October 11, 2017
Good Day, Madame Chairman. Chairman Clayton and Commissioners Stein and Piwowar and the members of the Investor Advisory Committee. I appreciate the opportunity to represent The Digital Reserve in the October 12, 2017 Investor Advisory Committee. My name is Jomari Peterson. I am the Chairman for the Digital Reserve Public Benefit Corporation. The Digital Reserve PBC supports financial inclusion through a novel micro-finance focused proof of stake distributed ledger. I previously served as a co-founder to the Quantum Resistant Ledger, as the Strategy and Operations Lead. In addition, I am a PhD candidate at Carnegie Mellon University in Engineering & Public Policy. It is an honor to offer some insight into our perspective on these new digital systems and infrastructures.
The Digital Reserve believe that it is important to establish some form of regulation to offer the clarity necessary to prevent or mitigate harm to citizens and stakeholders. However, we strongly advocate that a priority be placed on simple rules and low-cost actions for the creation of these new elective economies and assets. It is important to realize that the internal protocol and purposes of these various implementations are extremely diverse. They need the room to grow and shape themselves. Many of these token sales are reliant on the response and contributions of communities to meet their stated goals. Therefore, the expected benefit to the community and empowerment given by these technologies should be carefully considered.
We appreciate that the SEC has not pursued a one size fits all approach to distributed ledger technology and blockchain implementations. It is important to consider that aside from the ability to create a ledger of transactions in a distributed manner, many of these technological implementations are also creating new markets and economic structures. This work is not something that can be effectively done without the ability to exist outside of current regulatory structures and frameworks. Therefore, we at the Digital Reserve, strongly advocate that these crowdsales be weighted against their reliance on inputs outside of the distributed ledger's internal protocol. In the case of lending, there is a strong difference between lending tokens that represent a value in United States Dollars and tokens that operate as a totally separate unit of account. While exchanges due exist, there are secondary markets of exchange and trade which should not be considered in the evaluation of various implementations.
When it comes to Initial Coin Offerings (ICOs)/ Token Sales many of these developing applications are aiming to create the building blocks for communities to create value. Thus, to support the research and development for establishing new institutions, it requires an initial influx of funds to provide the funds for operations, development and a method for distributing the initial tokens. That initial token distribution is vital to systems that are reliant consensus mechanisms which emphasis the utilization of held coins. The most prevalent form of this is Proof of Stake which focuses on securing the network by users. These users have an incentive to maintain honesty because their internally staked tokens are used as collateral for their continued honest behavior. These type of internal economic system requires an initial distribution that in many cases is most effective through a crowdsale where participants are provided tokens for their support. This is why the focus of the internal protocol is important. An important question about the design should be if the tokens are meant to be an independent product or intrinsically connected to the current economic systems like the United States Dollar or other regulated assets. This distinction is what we at the Digital Reserve believes that separates various distributed ledger and blockchain implementations.
The Digital Reserve is very excited to participate in the continued dialogue and would love to provide any resources necessary to deepen the understanding about these subjects.
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Jomari Peterson
"Creating the Context for Miracles"