Connect the before and the began
It is the last article in a series of cryptocurrency analysis articles. From “Invite out Satoshi Nakamoto to Welcome the New World” in January 2023 to “The Role of the Cryptocurrency Foundation” in October 2023, 91 articles expressed our Perspectives on Cryptocurrencies. Our point of view is not the mainstream view of cryptocurrency. Our primary point of view is to use blockchain to summarize Satoshi Nakamoto’s thoughts and believe that Satoshi Nakamoto should not come out is untenable and objectively hinders the development of cryptocurrency. This point of view has been repeatedly stated from different angles in the above articles. Many innovations in the cryptocurrency space deserve recognition and further development, and it is impossible to go into detail about these developments. The related articles are the theoretical basis and ideological source of chainless systems.
Starting from the following article, we will enter the white paper series. An early introduction will be made around the decentralized currency DW20 and the WEB3.0 chainless financial platform. The official release of the project white paper will be synchronized with the seed round airdrop and the APP’s download. The chainless website (chainless.hk) will be the official website of the chainless system and a forum for communication with the user community.
This article describes why cryptocurrencies need foundations rather than companies.
Ethereum becomes a role model for the development of cryptocurrency foundations
The emergence of the cryptocurrency foundation is the need for ICO (initial coin offering). It has not yet been found who first proposed the cryptocurrency foundation. The earliest ICO appeared in the form of “token crowdfunding.” On July 31, 2013, J.R. Willet issued Mastercoin. He published a paper on the Bitcointalk and gave a Bitcoin address. The financing of the currency is very rudimentary and does not have a clear legal structure. In an interview, Willett was thankful he did not go to jail.
In June 2014, Ethereum started pre-sale. In terms of fundraising method, Ethereum also adopted the form of lCO like Mastercoin. Unlike previous lCOs, Ethereum is conducted under a specific legal framework. In order to make the pre-sale of ETH comply with legal and financial regulations, the Ethereum community has established several legal entities, including the non-profit Ethereum Foundation, established in Switzerland in June 2014. Deepchain author “DoorMen” believes: “The subsequent lCO projects are basically based on the Ethereum framework.”
Features of the Ethereum Foundation
1. Non-profit
There are many types of foundations, and there is no unified model. The first characteristic of the Ethereum Foundation is that it is non-profit. The Ethereum Foundation has a source of income, which is 2% of the total transaction fees of Ethereum, which is used for management fees and other expenses. The biggest problem is investing in ecological projects. Since it is not profitable, the Foundation will not have a share even if the ecological project makes money. At that time, in order to avoid illegal fundraising, They left flaws, which is unreasonable now. The chainless system retains 35% of its profits, and this retention will likely be used to invest in ecological or non-ecological projects to expand the chainless system’s profits further. Top Web2 projects invest in business-related projects to strengthen themselves, which has become a sharp tool, while the “non-profit” of non-profit foundations is a self-cut arm. How can you defeat Web2 without mergers and acquisitions? If a foundation profits from its investment, it can just pay taxes. Therefore, a non-profit foundation is the wrong option and has become one of the reasons that restricts the development of cryptocurrency.
2. No Equity
The Ethereum Foundation “holds” less than 1% of Ethereum’s equity and does not have a corporate structure in the traditional sense. Nor should it be restricted by conventional corporate law. After Ethereum 2.0, Ethereum represents the “equity” of the Ethereum system. For detailed analysis, see “Looking at Cryptocurrency from 12 Head Projects” (chainless.hk). Ethereum’s decisions are not based on “coin ownership.” The same coin has different rights. This situation resembles the stock market’s A and B share structure. However, stocks have clear explanations, clarifying the relationship between AB stocks, but Ethereum does not. From the perspective of corporate governance structure, no fund law or company law meets the needs of Ethereum. The Ethereum Foundation mainly relies on moral constraints.
The Ethereum Foundation is the core team of the Ethereum system
The role of the Foundation is not to control Ethereum. Its mission is to promote the development and growth of the Ethereum ecosystem and provide support and resources to developers, enterprises, and communities. The Foundation’s work focuses on:
Protocol research and development: The Foundation’s research team is committed to promoting the development and improvement of the Ethereum protocol, including network security, scalability, privacy protection, etc.
Ecosystem support: The Foundation provides financial and non-financial support to projects and entities within the Ethereum ecosystem through grants, incubators, etc., to accelerate the ecosystem’s growth.
Community building: The Foundation promotes communication and cooperation within the Ethereum community and enhances community cohesion and innovation by organizing meetings, events, social media, etc.
We see that the Ethereum Foundation has the ultimate responsibility for system security, fund allocation, and future development, and they also have legal and other personnel. This power means the Ethereum Foundation has the right to operate the Ethereum system.
Influence operations: They are based on a very loose foundation, which we call influence operations. The core value of tokens as a community bond has not been truly utilized.
The Ethereum system does not have a user community, while the chainless system does. Therefore, the community of Ethereum is not a community of all currency holders.
The Ethereum Foundation is just a limited centralized team
Obviously, Ethereum is different from Bitcoin, which does not have a core team responsible for operations. Although Ethereum has it, the core team of Ethereum does not have as much power as the traditional centralized team. One of the reasons is that following the principles of openness, justice, and transparency of Bitcoin, the second core team pays more attention to development. This is the natural evolution of history. Due to the existence of forks, it also limits their management of ecological projects on the platform. The third is a high degree of automation, with nothing to manage.
No checks and balances on the Ethereum Foundation
The corporate governance structure of listed companies has checks and balances on the management team. What is the power to check and balance Ethereum? The chainless system is designed with checks and balances to prevent the core team from doing evil.
What should the equity-free core team be called?
The Ethereum Foundation is the offline Foundation closest to cryptocurrency’s characteristics. Using the word Foundation to describe the core team is not accurate. Using the term operating company to describe it may be more precise, which aligns with the separation of ownership and management rights practice. The trustee operation has mature experience, and the trustee accepts the election of all currency holders. There are direct elections and indirect elections. The stock market generally conducts direct elections through shareholders’ meetings. Indirect elections are used in the chainless system community, where the group owners vote indirectly to elect the core team, and the community screens the candidates out at all levels.
Community projects generally have dispersed “shareholdings,” and there is no absolute “major shareholder.” Emphasizing no equity, using a foundation is in line with the current legal environment, but the organizational structure of a foundation is too simple. Why does Buffett compose companies rather than funds? Because they have equity and a complete corporate governance structure. The amplified community is the country. The president has no “equity” and is elected. The decision-making power of the Ethereum Foundation is greater than that of the president because the president is still subject to checks and balances.
The core team of community projects should be called an operating company or Opecompany in the future. However, the current legal environment is not feasible.
Enter the chainless white paper
The community is an area worth exploring, and the practice of cryptocurrency is ahead of humanity. We see the successes and failures. Chapter 3 of the Chainless System, Community, and Chapter 4 of the Core Team are all summaries and explorations of practices in the cryptocurrency community.
Entering the chainless white paper, we first start by explaining the series of innovations in the chainless system, which is divided into four sections:
1. Product innovation of chainless systems;
2. Innovation of production relations in a chainless system;
3. Business model innovation of chainless systems;
4. The role of the core team of the chainless system.
In the preface of the chainless white paper, it is said that the ideological value of cryptocurrency is greater than the product value, and the product value is greater than the value of the blockchain ledger. The series of articles and whitepapers express this idea. The general expression is machine trustworthiness based on openness, fairness,unbiased, and competition, realized through the Bitcoin system. Nick Szabo, one of the founders of Bitcoin, also expressed the same view: Although technology is essential, the design of Bitcoin is the most important.
We first proposed the token distribution POP algorithm based on the number of people in the production relations innovation. For information on the POP algorithm, see Chapter 2 of the chainless white paper. POW is an algorithm based on time, POS is an algorithm based on equity, and POP (Poof Of People) is based on headcount (traffic). Most projects on the Internet are based on traffic. If our experiment is successful, it will push cryptocurrency applications to a new stage.
In the business model innovation, for the first time, relying on the chainless user community and indirect incentive plan, a business model in which the wool comes from the “pig + sheep” was proposed. This model amplifies user value through community design. See Chapter 3 of the Chainless White Paper for details. The groping in the dark by cypherpunks such as Nick Szabo and Satoshi Nakamoto offered the design ideas and successful products of Bitcoin, created new ideas for humanity, and made improved innovation possible.
