EthHub, an open-source community for Ethereum, produced a response to the request, answering most of the questions posed by the CFTC directly and in detail.
Why the CFTC Cares About Ethereum
The goal of the CFTC’s request is to collect information from the public in order to improve the CFTC’s “understanding of the technology, mechanics, and markets for virtual currencies beyond Bitcoin, namely here Ether and its use on the Ethereum Network,” according to the document.
The CFTC added that the public input will help the agency provide effective guidance as financial markets evolve “and potentially seeks to list new virtual currency based futures and derivatives products.”
The agency has issued previous guidance on cryptocurrency, but it has focused primarily on bitcoin, the only cryptocurrency that has received serious consideration from mainstream financial markets so far. The recent request for input suggests that the CFTC believes that financial markets may begin experimenting with other cryptocurrencies or blockchain networks, including Ethereum.
So, naturally, a community like EthHub has taken it upon itself to provide direct answers to the CFTC’s questions.
EthHub describes itself in documents on GitHub, the software and documentation-hosting site, as an “open source, community run information hub” that provides “a one stop shop for essential Ethereum information.”
The precise activities of EthHub, and the identities of the people running it, are a bit unclear. The organization’s Twitter page suggests that it launched in September 2018, but it didn’t create a GitHub account until early December, and there is little information available on its website.
Yet EthHub has emerged as the first organization to issue a lengthy response to the CFTC’s request for input. The response includes answers to all but one of the 25 questions posed about Ethereum by the CFTC, which cover topics ranging from how Ethereum is different from Bitcoin to potential security vulnerabilities in Ethereum smart contracts and wallets.
Ether and Derivative Contracts
The one question that EthHub did not answer, which deals with “any potential impacts on Ether and the Ethereum Network that may arise from the listing or trading of derivative contracts on Ether,” may also be the one that most interests the CFTC. The question essentially asks what might happen to the Ethereum network or the value of ether if ether were traded on stock exchanges or other mainstream financial markets.
To date, no cryptocurrency has been traded in this way. Bitcoin futures contracts have happened, but they are not quite the same thing, and at any rate, such trades have not taken place on a large enough scale to draw firm conclusions.
Nonetheless, the EthHub response offers valuable insight into other questions related to how ether might be integrated into conventional financial markets. It discusses the potential impact of ether derivative contracts on Ethereum consensus protocols, for instance, as well as the extent to which the Ethereum blockchain can resist attempts to manipulate the value of ether in order to defraud financial markets.
The response also points to potential problems that might concern regulators, such as the potential of some ether trading organizations to manipulate the ether market and the risk of a 51 percent attack against the Ethereum network.
EthHub and the State of the Ethereum Community
It’s important to keep in mind that, while EthHub attempts to speak for the Ethereum community as a whole, the reality is that the Ethereum ecosystem is decentralized by nature. It’s not possible to create a set of responses to the CFTC report that accurately reflects the opinions of all parties with an interest in Ethereum.
Still, to the extent to which the EthHub report does reflect prevailing attitudes within the Ethereum community, it speaks volumes about the state of Ethereum and ether’s potential fitness to be traded on conventional financial markets.
It remains unclear what might come of the CFTC request for input, which remains open until February 9, 2019, but EthHub has made a persuasive case for regulators to look favorably on Ethereum and ether.