The SEC has filed a lawsuit against Binance and its CEO Changpeng Zhao. The lawsuit is extensive and, among other things, alleges that the ADA is a security. The SEC's activity can be seen as an attack on the freedom of citizens and an effort to prevent the development of modern technologies that have the potential to change the world for the better. The good news is that Cardano is a decentralized network. Each of the 1.3M ADA stakers is involved in decentralizing Cardano along with 3,000 SPOs around the world. The SEC can't stop Cardano and is very likely wrong in thinking that the ADA is security. Cardano is not just a protocol, but a movement fighting for ideals and freedom. This can't be stopped by a court decision.
The hundreds of Catalyst-funded teams are no less official than the IOG, Cardano Foundation, and Emurgo. Every private key in the stakers' wallets is a key to freedom and keeping Cardano running. Cardano is not just a protocol, but a collective effort of the entire community, which is why the ADA cannot be classified as a security.
Cardano is unstoppable by design
The SEC views Cardano as a technology being built by three founding entities, IOG, Cardano Foundation, and Emurgo. The SEC believes that these entities are doing so with the intent to profit and that all ADA holders are investors. The purchase and holding of ADAs should allegedly be considered an investment. This perception does not match reality and the SEC is wrong on almost everything. Cardano has been built from the beginning to be as decentralized as possible.
ADA coins cannot be a security, since by holding native coins of the Cardano protocol, each holder can potentially become an active participant in the network consensus. Cardano is a decentralized network and the quality of this property is directly related to the distribution of ADA. If ADA coins were held by a single entity, the network would be centralized. Each new ADA holder increases the quality of the network by making it more decentralized.
In addition to block production, ADA holders decide how to fund ecosystem development through Catalyst. Fund10 was recently announced, so there have been 9 successful Funds in the past. ADA holders have been deciding what projects get funded. Some of the winners include the dcSpark team. dcSpark is no less official than, say, the IOG team. The reality is that people who are not directly employed by the IOG team are involved in the development of the protocol and the entire ecosystem.
The market value of ADA coins is not influenced by the 3 founding entities but by all ADA holders. It is true that the IOG has the greatest decision-making influence on the development of the protocol. However, it was the Staking Pool Operators (SPOs) who were able to participate in the voting to change key protocol parameter settings. Cardano is entering the Voltaire era when governance will be handed over to the ADA holders. This handover was declared from the very beginning of the project.
The market value of the ADA is influenced by each project stakeholder whether they want to or not. The primary purpose of ADA coins is not to gain profit, but to decentralize the protocol around a scarce resource. From our point of view, it doesn't matter that some people may buy ADA coins primarily for speculation. Whether they want to or not, all ADA holders participate in decentralization, even if they are not active stakers.
Many factors affect the market value of ADA coins. In addition to the activity of the founding entities, it is also the decision-making of ADA holders and this has a direct impact on adoption, the quality of the ecosystem, the number of applications, etc. External events such as the mood of the global markets, or the success of other blockchain projects, cannot be influenced.
Cardano is an unstoppable network by design. Nowhere is there a STOP button to stop the network. Block production, a key functionality for Cardano's existence, is in the hands of the SPOs, not the founding entities. There are around 3000 registered SPOs in the Cardano ecosystem from all over the world who need to obtain ADA coins for this activity. They can buy ADA coins or obtain them through a delegation process from stakers.
Each private key in the Cardano wallet is essentially a tool that decentralizes the network. There are 1.3M stakers worldwide. These people are not registered anywhere and it is almost impossible to find them all or confiscate their keys in some centralized way.
If the authorities succeed in shutting down a pool in the US, many other pools will spring up elsewhere. US citizens can run a pool from another country and it is very easy to send the ADA to the other side of the world.
In terms of governance, Charles Hoskinson is not the CEO of Cardano and has almost no control over the protocol. Cardano is fundamentally similar to Bitcoin and basically, all other blockchain projects that are decentralized. Every blockchain project has a team, a GitHub maintainer, and some leaders who make key decisions. The only difference between Cardano and Bitcoin is that the IOG team is transparent about the individual members and the distribution of roles. Bitcoin's development is a little less transparent, but it is possible to trace key people with a lot of influence on the development of the protocol. What is important in both cases is that users, including pool operators, can refuse any upgrade to the protocol. No member of the Cardano or Bitcoin team can force a change in the protocol.
If anyone can be identified as a Cardano owner, it would be all ADA holders. In the case of Bitcoin, it would be the miners.
Even if by chance Charles Hoskinson and all the members of the team are imprisoned, it means nothing to Cardano and the development can continue. Cardano's research is not only taking place in the IOG team but at several universities around the world. Innovation may be slowed down, but not completely stopped.
Thanks to Catalyst, many independent teams are working on Cardano. It's very easy to focus more on protocol development at the expense of ecosystem development. ADA holders decide what gets funded. They decide about the future and basically about success. The teams behind decentralized protocols actually have much less control than the SEC and many people think.
ADA is not a security
The primary mission of the SEC is to protect investors, maintain fair and efficient markets, and facilitate capital formation. The agency achieves this by overseeing key participants in the securities industry, such as securities exchanges, brokers, dealers, investment advisors, and mutual funds. The SEC works to ensure that these entities operate in a manner that is fair, transparent, and in compliance with the applicable regulations.
As we have explained, ADA holders do not need SEC protection because they are not investors, but primarily people involved in the development of the decentralized ecosystem.
None of the founding entities ever claimed that ADA coins would have a higher market value in the future. Charles Hoskinson has explicitly stated on several occasions that he has no influence on the value of the ADA coins and that he does not care. The initial coin sales were deliberately made in Japan, outside of US jurisdiction. "Investors" from the US did not have a chance to participate in the initial sale of ADA coins. Even VC funds did not participate.
ADA can be traded on centralized exchanges such as Binance. If the exchanges are violating the law, it's probably okay for the SEC to do its job. Just because Binance trades ADA doesn't mean that ADA is a security. So the question is what the SEC should do if an exchange is trading a digital asset that may not be a security. Let the lawyers answer that question. However, shouldn't exchanges follow the law regardless of what they trade?
In our view, the SEC is failing in its function because it has allowed many centralized exchanges to operate in the U.S. for years without a clear position. The SEC is unable to give a clear opinion on what cryptocurrencies are or are not considered securities. SEC chair Gensler declines to say if ETH is a security in a contentious Congressional hearing. He is unable to answer even a simple question after several years of ETH sales in the US. ETH is not named in the Binance lawsuit, so maybe Gensler (or the SEC) has changed his mind.
The value of basically everything in the world is changing, including the value of money. The potential change in the value of digital assets and the fact that they can be traded on an exchange does not automatically make them securities. Cryptocurrencies are a whole new asset class and should be treated as such. In many other countries around the world, the authorities have understood this. The SEC is one of the few authorities, and this is true even within the U.S., which is trying to regulate technological innovation with laws that are decades old. We hope that common sense will prevail.
Attack on freedom
The SEC's activity can be seen as an attack on freedom. Anyone who understands the basic principles of blockchain technology knows that it allows us greater independence from intermediaries. Cryptocurrencies in general make it harder to gain control over people's activities. This is the opposite of what many in power are trying to achieve.
The right to choose our community, to own property, to own our identity, to own our money and our data, to vote on our future, all of this can be enabled by blockchain technology. Protocols, along with coins, are the tools to achieve this. Protocols and the communities around them are inseparable. They bring us greater freedom. Entry is voluntary.
Our world is becoming increasingly complex. Governments are no longer in control of what is happening around us. IT giants control the data. Central banks control money. Governments across the world are unable to agree on solutions to global problems. It is clear that those who control technology will control people. This may be, for example, the CBDC or some form of social credit that we see in China. Decentralized open-source projects will allow us to retain our freedom.
In a way, we are seeing a battle of technologies. Decentralized systems built from the bottom up will compete with those controlled by the powerful.
At this point, it doesn't matter if you consider Cardano, Ethereum, or Bitcoin to be the best blockchain in the world. There's a lot more at play, and divisions between communities are petty and unnecessary in this context. On one side are those who want freedom and on the other side are those who want to usurp power. All decentralized networks are on the side of freedom. If communities work together to defend their fundamental rights, they will be stronger.
Every ADA holder is a freedom fighter at this point. Cardano, as a decentralized network, is a tool for communication among us. Cardano allows us to collaborate, make decisions, and be financially independent. I believe other communities feel the same way. If the pressure from the SEC continues, it will be the perfect time to bring communities together. Let's take advantage of that.
It is difficult to estimate further developments. If the SEC proves in court that CZ committed fraud, it is very likely that he will get punished. Binance exchange may get a heavy fine and go out of business in the US. This would be unpleasant, but the blockchain industry will survive this event.
Cardano's existence is not dependent on Binance. A decentralized network cannot be stopped by this type of event. Anyway, all of you who hold ADA coins on this exchange better download them to your own Cardano wallet immediately.
Most stakers remain loyal to Cardano. All the developers are at work, building. The SEC had no effect on DeFi summer and this morning we reached a new ATH in terms of locked ADA coins. The world keeps running, Cardano keeps producing blocks and nothing serious has happened. Just keep calm and stake ADA.