and dangers of a system based on fiat paper money (or digital ledgers of those paper dollars such as your bank balance or any method to keep track of how many “imaginary” paper dollars you “have”) is exactly the real issue at hand.

photo credit: twitter

It’s no secret that many attack those goals and intentions superficially and dismiss the entire discussion with a wave of the hand. They willfully use the complexity of the cryptographic solutions, at the heart of cryptocurrency, as a way to gloss over the real and substantive problems being targeted.

They prey on the ignorance of the majority to try and discount out of hand any value at all for the movement and the various products.

Opening up the door to this exact exchange and characterizing it as a “battle” in one fowl swoop clarifies and simplifies the real issues and the real reason for the existence, and according to many, including Elon Musk, the need for monetary “reform” or change via a shift toward crypto.

Opening up the door to this exact exchange and characterizing it as a “battle” in one fowl-swoop clarifies and simplifies the real issues and the real reason for the existence of, and the need for, monetary “reform” or change via a shift toward crypto.

D.L.

The “price” of Bitcoin or any other crypto currency on any given day has almost nothing whatsoever to do with that debate.

Speculation abounds but not just in Crypto

The “price” is a function of, mostly, speculation and scarcity, due, in the case of Bitcoin to the mining cap, or at least a perceived scarcity. And additionally the various perceived advantages of crypto such as privacy, decentralization, use of block chain systems, etc.

But the price is like the smoke above the battlefield, not the reason for the battle or any indicator who is winning or who is on the side of might or right.

Two major questions that arise from this tweet and the potential shift toward a clearer and simpler dialogue on crypto are the following:

  1. Is crypto generally, and Bitcoin / Ether more specifically established and entrenched enough to withstand the coming backlash from governments that feel threatened and other status quo institutions that will do whatever it takes to discourage or even stamp out crypto usage?
  2. Will the very battle itself, that Elon Musk says is the current “true” battle, bring even more attention to the weaknesses and problems with the current fiat money system and thereby increase, perhaps inadvertently yet massively, the size of the battle and its stakes?

Alternative systems of trade have been tolerated in the US for some time now. How are those air miles doing? What about the chips and points for perks you got at the Indian Casino? Is it too late to outlaw all crypto without causing a revolution in the streets?

The other side of the (clipped) coin

It is truly surprising to see how little is to be found in the media about the deeper reasons for the rise of crypto. How it sometimes seems like direct criticism of fiat currency is almost taboo.

Naturally any internet search will find many “rabbit hole” sources for all kinds of information critical of the current monetary system, the same system the near total collapse of which in 2008 inspired the creation of bitcoin.

It appears that Elon Musk is emphasizing, in a subdued manner, exactly the way that the nonsense-furor over huge price gains or declines is completely missing the actual point. The “true battle”.

Many stories in the media and millions of private comments are currently following a kind of convoluted logic – first the popularity of crypto (which is linked to the unpopularity of the very messed up fiat system) artificially and massively increases prices in many crypto assets.

This “bubble”, a typical outcome of human herding behavior in financial markets, inevitably bursts or sees large setbacks. Then the coin or crypto system itself is blamed for the human stupidity and greed that caused the distortions of price, just like happened in the dot-com bubble and the 2007 housing bubble and subsequent crash.

The difference is that the crypto bubble, in an interesting way, is in reality due to a surge in skepticism toward fiat currencies, a boom in the prevalence of mistrust toward governments and a combination of fear and greed that is growing, not dissipating.

Although many have rightly criticized Elon Musk’s tweets and odd Saturday Night Live appearance, and there is a kind of mini-backlash (growing?) against all things Musk, in this case it is a healthy and wise tweet that we have shown above.

Reframing, or more aptly refocusing the discussion away from prices and speculative profits and back to the real reasons that cryptos were initially created and why it has gained such massive support is a welcome shift. That this reframing comes from the likes of Musk himself, is fitting and who better to put forth a message to simplify and clarify the nature of the real “battle” at hand.

The following video has some interesting data and arguments for, and mainly against, the fiat regime under which we have lived for most of the last century. Although, in a sense, a kind of advertisement for Gold and Silver, the overview is nevertheless accurate and does not exaggerate the dangers and issues that revolve around the fiat system.

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Lynxotic does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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