Addressing a small gaggle of reporters this week at the Collision Conference 2018 in New Orleans, Ethereum co-founder Joseph Lubin said he felt "absolutely unconcerned" about recent reports that the Securities and Exchange Commission (SEC) was weighing whether it can and should regulate Ether.
"We are absolutely unconcerned about the current discussions," he said.
After acknowledging that former Commodity Futures Trading Commission Chairman Gary Gensler said last week that Ether and Ripple shared characteristics of securities, not commodities, Lubin added, "We are comfortable that many regulators that matter understand what Ethereum is."
Security Or Commodity?
Second only to bitcoin, Ether is the world's second-largest cryptocurrency by value. The cryptocurrency is built off Ethereum, an open-source, decentralized computing platform that uses blockchain technology to facilitate so-called "smart contracts."
Like many cryptocurrencies, Ether currently occupies a regulatory gray area.
At the moment, cryptocurrencies are classified as commodities by the Commodity Futures Trading Commission. On May 1, however, the Wall Street Journal reported that the SEC was in the process of deciding whether to classify Ether as a security instead.
Neither is correct, says Lubin, because Ether isn't actually a cryptocurrency at all.
"We don't really consider Ether a cryptocurrency," Lubin told reporters. Instead, "we have always considered Ether a 'crypto-fuel,' or one of the first crypto-commodities."
How To Regulate?
Lubin's reasoning is that Ether "fuels" apps on the Ethereum blockchain. Meaning, every time a developer relies on resources from across the greater Ethereum network—whether for data storage, computational power or so on—they must first pay some fraction of Ether.
That makes Ether "like oil or gasoline in the economy," said Lubin.
However, neither oil nor gasoline are used as a payment method in most modern economies.
When pressed on which regulatory scheme a crypto commodity ought to fall under, Lubin said, "I'm not sure that Ether needs to be regulated in any way."
He pointed to the examples of cellphone minutes or air miles, which are traded between a company and its consumers in a nonregulated fashion.
"It's a way of accessing a shared compute resource," he said.
Could Ether Be A Currency?
On the news of the regulatory scrutiny, Ether fell 6% by value, though it has since recovered some of that decline.
Lubin brushed off concerns about the price volatility.
"We're just all about building software," he said, though he admitted he liked when the price of Ether went up, because "it brings attention to the ecosystem."
Lubin also addressed whether he thought Ether, or any cryptocurrency, had the potential to move beyond life as a speculative instrument to instead fulfill the actual functions of currency, such as acting as a medium of exchange or as a measure of fair value.
"Money was invented to facilitate barter," he said. But, he added, "We can now exchange things in trustworthy atomic swaps, where there is no counterparty risk. … There will be, in these kinds of transactions, no need for the facilitation of money."
Will Ether Make Currency Obsolete?
The Ethereum architecture, said Lubin, opens up "a world in which you're going to tokenize everything," from gold to electricity, from real estate to music to reputation.
"Virtually everything is going to move into these natively digital, noncounterfeitable, digitally scarce representations," he said.
"Deep markets" will develop around these tokenized products, he predicts, leading traders to congregate on decentralized exchanges.
"These traders, as they often do, will try to manipulate markets, or do things that enable them to make money," said Lubin. There are some sophisticated techniques in centralized markets. And there will be sophisticated techniques in decentralized markets."
His solution? "We're going to need radical decentralization," he said.
Rise Of Global Villages
Right now, we are in the midst of a currency evolution, says Lubin, from centralization to decentralization.
Central banks will continue to issue currency, but he says "there will be use cases for which a global decentralized money is proper or necessary. And there will be many situations where we’re just exchanging different kinds of tokens for specific context."
One example Lubin offered was "global villages," or communities that would emerge in response to a shared goal, such as curing cancer or supporting a band.
"These groups can issue their own token, trade their own token and incentivize people to work for this token, because it has some value for various reasons," he said.
"The nature of money is going to evolve," noted Lubin, adding, "Though certainly, nation states will still issue their own."
Contact Lara Crigger at [email protected]