May 6, 2021 Blockchain and Bankruptcy: Short term and long term observations of how blockchain technology can affect the law and practice of bankruptcy Presented by the Orange County Bankruptcy Forum

SPEAKERS Jonathan Dunsmoor Securities Attorney | Investor | Blockchain Believer

William J. Wall The Wall Law Office Bankruptcy Attorney

MODERATOR Anerio V. Altman Lake Forest Bankruptcy

Date/Time: Thursday, May 6, 2021 12:00 pm - 1:30 pm PT

This activity has been approved for Minimum Continuing Legal Education by the State Bar of California in the amount of 1.5 hours of CLE. The Orange County Bankruptcy Forum certifies that this activity conforms to the standards for the approved education activities prescribed by the rules and regulations of the State Bar of California governing MCLE.

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Jonathan C. Dunsmoor, Esq. is a US corporate attorney who focuses his practice on securities law and regulatory matters including blockchain related offerings, asset management in DeFi, and governance tokens. Mr. Dunsmoor represents private companies, including those exploring blockchain/ cryptocurrency opportunities, as well as angel investors and investment funds. He has extensive experience in structuring, negotiating and consummating public and private securities offerings with a particular focus on technology driven finance including Crowdfunding, Regulation A+ and Security Token Offerings. He routinely advises large financial institutions and both private and public companies on blockchain technology and as well as best practices in structuring operational and corporate data. Jonathan is the founder and principal of Dunsmoor Law, P.C. and Senior Of Counsel for the New York-based Reid & Wise, LLC with offices in San Francisco and Shanghai.

William (Bill) J. Wall has a long history and proven record of success in achieving consensual and often unique solutions for distressed entities and their stakeholders. Bill represents individuals and organizations, including debtors, creditors, trustees, and assignees for the benefit of creditors, in all phases of the insolvency process with an emphasis on insolvency related litigation. After two decades of bankruptcy practice, Bill has expanded his practice to encompass blockchain law, particularly the intersection between blockchain technology and bankruptcy. Bill also counsels entertainers, visual artists, writers, and other content creators through the process of protecting and monetizing their content, often in conjunction with the integration of emerging blockchain technologies. BLOCKCHAIN AND BANKRUPTCY

BY: JONATHAN C. DUNSMOOR, ESQ.* AND WILLIAM “BILL” WALL, ESQ.**

The Wall Law Office 26895 Aliso Creek Rd, #B-110, Aliso Viejo, CA 92656 949-387-4300 - [email protected]

Dunsmoor Law, P.C. 3407 Delaware Ave Ste. 257, Tonawanda, NY 14217 (by appointment only) 716-371-1936 – [email protected]

*Licensed in New York **Licensed in California All Rights Reserved 2021 INTRODUCTION

William J. Wall (BW); Bankruptcy Attorney and Blockchain Enthusiast

Jonathan Dunsmoor (JD); Securities Attorney and Blockchain Believer WHAT IS BLOCKCHAIN?

• Blockchain is a technology that allows for an immutable transmission of data over a decentralized network. • Immutable because of advanced levels mathematics resulting in cryptography • Decentralized because no one central party has the entire “chain.”* *in most cases WHAT IS MONEY?: A VERY, VERY BRIEF HISTORY

1. Barter: Goods in exchange for service and other goods! 2. Gold, jewels, oh my! 3. Gold to paper receipts • Safety for travelers • Fungibility • Aided with Lending 4. Paper money! 5. The Gold Standard Act of the United States 1900 and established gold as the only standard for redeeming paper money. 6. The End of the Gold Standard 1933 7. Nixon Administration and the Smithsonian Agreement (birth of fiat currency) THE BIRTH OF ELECTRONIC MONEY

• EGold - 1996 to 2009 ($2 billion transactions per year in 2008) • Liberty Reserve - 2006 to 2013 (“Liberty Dollars” and “Liberty Euros” $0.9 billion transactions per year) • Others, Goldmoney.com, e-Bullion.com, CrowneGold.com, Pecunix.com, and INTgold.com. • Most resulted in criminal prosecution for lack of money transmission licenses and/or related criminal activity associated with product CREATION OF BITCOIN • What is Bitcoin? Bitcoin is the first decentralized cryptocurrency • Created by Satoshi Nakamoto (and NOT Craig Wright) • But possibly the NSA. • Only 21 Million BTC available • Created via “Proof of Work” mining

Condensed Timeline: • October 2008: White paper released Bitcoin: A Peer-to-Peer Electronic Cash System • January 2009: Bitcoin Genesis block “mined” • October 2009: $1 = ~ 1,309 BTC • 2014: Ethereum's ICO • September 2019: 1 BTC = $10,500 • May 2021: 1 BTC=$56,000 • Meaning a $1 investment in Bitcoin in October 2009 would be worth approximately $73 million dollars in May 2021. WHAT ARE ALTCOINS? WHY IS THIS IMPORTANT?!?

• Peer to Peer • Decentralized • Private or Public blockchains but mostly anonymous transactions • Cryptographically secure • No double spend! • Immutable! (Possibly subject to a 51% attack) SOME BASIC TERMINOLOGY

• Blockchain is the technology • Mining: Processing transactions using “hashing” power to solve “blocks” • Transactional Hash: Is a uniquely identifier of each particular transaction on a blockchain (it can be private, public or both) • Block: Small records of the entire blockchain • Fiat money: Inconvertible paper money made legal tender by a government decree. • Bitcoin is the first cryptocurrency system • Bitcoins are the units within the Bitcoin blockchain (1 bitcoin (BTC) equivalent to 1,000 millibitcoins (mBTC), 1,000,000 microbitcoins (μBTC), or 100,000,000 satoshis) • Altcoins are anything other than Bitcoin. “Alternative coins” • Coin is generally a specific unique blockchain protocol (ie. Bitcoin, Litecoin, Ethereum, etc.) • Token is a derivate of an existing blockchain that is built “on top” another blockchain protocol • ICO or Initial Coin Offering • STO or Security Token Offering sometimes called a DSO Fun fact: A “whale” is a • HODL: Hold On for Dear Life cryptocurrency holder with • FOMO: Fear Of Missing Out significant assets. • FUD: Fear, Uncertainty and Doubt • UTILITY TOKEN V. SECURITY TOKEN…. *WE WILL PROVIDE A GLOSSARY PRIVATE KEY V. PUBLIC KEY BLOCKCHAIN & THE LAW: WHY DOES THIS MATTER?

• In the same way the Internet changed the world, Blockchain technology will change everything again. • Contract Disputes (Smart Contracts: are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code) • Payments made on chain (Stablecoin: A cryptocurrency with a stable asset price. Generally backed by a fiat currency) • Financial transactions, real estate transactions, HIPPA, and more • No one truly cared until ICO started to become popular… STATE VS. FEDERAL VS. INTERNATIONAL LAW

• Each and every jurisdiction is different and changing rapidly • Canadian, Gibraltar, Malta, Estonia, Singapore and Switzerland all ahead of USA. • Why? Easy regulatory process. Canadian provinces govern. Gibraltar, Malta, Estonia, and Switzerland all small countries with quick response time. Singapore understands it is the key to Asia • Bahrain, a strong US ally with Fifth Fleet station there, dramatically ahead of most of MENA region • South America and Africa are significantly behind; mostly for fear of giving up centralized power • Australia is suffering a bit of an identity crisis • USA must step in several ways THE STATES

• Just as in real estate, location matters most. • Some states are working diligently to combat fraud and build sandboxes • Do work with universities and private companies to create a thorough understanding of the technology • Don’t be New York and create a BitLicense • All cryptocurrencies are blockchain based but not all blockchains are cryptocurrencies! WTF: SEC, CFTC, IRS, FINCEN, ET. AL. •Who has jurisdiction? (It depends) •Why do they have jurisdiction? (No one is exactly sure) •But I want jurisdiction? •But I want a bigger budget! •WHAT IS A DOA?! BANKRUPTCY JURISDICTION AND COMMENCING CASES SEC V. W.J. HOWEY CO., 328 U.S. 293 (1946)

The Howey Test: 1) Investment of money; 2) In a common enterprise; and 3) With the profits coming primarily from the efforts of others. If, all three conditions are met, it’s a security! - Howey

SO WHAT IS RIPPLE (XRP?) THE DAO REPORT

• July 25, 2017 • “Decentralized Autonomous Organization” • As of the time the offering closed, the total ETH raised by The DAO was valued in U.S. Dollars (“USD”) at approximately $150 million • Problems: • 1) DAO Token holder certain voting and ownership rights. • 2) The DAO would earn profits by funding projects • 3) DAO Token holders could sell their DAO Tokens in a variety of ways in the secondary market and thereby monetize their investment U.S. SECURITIES AND EXCHANGE COMMISSION (SEC)

THE SPEECH HEARD AROUND THE CRYPTO WORLD • 2) June 14, 2018 - Digital Asset Transactions: When Howey Met Gary (Plastic) - William Hinman Director, Division of Corporation Finance • In cases where the digital asset represents a set of rights that gives the holder a financial interest in an enterprise = Security • And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. NO ACTION LETTER: TURNKEY JET THE FIRST SEC “APPROVED” UTILITY TOKEN • SEC doesn’t like the word “approved” but that is what it is. Technically an exemption. • TKJ will not use any funds from Token sales to develop the TKJ Platform, Network, or App, and each of these will be fully developed and operational at the time any Tokens are sold; • the Tokens will be immediately usable for their intended functionality (purchasing air charter services) at the time they are sold; • TKJ will restrict transfers of Tokens to TKJ Wallets only, and not to wallets external to the Platform; • TKJ will sell Tokens at a price of one USD per Token throughout the life of the Program, and each Token will represent a TKJ obligation to supply air charter services at a value of one USD per Token; • If TKJ offers to repurchase Tokens, it will only do so at a discount to the face value of the Tokens (one USD per Token) that the holder seeks to resell to TKJ, unless a court within the United States orders TKJ to liquidate the Tokens; and • The Token is marketed in a manner that emphasizes the functionality of the Token, and not the potential for the increase in the market value of the Token. NO ACTION LETTER: POCKET FULL OF QUARTERS JULY 25, 2019 • PoQ will not use any funds from Quarters sales to build the Quarters Platform, which has been fully developed and will be fully functional and operational immediately upon its launch and before any of the Quarters are sold;

• the Quarters will be immediately usable for their intended purpose (gaming) at the time they are sold; • PoQ will implement technological and contractual provisions governing the Quarters and the Quarters Platform that restrict the transfer of Quarters to PoQ or to wallets on the Quarters Platform;

• gamers will only be able to transfer Quarters from their Quarters Hot Wallets for gameplay to addresses of Developers with Approved Accounts or to PoQ in connection with participation in e-sports tournaments;

• only Developers and Influencers with Approved Accounts will be capable of exchanging Quarters for ETH at pre-determined exchange rates by transferring their Quarters to the Quarters Smart Contract;

• to create an Approved Account, Developers and Influencers will be subject to KYC / AML checks at account initiation as well as on an ongoing basis;

• Quarters will be made continuously available to gamers in unlimited quantities at a fixed price; • there will be a correlation between the purchase price of Quarters and the market price of accessing and interacting with Participating Games; and

• PoQ will market and sell Quarters to gamers solely for consumptive use as a means of accessing and interacting with Participating Games. TURNKEY JET VS. POCKET FULL OF QUARTERS

• Light years apart • TKJ: Fully function Platform, Network, or App • PFQ: Fully function Platform • TKJ: TKJ offers to repurchase Tokens, it will only do so at a discount to the face value of the Tokens • PFQ: Developers and Influencers with Approved Accounts (KYC/AML) will be capable of exchanging Quarters for ETH at pre-determined exchange rates REGULATION A+

• Up to $50M from accredited and non accredited investors • Accredited investors: Net worth over $1M not including home or income at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount • YouNow, Inc. and Blockstack Token, LLC • Neither are “true” security token offerings • More like Utility Tokens with more steps SEC FINHUB

• https://www.sec.gov/finhub • Created in October 2018 • Used to share knowledge between SEC and private companies using fintech solutions including blockchain COMMODITY FUTURES TRADING COMMISSION (CFTC) • CFTC sees this technology as their opportunity to expand their purview • Had some major early wins in federal courts • But theses are mostly default judgments or federal district courts • Believes Bitcoin is a commodity under the Commodity Exchange Act (CEA) • Some of these cases are justified as they involve Bitcoin futures (see CFTC v. My Big Coin Pay, Inc.) • The Court specifically agreed with the CFTC that “Congress’ approach to defining ‘commodity’ signals an intent that courts focus on categories—not specific items.” My Big Coin Pay, Inc. COMMODITY, CURRENCY OR OTHER? • Commodity under Commodity Exchange Act: The term “commodity” means wheat, cotton, rice, corn, oats, barley, rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil, and all other fats and oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and frozen concentrated orange juice, and all other goods and articles, except onions (as provided by section 13–1 of this title) and motion picture box office receipts (or any index, measure, value, or data related to such receipts), and all services, rights, and interests (except motion picture box office receipts, or any index, measure, value or data related to such receipts) in which contracts for future delivery are presently or in the future dealt in. CODE DEFINITIONS

• 11 USC 101(6): The term “commodity broker” means futures commission merchant, foreign futures commission merchant, clearing organization, leverage transaction merchant, or commodity options dealer, as defined in section 761 of this title, with respect to which there is a customer, as defined in section 761 of this title. • 11 USC 761: COMMODITY CONTRACT DEFINED

(4)“commodity contract” means—(A)with respect to a futures commission merchant, contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade;

(B)with respect to a foreign futures commission merchant, foreign future;

(C)with respect to a leverage transaction merchant, leverage transaction;

(D)with respect to a clearing organization, contract for the purchase or sale of a commodity for future delivery on, or subject to the rules of, a contract market or board of trade that is cleared by such clearing organization, or commodity option traded on, or subject to the rules of, a contract market or board of trade that is cleared by such clearing organization;

(E)with respect to a commodity options dealer, commodity option;

(F)(i)any other contract, option, agreement, or transaction that is similar to a contract, option, agreement, or transaction referred to in this paragraph; and

(ii)with respect to a futures commission merchant or a clearing organization, any other contract, option, agreement, or transaction, in each case, that is cleared by a clearing organization;

(G)any combination of the agreements or transactions referred to in this paragraph;

(H)any option to enter into an agreement or transaction referred to in this paragraph;

(I)a master agreement that provides for an agreement or transaction referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), or (H), together with all supplements to such master agreement, without regard to whether the master agreement provides for an agreement or transaction that is not a commodity contract under this paragraph, except that the master agreement shall be considered to be a commodity contract under this paragraph only with respect to each agreement or transaction under the master agreement that is referred to in subparagraph (A), (B), (C), (D), (E), (F), (G), or (H); or

(J)any security agreement or arrangement or other credit enhancement related to any agreement or transaction referred to in this paragraph, including any guarantee or reimbursement obligation by or to a commodity broker or financial participant in connection with any agreement or transaction referred to in this paragraph, but not to exceed the damages in connection with any such agreement or transaction, measured in accordance with section 562;

(5)“commodity option” means agreement or transaction subject to regulation under section 4c(b) of the Act;

(6)“commodity options dealer” means person that extends credit to, or that accepts cash, a security, or other property from, a customer of such person for the purchase or sale of an interest in a commodity option;

(7)“contract market” means a registered entity;

(8)“contract of sale”, “commodity”, “derivatives clearing organization”, “future delivery”, “board of trade”, “registered entity”, and “futures commission merchant” have the meanings assigned to those terms in the Act;

(9)“customer” means—(A)with respect to a futures commission merchant—(i)entity for or with whom such futures commission merchant deals and that holds a claim against such futures commission merchant on account of a commodity contract made, received, acquired, or held by or through such futures commission merchant in the ordinary course of such futures commission merchant’s business as a futures commission merchant from or for a commodity contract account of such entity; or

(ii)entity that holds a claim against such futures commission merchant arising out of—(I)the making, liquidation, or change in the value of a commodity contract of a kind specified in clause (i) of this subparagraph;

(II)a deposit or payment of cash, a security, or other property with such futures commission merchant for the purpose of making or margining such a commodity contract; or

(III)the making or taking of delivery on such a commodity contract; FUTURES = CFTC • Futures Contract: An agreement traded on an organized exchange to buy or sell assets, especially commodities or shares, at a fixed price but to be delivered and paid for later. • Futures contracts – Absolutely, CFTC jurisdiction. • Cryptocurrencies – Most likely not. • Utility Tokens – It depends.

DUNSMOOR LAW, PC - ALL RIGHTS RESERVED UNIVERSITY OF SOUTH CAROLINA PRESENTATION SEPTEMBER 5, 2019 LABCFTC

• Created May 2017 • Accelerator within LabCFTC created June 2019 • Needs more applicants! Apply now! INTERNAL REVENUE SERVICE (IRS)

• IRS has stated virtual currencies will be taxed as property • which is just a fancy way to say it's taxed like a stock • If you buy crypto and hold it for more than a year, you pay long-term capital gains when you sell. • For federal taxes, that means you pay a 0%, 15% or 20% • If you buy and hold it for less than a year, you pay short-term capital gains when you sell. • For federal taxes, that is determined by your tax bracket • It will not be treated like a currency! • Traditionally, gains on futures contracts are split 60/40 between long-term and short-term capital gains rates. INTERNAL REVENUE SERVICE (IRS)

• Nearly every type of transaction therefore is taxable including mining • Disclosure requirements must be strictly adhered to or else. • A taxpayer who receives virtual currency as payment for goods or services must, in computing gross income, include the fair market value of the virtual currency, measured in U.S. dollars, as of the date that the virtual currency was received. • Order fill problem • IRS and to the payee on Form 1099- MISC, Miscellaneous Income!! IRS V. WHALE DOE

• The IRS currently hunting for whales • IRS enforcement actions are one of the few times deterrent work on high profile cases • It will pay a “whistleblower fee” but do not rat on your clients. That’s unethical. • Be aware of risks in whistleblowing especially advising clients on the practice regardless of the regulatory body but especially with the IRS FINANCIAL CRIMES ENFORCEMENT NETWORK (FINCEN)

• MSB – Money Services Business. (Middleman for money or VALUE) • Bank Secrecy Act of 1970 (the Currency and Foreign Transactions Reporting Act) • AML born • USA PATRIOT Act of 2001 • KYC born • AML policies • KYC input FINANCIAL CRIMES ENFORCEMENT NETWORK (FINCEN)

• A user of virtual currency is not an MSB under FinCEN’s regulations and therefore is not subject to MSB registration, reporting, and recordkeeping regulations. • An administrator or exchanger is an MSB under FinCEN’s regulations, specifically, a money transmitter, unless a limitation to or exemption from the definition applies to the person. • An administrator or exchanger is not a provider or seller of prepaid access, or a dealer in foreign exchange, under FinCEN’s regulations. • What does this all mean? Security Token, Utility Token, or Cryptocurrency FEDERAL TRADE COMMISSION! (FTC)

• The FTC brought its first cryptocurrency-related case in June 2015, another in February 2016, and held a public forum on blockchain technology in March 2017. • 2018 the FTC’s first chain referral case (“Ponzi scheme”) involving cryptocurrency. • Most if not all cases involve making any misleading claims about their products, the company, or both. TIMELINE

• Bitcoin 2009 • SEC 2013 • FinCEN 2013 (claims 2011) • CFTC 2014 • IRS 2014 • FTC 2015 BANKRUPTCY ISSUES RELATED TO TECHNOLOGY a.Commencing Case- Blockchain Companies i. Authority to File (or respond to petition) ii.Venue b.Related Cases; Chapter 15 c. Property of Estate d.Automatic Stay i. Smart Contracts. 1.Terminating 2.Willful violations? 3.Potential Solution- Oracles? • Potential for Pre-Packaged Bankruptcies THE PAST AND THE PRESENT: INTRODUCTION TO PROOF OF STAKE

• Centralized - Easily Hackable (Everyone has been hacked) • In the past and currently in the present we have centralized systems that are subject to hacking, corruption, and destruction • Presently we are working to build a decentralized system that replaces nearly all current systems from traffic control, voting, banking, and birth records ADVANCED ISSUES

•Proof of Stake (trusted nodes) v. Proof of Work •DEX •Global Currency •Unbanking •Privacy and Identities on Blockchain THE FUTURE & KEY TAKEAWAYS

• Without knowing it, you are using blockchain in some form or fashion already • Generally, your clients or future clients will want to know 1) how blockchain will affect their business or 2) what they can do to use blockchain • You will see more and more blockchain based dispute in the days, weeks, and years to come • The practice of law will change: Emails, data storage, payments, smart contracts, etc. BANKRUPTCY IMPLICATIONS OF TRANSFERS

Staking 1.Ownership of Staked Funds 2.Rights to Staking Rewards 3.Differences with other financial vehicles 4.Cash Collateral WHAT IS AN NFT? a.Definition: A non-fungible token is a unit of data stored on a digital ledger, called a blockchain, that certifies a digital asset to be unique and therefore not interchangeable. b.Discussed and foreseeable uses i.Art ii.Gaming iii.Supply Chain iv.New Asset Class which could be property of estate- requires more knowledge about debtors POTENTIAL INVESTMENT USES AND PROBLEMS WITH NFTS i.Fractionalized ownership 1.Is it a security? 2.Real Estate- Statute of frauds ii.Payment to original issuer on future transfer iii.Fractionalized revenue iv.Management OTHER ISSUES TANGENTIALLY RELATED TO BANKRUPTCY a. Use of blockchain technology as effectuating Chapter 11 Plan i. Voting ii.Plan Payment iii.Issuing New Securities iv.Administration through Smart Contracts b. Triggering Events i. Change in regulatory status 1.Value Crash 2.Substantial tax liability ii.Value of mining reduced iii.Power usage c. Dischargeability i. financial advice and disclaimers ii.Defamatory statements on an immutable ledger iii.Taxes d. SEC actions and receiverships QUESTIONS, CONCERNS, & COMMENTS Phone: 716-371-1936 E-mail: [email protected] Phone: 949-387-4300 Email: [email protected] THANK YOU EVERYONE WHO MADE IT THROUGH THE PRESENTATION! ADDITIONAL RESOURCES & CITES

Educational Resources • https://www.investopedia.com/tech/three-people-who-were-supposedly-bitcoin- founder-satoshi-nakamoto/ • http://cryptoandblockchaintalk.com/ • https://coinmarketcap.com/ • https://www.theblockcrypto.com/ • https://www.irs.gov/compliance/whistleblower-informant-award • https://www.coindesk.com/ • https://scholarship.law.columbia.edu/cgi/viewcontent.cgi?article=2385&context=f “Legal” Resources aculty_scholarship • https://www.blockchainlegalresource.com/ • https://www.blankrome.com/sites/default/files/2019-09/bloombergtaxjournal- • https://www.fintechandpayments.com/ sept2019.pdf • https://www.openlaw.io/ • https://www.lw.com/thoughtLeadership/what-sec-lawsuit-against-kik-teaches-us- about-token-presale-agreements • https://legalconsortium.org/ • https://www.sec.gov/news/speech/speech-hinman-061418 Cites: • SEC v. W.J. Howey Co., 328 U.S. 293 (1946) • https://bitcoin.org/bitcoin.pdf • https://www.sec.gov/divisions/corpfin/cf-noaction/2019/turnkey-jet-040219- • https://fas.org/sgp/crs/misc/R41887.pdf 2a1.htm • http://romaninukraine.com/wp-content/uploads/2014/11/Intro-to-Bitcoin- Presentation-Oct-2014.pptx ADDITIONAL RESOURCES & CITES

Cites: • https://www.cftc.gov/PressRoom/PressReleases/7886-19

• https://www.coindesk.com/the-8-biggest-bombshells-from-the-secs-kik-ico-lawsuit • https://www.irs.gov/pub/irs-drop/n-14-21.pdf

• https://www.sec.gov/litigation/investreport/34-81207.pdf • https://www.nerdwallet.com/blog/taxes/federal-income-tax-brackets/

• https://www.sec.gov/investor/alerts/ia_virtualcurrencies.pdf • https://www.forbes.com/sites/matthougan/2019/06/11/how-bitcoin-is-taxed/

• https://www.sec.gov/Archives/edgar/data/1719379/000110465919020748/a18-15736_1partiiandiii.htm • https://www.ftc.gov/news-events/blogs/techftc/2018/03/its-time-ftc-blockchain-working-group

• https://www.sec.gov/Archives/edgar/data/1725129/000162827919000230/younow1a.htm • https://www.ftc.gov/news-events/press-releases/2018/03/ftc-shuts-down-promoters-deceptive-cryptocurrency-schemes

• https://www.sec.gov/finhub • https://www.ftc.gov/news-events/press-releases/2015/06/app-developer-settles-ftc-new-jersey-charges-it-hijacked

• SEC v. C.M. Joiner Leasing Corp., 320 U.S. 344, 351 (1943) • https://www.ftc.gov/news-events/press-releases/2016/02/operators-bitcoin-mining-operation-butterfly-labs-agree-settle

• https://www.sec.gov/news/press-release/2018-240 • https://www.investor.gov/additional-resources/news-alerts/alerts-bulletins/investor-alert-bitcoin-other-virtual-currency

• https://www.cftc.gov/LabCFTC/Overview/index.htm • https://www.cftc.gov/PressRoom/PressReleases/pr7231-15

• https://www.cftc.gov/PressRoom/PressReleases/7949-19 • https://www.fincen.gov/sites/default/files/shared/FIN-2013-G001.pdf

• https://www.cftc.gov/sites/default/files/idc/groups/public/@customerprotection/documents/file/oceo_bitcoinbasics0218.pdf • https://www.fincen.gov/sites/default/files/shared/20110726b.pdf

• https://www.cftc.gov/PressRoom/PressReleases/7965-19 • https://www.scstatehouse.gov/sess123_2019-2020/bills/4351.htm

• https://www.cftc.gov/PressRoom/PressReleases/7820-18

• CFTC v. McDonnell in the Eastern District of New York (see CFTC Release 7702-18, March 6, 2018; CFTC Release 7774-18, August 24, 2018

• https://www.cftc.gov/sites/default/files/2018-10/enfmybigcoinpayincmemorandum092618.pdf GLOSSARY • GLOSSARY OF BLOCKCHAIN TERMS • Prepared for Orange County Bankruptcy Forum Presentation • Blockchain and Bankruptcy: Short term and long-term observations of how blockchain technology can affect the law and practice of bankruptcy. • Presented by • Italics Entries include Acronyms. • A • API API stands for Application Programming Interface. It is a set of routines, protocols, and tools for building software applications. APIs specify how software components should interact, such as what data to use and what actions should be taken. • ASIC An acronym for application-specific integrated circuit — a device designed for the sole purpose of mining cryptocurrencies. • Account An account is essentially a whose purpose is to track the financial activities of a specific asset/ • Address A place where cryptocurrency can be sent to and from, in the form of a string of letters and numbers. • Airdrop A marketing campaign that distributes a specific cryptocurrency or token to an audience. • Algorithm A process or set of rules to be followed in problem-solving or calculation operations, usually by a computer, although humans tend to follow steps algorithmically as well (let’s say doing math or following a recipe). • Altcoin As Bitcoin is the first cryptocurrency that captured the world’s imagination, all other coins were subsequently termed “altcoins,” as in “alternative coins.” • Anti-Money Laundering (AML) A set of international laws enacted to curtail criminal organizations or individuals laundering money through cryptocurrencies into real-world cash. GLOSSARY • Astroturfing The practice of disguising marketing campaigns or otherwise sponsored messaging as the unprompted views of genuine community members. • Atomic Swap The transfer of cryptocurrency from one party to another, without the use of an exchange or other intermediary. • Attestation Ledger An attestation ledger is an account book designed to provide evidence of individual transactions. It is generally used to “attest” that a financial transaction took place, or to prove authenticity of transactions or products. • Automated Market Maker (AMM) An automated market maker (AMM) is a system that provides liquidity to the exchange it operates in through automated trading. • B • Bit A bit is a basic unit of information in computing. • Bit License A business license permitting regulated virtual currency activities, issued by the New York State Department of Financial Services. • Bits A commonly used unit, or subdivision, of a single Bitcoin. • Block A file containing information on transactions completed during a given time period. Blocks are the constituent parts of a blockchain. • Block Explorer An application enabling a user to view details of blocks on a given blockchain. Also known as a blockchain browser. • Block Height A value describing the number of blocks preceding a given block in the blockchain. • Block Reward The coins awarded to a miner or group of miners for solving the cryptographic problem required to create a new block on a given blockchain. • Blockchain A distributed ledger system. A sequence of blocks, or units of digital information, stored consecutively in a public database. The basis for cryptocurrencies. • Bots Automated software that can carry out tasks such as cryptocurrency trades. GLOSSARY • Brute Force Attack (BFA) An attempt to crack a password or key through automated trial and error. • Bug Exploit A bug exploit is an attack that take advantage of a system's vulnerabilities. • Burned Cryptocurrency tokens or coins are considered “burned” when they have been purposely and permanently removed from circulation. • • C • Central Bank Digital Currency (CBDC) CBDCs are digital currencies issued by a central bank whose status as legal tender depends on government regulation or law. • Central Ledger A central ledger is a physical book or a computer file used to record transactions in a centralized manner. • Central Processing Unit (CPU)The part of a computer that is in charge of interpreting and executing programs and coordinating the work of all other components. • Centralized A centralized organizational structure is one in which a single node or a small number of them are in control of an entire network. • Centralized Exchange (CEX) A cryptocurrency exchange that is operated by a company that owns it in a centralized manner. • Chain Split Chain splits are another term used to describe cryptocurrency forks — the separation of a single original coin into several independently managed projects. • Cipher A cipher is any algorithm that can be used to encrypt and decrypt information. • Ciphertext Ciphertext is a result of encryption that has been performed on plaintext through the usage of an algorithm. • Circulating Supply The best approximation of the number of coins that are circulating in the market and in the general public’s hands. GLOSSARY

• Client Software that can access and process blockchain transactions on a local computer. A common application of this is a cryptocurrency software wallet. • Cloud Mining Cryptocurrency mining with remote processing power rented from companies. • Coin A coin can refer to a cryptocurrency that can operate independently or to a single unit of such cryptocurrency. • Coinbase In mineable cryptocurrencies, a coinbase is the number of coins that are generated from scratch and awarded to miners for mining every new block. • Cold Storage Offline storage of cryptocurrencies, typically involving hardware non-custodial wallets, USBs, offline computers, or paper wallets. • Cold Wallet A cryptocurrency wallet that is in cold storage, i.e., not connected to the internet. • Collateralized Debt Position (CDP) A collateralized debt position is held by locking collateral in smart contracts to generate stablecoins. • Confirmations A cryptocurrency transaction is considered confirmed when it is included in a block on the blockchain. Each new block after the first one is an additional confirmation for that transaction. • Consensus Consensus is achieved when all participants of the network agree on the order and content of the blocks in the blockchain. • Consortium Blockchain A privately owned and operated blockchain where a consortium shares information not readily available to the public, while relying on the immutable and transparent properties of the blockchain. • Crowdfunding Crowdfunding enables fundraisers to collect money from a large number of people through a variety of different platforms. • Cryptoasset A cryptoasset is any digital asset that uses cryptographic technologies to maintain its operation as a currency or decentralized application. • Cryptocurrency Cryptocurrencies are digital currencies that use cryptographic technologies to secure their operation. GLOSSARY

• Cryptography A field of study and practice to secure information, preventing third parties from reading information to which they are not privy. • Custodial Custodial cryptocurrency businesses are the ones that are in possession of their customers’ funds for the duration of the use of their services. • D • Decentralized The property of a system in which nodes or actors work in concert in a distributed fashion to achieve a common goal. • Decentralized Applications (DApps) A type of application that runs on a decentralized network, avoiding a single point of failure. • Decentralized Autonomous Initial Coin Offerings (DAICO) A method for decentralized funding of projects that introduces a form of governance in the ICO process, allowing backers to vote for the return of their funds if certain conditions are met. • Decentralized Autonomous Organizations (DAO) An organization that is run through rules encoded in smart contracts. • Decentralized Exchange (DEX) A peer-to-peer exchange allowing users to trade cryptocurrency without the need for an intermediary. • Decentralized Finance (DeFi) A movement encouraging alternatives to traditional, centralized forms of financial services. • Decryption The process of transforming encrypted data back into a format that is readable by a user or machine. • Delegated Proof-of-Stake (dPOS) An alternative to the Proof-of-Stake and Proof-of-Work consensus algorithms. • Derivative A financial instrument deriving its value from the value of an underlying asset. • Deterministic Wallet A type of cryptocurrency wallet in which keys and addresses are created from a single seed. • Digital Art Digital art is art and media that is made by using digital technology. GLOSSARY

• Digital Commodity A commodity that exists digitally • Digital Currency A currency that exists only in digital form, as opposed to traditional physical currencies. • Digital Identity Information used by a person or entity to identify themselves to a computer or network. • Digital Signature A method for proving the authenticity of a digital communication. • Distributed Consensus Collective agreement reached among nodes in a network. • Distributed Denial of Service (DDoS) Attack An attempt by a bad actor to disrupt the operation of an application, server, or network by flooding it with traffic. • Distributed Ledger Distributed ledgers are ledgers in which data is stored across a network of decentralized nodes. A distributed ledger does not necessarily involve a cryptocurrency and may be permissioned and private. • Distributed Ledger Technology (DLT) A database that is shared by multiple participants, in multiple places. The basis for blockchains. • Distributed Network A network in which the data and applications are dependent on multiple sources, as opposed to one location. • Dominance A measure of Bitcoin's value in the context of the larger cryptocurrency market. • Double Spending The potential for a digital currency to be spent twice. • E • ERC 20 Tokens designed and used solely on the Ethereum platform. • ERC 721 A token standard for non-fungible Ethereum tokens. An Ethereum Improvement Proposal introduced in 2017, it enables smart contracts to operate as tradeable tokens similar to ERC20 tokens. • Emission The speed at which new coins are produced and released. • Encryption A method through which information can be made into code. GLOSSARY • Escrow A financial instrument where assets or cash are held by a third party while a buyer and a seller complete a deal. • Ether The form of payment used in the operation of the distribution application platform, Ethereum, in order to incentivize machines into executing the requested operations. • Ethereum Improvement Proposal (EIP) Ethereum Improvement Proposals (EIPs) describe standards for the Ethereum platform, including core protocol specifications, client APIs, and contract standards. • Ethereum Virtual Machine (EVM) A Turing-complete virtual machine that enables execution of code exactly as intended; it is the runtime environment for every smart contract. Every Ethereum node runs on the EVM to maintain consensus across the blockchain. • Exchange Cryptocurrency exchanges (sometimes called digital currency exchanges) are businesses that allow customers to trade crypto currencies for fiat money or other cryptocurrencies. • Exchange Traded Fund (ETF)A security that tracks a basket of assets such as stocks, bonds, and cryptocurrencies but can be traded like a single stock. • F • Faucet A cryptocurrency reward system usually on a website or app, that rewards users for completing certain tasks. It is mostly a technique used when first launching an altcoin to interest people in the coin. • Fiat Currency which is “legal tender” backed by a central government, such as the Federal Reserve, and with its own banking system, such as fractional reserve banking. It can take the form of physical cash, or it can be represented electronically, such as with bank credit. • Fiat-Pegged Cryptocurrency Also known as “pegged cryptocurrency,” it is a coin, token or asset issued on a blockchain that is linked to a government- or bank-issued currency. Each pegged cryptocurrency is guaranteed to have a specific cash value in reserves at all times. • Flash Loan Attack Flash loan attacks are when malicious actors exploit a smart contract. GLOSSARY

• Fork (Blockchain) Forks, or chain splits, create an alternate version of the blockchain, leaving two blockchains to run simultaneously. An example is Ethereum and Ethereum Classic, which was forked after the DAO hack. • Fork (Software) A software fork, also known as a project fork, is when developers take the technology (source code) from one existing software project and modify it to create a new project. An example is Litecoin, which was a software fork of Bitcoin. • Full Node Nodes that download a blockchain’s entire history in order to observe and enforce its rules. • Fungible In cryptocurrency, fungibility is when a coin or token can be replaced by any other identical coin or token. • G • Gas A term used on the Ethereum platform that refers to a unit of measuring the computational effort of conducting transactions or smart contracts or launch DApps in the Ethereum network. It is the “fuel” of the Ethereum network. • Genesis Block The first block of data that is processed and validated to form a new blockchain, often referred to as block 0 or block 1. • Gold-Backed Cryptocurrency A coin or token issued that represents a value of gold; for example, one physical gram of gold equals one coin. • Governance Token A governance token is a token that can be used to vote on decisions that influence an ecosystem. • Graphical Processing Unit (GPU) More commonly known as a graphics card, it is a computer chip that creates 3D images on computers but has turned out to be efficient for mining cryptocurrencies. • Group Mining As opposed to solo mining, group mining is when multiple people mine together. • Gwei The denomination used in defining the cost of gas in transactions involving Ether. • GLOSSARY • Hacking The process of using a computer to manipulate another computer or computer system in an unauthorized fashion. • Halving An event in which the total rewards per confirmed block halves. • Hard Cap A hard cap is the absolute maximum supply of a digital asset. • Hard Fork (Blockchain) A type of protocol change that validates all previously invalid transactions and invalidates all previously valid transactions. • Hardware Security Module A hardware security module is a type of computing device that secures digital keys and encrypts data. • Hardware Wallet A hardware wallet is a wallet for cryptocurrencies that usually resemble a USB stick. • Hash The act of performing a hash function on input data of arbitrary size, with an output of fixed length that looks random and from which no data can be recovered without a cipher. An important property of a hash is that the output of hashing a particular document will always be the same when using the same algorithm. • Hash Function Any function used to map data of arbitrary size to data of a fixed size. *see Cryptographic Hash Function. • Hash Power / Hash Rate A unit of measurement for the amount of computing power being consumed by the network to continuously operate. • Hidden Cap Hidden cap is an unknown limit to the amount of money a team elects to receive from investors in its initial coin offering (ICO). The purpose of a hidden cap is to even the playing field by letting smaller investors put in money, without the large investors forming an accurate understanding of the total cap and adjusting their investment as a result. • Hierarchical Deterministic Wallet (HD Wallet) A wallet that uses Hierarchical Deterministic (HD) protocol to support the generation of crypto-wallets from a single master seed using 12mnemonic phrases. *see Deterministic Wallet. • Hosted Wallet A wallet managed by a third-party service. • Hot Storage The online storage of private keys allowing for quicker access to cryptocurrencies. *see Cold Storage. GLOSSARY

• Hot Wallet A cryptocurrency wallet that is connected to the internet for hot storage of cryptoassets, as opposed to an offline, cold wallet with cold storage. *See Cold Wallet. • Howey Test A test used to determine whether or not an asset is a security. • Hybrid PoW/PoS A hybrid PoW/PoS allows for both proof-of-stake and proof-of-work as consensus distribution algorithms on the network. This approach aims to bring together the security of PoW consensus and the governance and energy efficiency of PoS. • I • Immutable A property that defines the inability to be changed, especially over time. • Impermanent Loss When a liquidity provider has a temporary loss of funds because of volatility in a trading pair. • Infinite Approval Pre-approving smart contracts to enable the platform to spend any amount of your coins. • Initial Bounty Offering (IBO) A novel way of launching a project that focuses on people contributing skills to a platform rather than money. • Initial Coin Offering (ICO) Short for Initial Coin Offering, an ICO is a type of crowdfunding, or crowd sale, using cryptocurrencies as a means of raising capital for early-stage companies. • Initial Dex Offering An initial dex offering (IDX) is an alternative to an initial coin offering (ICO). • Initial Exchange Offering A type of crowdfunding where crypto start-ups generate capital by listing through an exchange. • Initial Token Offering (ITO) ITOs are similar to initial coin offerings — but have more of a focus on offering tokens with intrinsic utility in the form of software or usage in an ecosystem. • Internet of Things (IoT) A global interconnected network of devices, sensors and software that can collect and exchange data with each other in real-time over the Internet. GLOSSARY

• Know Your Customer (KYC) Short for Know Your Customer, these are checks that crypto exchanges and trading platforms must complete to verify the identity of their customers. • Ledger A record of financial transactions that cannot be changed, only appended with new transactions. • Lightning Network A second-layer protocol that is designed to solve Bitcoin’s scalability problem by allowing transactions to be processed more quickly. • Liquidity How easily a cryptocurrency can be bought and sold without impacting the overall market price. • Liquidity Pool Liquidity pools are crypto assets that are kept to facilitate the trading of trading pairs on decentralized exchanges. • Liquidity Provider Liquidity providers are decentralized exchange users who fund a liquidity pool with tokens they own. • Liveness A guarantee that a system will continue to provide data, and that no centralized authority can shut down its services. • M • Mainnet An independent blockchain running its own network with its own technology and protocol. It is a live blockchain where its own cryptocurrencies or tokens are in use, as compared to a testnet or projects running on top of other popular networks such as Ethereum. • Market An area or arena, online or offline, in which commercial dealings are conducted. Usually referred to as the “crypto market,” which refers to the cumulative cryptocurrencies and projects operating within the industry. • Market Capitalization/Market Cap/MCAP Total capitalization of a cryptocurrency’s price. It is one of the ways to rank the relative size of a cryptocurrency. *see Circulating Supply. • Masternodes Masternodes are a server maintained by its owner, somewhat like full nodes, but with additional functionalities such as anonymizing transactions, clearing transactions, and participating in governance and voting. It was initially popularized by Dash to reward owners of these servers for maintaining a service for the blockchain. GLOSSARY • Max Supply The best approximation of the maximum amount of coins that will ever exist in the lifetime of the cryptocurrency. *see Circulating Supply and Total Supply. • MicroBitcoin (uBTC) One millionth of a bitcoin or 0.000001 of a bitcoin. Often confused as a fork of Bitcoin. • Microtransaction A business model where very small payments can be made in exchange for common digital goods and services, such as pages of an eBook or items in a game. • Mineable Some cryptocurrencies have a system through which miners can be rewarded with newly created cryptocurrencies for creating blocks through contributing their hash power. Cryptocurrencies with this ability to generate new cryptocurrencies through the process of confirmation is said to be mineable. * Not Mineable Some cryptocurrencies are generated only through other mechanisms, such as annual inflation through staking. These cryptocurrencies are said to be not mineable. • Miners Contributors to a blockchain taking part in the process of mining. They can be professional miners or organizations with large-scale operations, or hobbyists who set up mining rigs at home or in the office. • Mining A process where blocks are added to a blockchain, verifying transactions. It is also the process through which new bitcoin, or some altcoins are created. • Mining Contract Another term for cloud mining, where users can rent or invest in mining capacity online. • Mining Pool A setup where multiple miners combine their computing power to gain economies of scale and competitiveness in finding the next block on a blockchain. Rewards are split according to different agreements, depending on the mining pool. Another term for this is Group Mining. • Mining Reward The reward resulting from contributing computing resources to process transactions. Mining rewards are usually a mix of newly minted coins and transaction fees. • Mining Rig A computer being used for mining. A mining rig could be a dedicated piece of hardware for mining, or a computer with spare capacity that can be used for other tasks, only mining part time. GLOSSARY • Mixing Service Also known as a tumbler, it is a service to improve the privacy and anonymity of cryptocurrency transactions by mixing potentially identifiable or “tainted” cryptocurrencies with other unrelated transactions, making it harder to track what the cryptocurrency was used for and who it belongs to. • Mnemonic Phrase A mnemonic phrase (also known as mnemonic seed, or seed phrase) is a list of words used in sequence to access or restore your cryptocurrency assets. It should be kept secret from everyone else. It is a standard in most HD wallets. • Mnemonics Mnemonics are memory aids with a system such as letters or associations that help in recall. *see Mnemonic Phrase. • Mobile Wallet A mobile wallet is a crypto wallet installed on a mobile device. • Money Transmitter/Money Transfer License In the legal code of the United States, a money transmitter or money transfer service is a business entity that provides money transfer services or payment instruments, whether it is real currency, cryptocurrency, or any other value. Money transmitters in the US are part of a larger group of entities called money service businesses or MSBs. • Multi-Signature (Multi-Sig) Multi-signature addresses provide an added layer of security by requiring more than one key to authorize a transaction. • N • Network A network refers to all nodes in the operation of a blockchain at any given moment in time. • Node The most basic unit of blockchain infrastructure that stores data. • Non-Custodial Usually referring to the storage of keys, in relation to wallets or exchanges, a non-custodial setup is one in which private keys are held by the user directly. • Non-Fungible Token (NFT) Non-fungible tokens are cryptocurrencies that do not possess the property of fungibility. • Nonce When a transaction is hashed by a miner, an arbitrary number meant to be used only once is generated, called a nonce. GLOSSARY • O • Off-Ledger Currency A currency that is created (minted) outside of the specified blockchain ledger but is accepted or used. • Offline Storage The act of storing cryptocurrencies in devices or systems not connected to the internet. • On-Ledger Currency A currency that is both minted on the blockchain ledger and also used on the blockchain ledger, such as Bitcoin. • One Cancels the Other Order (OCO)A situation where two orders for cryptocurrency are placed simultaneously, with a rule in place to enforce that if one is accepted, the other is cancelled. • Online Storage The act of storing cryptocurrencies in devices or systems connected to the internet. • Open-Source Open source is a philosophy, with participants believing in the free and open sharing of information in pursuit of the greater common good. • Oracle An agent that finds and verifies information, bridging the real world and the blockchain by providing data to smart contracts for execution of said contracts under specified conditions. • Oracle Manipulation Oracle manipulation is when an oracle smart contract is manipulated by hackers. • Over-the-Counter (OTC) Over-the-counter is defined as a transaction made outside of an exchange, often peer-to-peer through private trades. • P • Paper Wallet A physical document containing your private key or seed phrase. • Password Manager A password manager is a tool or software that stores all sorts of passwords needed for online applications and services. • Peer-to-Peer P2P The decentralized interactions between parties in a distributed network, partitioning tasks, or workloads between peers. • Permissioned Ledger A ledger designed with restrictions, such that only people or organizations requiring access have permission to access it. GLOSSARY

• Permissionless Often used to describe blockchains, a system is said to be permissionless when there is no entity that can regulate who can use it and how it can be used. • Phishing When a scammer pretends to be a trusted institution or person to trick people into revealing sensitive information such as Social Security numbers, passwords, banking details, etc., often through a malware link disguised as legitimate. • Platform Platform refers to the parent blockchain of tokens. It may also refer to a cryptocurrency exchange on which you may trade cryptocurrencies. • Private Key/Secret Key A piece of code generated in asymmetric-key encryption process, paired with a public key, to be used in decrypting information hashed with the public key. • Proof-of-Authority (PoA) A blockchain consensus mechanism that delivers comparatively fast transactions using identity as a stake. • Proof-of-Burn (PoB) A blockchain consensus mechanism aiming to bootstrap one blockchain to another with increased energy efficiency, by verifying that a cost was incurred in “burning” a coin by sending it to an unspendable address. • Proof-of-Developer (PoD) Any verification that provides evidence of a real, living software developer who created a cryptocurrency, in order to prevent an anonymous developer from making away with any raised funds without delivering a working model. • Proof-of-Replication (PoRep) Proof-of-replication is the way that a storage miner proves to the network that they are storing an entirely unique copy of a piece of data. • Proof-of-Spacetime (PoSt) PoSt means that someone can now guarantee that they are spending a certain amount of space for storage. • Proof-of-Stake (PoS) A blockchain consensus mechanism involving choosing the creator of the next block via various combinations of random selection andwealth or age of staked coins or tokens. *see Proof-of-Work PoW. • Proof-of-Work (PoW) A blockchain consensus mechanism involving solving of computationally intensive puzzles to validate transactions and create new blocks. *see Proof-of-Stake (PoS). GLOSSARY

• Protocol The set of rules that define interactions on a network, usually involving consensus, transaction validation, and network participation on a blockchain. • Public Address A public address is the cryptographic hash of a public key, allowing the user to use it as an address to request for payment. • Public Blockchain A blockchain that can be accessed by anyone. • • • Q, R • QR Code A machine-readable label that shows information encoded into a graphical black-and-white pattern. For cryptocurrencies, it is often used to easily share wallet addresses with others. • Rank The relative position of a cryptocurrency by market capitalization. • Rebase A token designed so that the circulating supply adjusts automatically according to price fluctuations. • Replay Attack Replay attacks are network security attacks where the comms between a sender and receiver is intercepted. • Replicated Ledger A copy of a distributed ledger in a network that is distributed to all participants in a cryptocurrency network. • S • Satoshi (SATS) The smallest unit of bitcoin with a value of 0.00000001 BTC. • Satoshi Nakamoto The individual or group of individuals that created Bitcoin. The identity of Satoshi Nakamoto has never been confirmed. • Scaling Problem The limitations of a blockchain's transaction throughout and ability to have fast and low cast transactions. • Scaling Solution A method of enable a system to expand. • Second-Layer Solutions A set of solutions built on top of a public blockchain to extend its scalability and efficiency, especially for micro- transactions or actions. Examples include Plasma, TrueBit, Lightning Network and more. GLOSSARY • Secure Element A secure element is a type of hardware chip that runs a specified number of applications. • Securities and Exchange Commission (SEC) An independent agency of the United States federal government, responsible for enforcing federal securities laws, proposing securities rules, and regulating the securities industry, the nation's stock and options exchanges, and other related activities and organizations. • Security Token A security token is essentially a digital form of traditional securities. • Seed Phrase A single starting point when deriving keys for a deterministic wallet. • Sharding A scaling approach that enables splitting of blockchain states into partitions containing states and transaction history, so that each shard can be processed in parallel. • Side Chain A blockchain ledger that runs in parallel to a primary blockchain, where there is a two-way link between the primary chain and sidechain. • Simplified Payment Verification (SPV) A lightweight client to verify blockchain transactions, downloading only block headers and requesting proof of inclusion to the blockchain in the Merkle Tree. • Slippage Slippage happens when traders have to settle for a different price than what they initially requested due to a price movement. • Smart Contract A smart contract is a computer protocol intended to facilitate, verify, or enforce a contract on the blockchain without third parties. • Smart Contract Audit A smart contract audit is a security check done by cybersecurity professionals meant to ensure that the on-chain code behind a smart contract is devoid of bugs or security vulnerabilities. • Soft Cap The minimum amount that an initial coin offering (ICO) wants to raise. GLOSSARY

• Soft Fork A protocol upgrade where only previously valid transactions are made invalid, with most soft forks requiring miners to upgrade their mining software. • Solidity The programming language used by Ethereum for developing smart contracts. • Stablecoin A cryptocurrency with extremely low volatility, sometimes used as a means of portfolio diversification. Examples include gold-backed cryptocurrency or fiat-pegged cryptocurrency. • Staking Participation in a proof-of-stake PoSsystem to put your tokens in to serve as a validator to the blockchain and receive rewards. • State Channel A second-layer scaling solution that reduces the total on-chain transactions necessary, moving the transactions off-chain and letting participants sign to the main chain after multiple off-chain transactions. • Storage (Decentralized) Decentralized storage refers to the concept of storing files online by splitting them into encrypted fragments and delegating these fragments to multiple nodes on a distributed network, e.g., a blockchain. • Substrate A web app development framework developed by Parity Technologies. • T • Taint The percentage of cryptocurrency in an account that can be traced to another account. • Testnet An alternative blockchain used by developers for testing. • Throughput Throughput is how many actions can be completed in a given time frame. • Timelock/Locktime A condition for a transaction to only be processed at a certain time or block on the blockchain. • Token A digital unit designed with utility in mind, providing access and use of a larger crypto economic system. It does not have a store of value on its own but is made so that software can be developed around it. • Token Generation Event The time at which a token is issued. GLOSSARY

• Token Swap Token swaps can refer to one of two things: 1. Direct exchange of a certain amount of one cryptocurrency token for another between users facilitated by a special exchange service. 2. Migration of a cryptocurrency token built on top of one blockchain platform to a different blockchain. • Tokenize The process by which real-world assets are turned into something of digital value called a token, often subsequently able to offer ownership of parts of this asset to different owners. • Tor Tor is a decentralized network that anonymizes users' web traffic by encrypting it and routing it through a series of relays before it reaches its final destination. • Total Supply The total amount of coins in existence right now, minus any coins that have been verifiably burned. *see Circulating Supply and Max Supply. • Trustless A property of the blockchain, where no participant needs to trust any other participant for transactions to be enforced as intended. • Two-Factor Authentication (2FA) • Two-factor authentication (2FA) is method of access that requires two different forms of authentication. • U, V, W, X, Y, Z • Unbanked Unbanked refers to those that are either unable to access banking services or choose not to. • Unconfirmed A state in which a transaction has not been appended to the blockchain. • Unpermissioned Ledger A public blockchain. • Unspent Transaction Output (UTXO) An output of a blockchain transaction that has not been spent and can be used as an input for new transactions. • Utility Token Tokens that are designed specifically to be able to help people use something. • Validator A participant on a proof-of-stake PoS blockchain, involved in validating blocks for rewards.