YLAYER - HackMD

# YLAYER [toc] # creates a technology layer to extend online virtual games into Real-Life multiplayer games. ## Abstract > YLAYER creates the incentives-layer to fulfill the needs of the online world and the real-life truth. Incentives control the behavior of the network and interface with users and society. > > YLAYER’s mission is to integrate the Metaverse and the physical world to create real-time multi dimensional games. YLAYER introduces an incentives-driven system to design the future realities. Every aspect of the game-space is built around incentive structures: the proposed design and planning systems, governance systems, policymaking frameworks and commercial regulation, and the development of YLAYER's cooperative corporation and economic development. The power of online Gaming The new Gamers Mindset What we do ## Introduction YLAYER The problem we want to solve: * The failure of Institutions * Intensification * Governance systems ## YLAYER's ECONOMIC DEVELOPMENT POLICY PLAN YLAYER will pursue its development as a cooperative corporation on blockchain. To secure the necessary funding YLAYER will attempt to utilize the ICO model. We assume a general and Permissionless DLT technology, a DLT network in which virtually anyone can become a participant in the validation and consensus process. We assume a Proof-of-stake consensus mechanism (PoS): PoS is a form of consensus mechanism within a DLT environment that requests participants to demonstrate ownership of a pre-defined crypto-asset. With PoS, a person can mine or validate block transactions according to how many of the respective crypto-assets he or she holds. Definitions according to: (https://https://www.esma.europa.eu/sites/default/files/library/esma50-157-1391_crypto_advice.pdf) ### Notes for ICO legislation ### Crypto Tokens Typology and Initial Coin Offerings in the EU Abstract Much like initial public offerings produce publicly traded securities, Initial Coin Offerings (icos) produce crypto tokens tradeable on crypto exchanges. Despite an apparent need for investor protection the ico and the tokenisation phenomenon have yet to be addressed by legislative action on the EU level. The paper studies the suitability of the EU regulatory framework to capture tokenised financial instruments and utility tokens based on the views of the EU supervisory and national competent authorities. It is argued that EU regulators shall first ensure legal certainty by defining the scope of tokenised financial instruments subject to MiFID. Further, authorisation and ongoing requirements shall be adapted to address the risks posed by distributed technology and direct global access of investors to crypto markets. Finally, there is no immediate need for a bespoke EU-wide regime governing utility tokens; fragmentation of the market is a positive development providing a testing field for future supranational initiatives. Keywords: EU regulation; financial market; ico ; tokenisation; crypto asset; utility token; security token ### 1 Introduction Between January 2014 and June 2018, token generation events or colloquially, initial coin offerings (icos), the alternative instrument of financing startups through online offering of crypto tokens to general public, raised between usd 13 billion and usd 18 billion.1 Software developers have used icos, tokenisation2 and distributed ledger technology (dlt)3 to create and finance a wide variety of online applications, both business- and retail- oriented, in the fields of financial services, hi-tech, media and entertainment, marketing, healthcare, etc.4 In some instances, crypto tokens serve as an integral part of technology and economics behind the project. In others, they have no purpose other than to fuel icos and raise financing from the general public at the early stage of the business development. The latter practice, of course, is prone to abuse, which recently questioned the integrity of the ico market. Out of 80,000 blockchain projects launched worldwide allegedly only 8 percent5 are still active today. Of the 902 startups that launched an ico in 2017 46 percent6 are cited to have disappeared. These statistics confirm that the unregulated ico market poses risks similar to traditional financial instruments (such as shares in a company) regulated under the current EU regulatory framework. Much like initial public offerings produce publicly traded securities, ico projects produce transferable crypto tokens which are listed and traded on crypto exchanges.7 Thus, the unregulated crypto market and global direct access of individuals to trades could ultimately be the main reason why the ico market is overwhelmed with ‘bad ideas’ and ‘scams’.8 Despite apparent need for investor protection on the level of the European Union (EU) the ico and the tokenisation phenomenon have yet to be addressed by EU-level legislative action. However, substantial efforts have been made by the EU financial supervisory authorities in the last five years to analyse the nature of crypto tokens and related activities. In particular, the European Banking Association (eba) and the European Securities and Markets Authority (esma) have provided valuable advice, risk-assessments and guidance to EU policymakers relating to the potential regulation of financial activities involving crypto assets and dlt in the EU. Undoubtedly, discussions among the authorities and policymakers on a potential EU-wide regulatory framework have gained momentum, with the introduction of the first bespoke regime for regulation of crypto tokens on a Member State level (Malta) feeding the argument for immediate cooperation in the face of the market fragmentation and regulatory arbitrage.9 However, the infancy of the ico phenomenon, and otherwise globally unregulated crypto exchange market, may have a cooling-off effect on policymakers; to regulate too early may mean to stifle innovation and drive capital away. The purpose of this paper is three-fold. The first research question to be answered is as follows: how the EU payment services and financial market laws apply to different types of crypto tokens and related activities (de lege lata)? For this purpose, the author will first provide a general typology of crypto tokens and their business applications in Section 2 by distinguishing between protocol and application tokens and will map an operational structure of a typical ico. Then, in Section 3 the author will render a limited doctrinal legal analysis of the applicable normative framework based on the opinions on the subject made by the eba, esma and the Securities and Markets Stakeholders Group (smsg).10 The second research question the author answers is whether the EU regulatory framework is suitable to govern crypto tokens and related activities which are not covered by it (de lege ferenda)? For this purpose, the author will provide dogmatic-style argumentation in Section 3 based on the synthesis of discussions made at the level of the eba, esma and smsg. The third and final question addressed in this paper is: whether an EU-wide legislative act governing crypto tokens not covered by the EU regulatory framework is currently required? The answer to the third question will be built upon the analysis made in answering the first two research questions and on a legal doctrinal analysis made in Section 4 of the first comprehensive regulatory framework covering primary and secondary offering of crypto tokens adopted in Malta as of November 1, 2018.11 Finally, the paper will summarise the three answers to the research questions in the conclusion Section for further consideration by scholars, commentators and policy-makers. ### 2 Basic Typology of Crypto Tokens, Operational Model of a Typical ico This Section describes a basic typology of crypto tokens (protocol tokens and application tokens) and serves as a starting point for understanding the underlying technology and economic functions of different types of crypto tokens. The Section further elaborates on the operational model of a typical ico. #### 2.1 Protocol Tokens A crypto token per se is merely an entry in a decentralised register (transaction ledger). A typical transaction ledger (blockchain network)12 records the history of transactions and the resulting balances (tokens) on the token accounts (public addresses or public keys). Holders of private keys (passwords to the token accounts) may dispose of the tokens by directing them from one public address to another. Such function of transferability is the starting point for description of any crypto token and especially, of a protocol token (often termed ‘cryptocurrency’, ‘virtual currency’, ‘coin’). Transferability of a protocol token is made possible because of the operation of the blockchain protocol which is native to the token.13 For instance, a bitcoin, as a protocol token, is native to the Bitcoin blockchain network because bitcoins are created and transferred on the network as rewards to miners for maintenance of transaction flow.14 Therefore, the role of miners, decentralised model of token creation and the systems of transaction fees together suggest that by design bitcoin has the ‘native’ function of a network resource – an integral part of the incentive mechanism which secures bitcoin’s applicability – to be used as a means of exchange between transaction parties. It appears that absent external reference to any asset or service, a protocol token, much like bitcoin, by design has a narrow application; holders of bitcoins agreed that the Bitcoin protocol and by extension, bitcoins, as such, have value and therefore accept bitcoins as means of payment.15 At the same time, popularity of a bitcoin as a means of payment is understandable: making electronic payments with protocol tokens without having to resort to a centralised third party is the most recognisable and prominent application of crypto tokens, especially in a cross-border context. However, in fact, protocol tokens have a wider functionality. For instance, the Bitcoin blockchain network allows the transfer of additional metadata together with bitcoins (e.g. deposit certificate identification number or the name and class of securities) making it possible to associate such transfers of bitcoins with transfers of externally referenced assets. Thus, anyone can assign particular external reference to the bitcoin (or, in other words, build the reference system on top of the Bitcoin network) and leverage the operation of the Bitcoin transaction ledger for transferring title in any tangible or intangible asset (e.g. cars, real estate, securities, intellectual property, etc.). Bitcoins which have been assigned with external reference are colloquially called ‘coloured coins’. In the case of Ethereum, a protocol token blockchain network,16 the ether token, in addition to its general payment function, also constitutes a network resource. By design of the Ethereum network ether operates as a transaction fee payable by network users to miners for smart contracts’ processing. The nature of smart contracts is unique enough to suggest that ether in this particular case is an inherent part of the mechanism to provide specific services to the network users – execution of autonomous computer programs called ‘smart contracts’. Potential functionality of smart contracts is very broad and may be generalised as intermediation of ‘economic or social activity online’.17 However, for the purposes of the present paper the author will describe in detail only one popular case of application of smart contracts – generation of application tokens. 2.2 Application Tokens Most of the application (app or platform) tokens are different from protocol tokens mainly because they are non-native to the protocol of a blockchain network and do not serve as a network resource. Rather, they are implemented in a second-layer protocol or in an application which is built on top of the blockchain network. Much like in the case of coloured coins, app tokens utilise the blockchain network in order to be transferred from one public address to another. However, unlike coloured coins, app tokens have a nature which is distinct from protocol tokens – app tokens are generated not by the blockchain network but by smart contracts and therefore by design are not integral to (not required for) the operation of the blockchain network. 2.2.1 How Smart Contracts Generate App Tokens Most of the existing app tokens are derivative from (built on the top of) Ethereum network and meet the erc20 standard.18 While being easy to deploy, identical and divisible, an erc20-standard token has been the primary choice for ico projects (from 50 percent to 85 percent19 of icos use erc20-standard tokens).20 App tokens are created by software developers on behalf of an operator (collectively, ‘Issuer’) who are in the process of developing an online application, service or platform (‘Platform’, ‘Application’). Issuers are free to determine the intended purpose of the app token which can fulfil various functions and offer different benefits to its holder. Smart contracts act as an electronic agent for both the Issuer and any person to whom an app token is issued by the smart contract (or ‘initial token holder’). Smart contracts enable the Issuer to automatise token generation by encoding the terms and the mechanics of token supply into the algorithm. Smart contracts understand what amount of tokens and at which point in time to generate and transfer to the pre-set public address. Smart contracts supporting the erc-20 standard can also accept and store ether tokens which are sent to the public address of such smart contracts. The level of the smart contract’s autonomy is predetermined by the Issuer. For instance, it is possible to program the smart contract to generate and distribute app tokens to the addresses from which it received ether. Alternatively, the Issuer may want to manually instruct the smart contract to generate and transfer tokens following a triggering event. 2.2.2 (De-)centralised Applications The level of autonomy is the judgement call of the Issuer not only in relation to the generation of the App token but also with regard to the transfers of the app tokens on the blockchain network. As an example, crypto exchange platforms which facilitate the secondary21 trading of crypto tokens can be generally divided into centralised and decentralised. A centralised platform, which is presently a dominant model, requires traders to deposit crypto tokens with the platform prior to trading by handing over the private keys. By safekeeping the deposited tokens on a single public address, centralised crypto exchange platforms ensure that they will only process transactions on the blockchain (on-chain) when traders deposit/withdraw their tokens at / from the platform. Other operations (matching of orders, clearing and settlement) are accounted for in a centralised manner in the books of the crypto exchange (off-chain). In contrast, in a purely decentralised crypto exchange platform there is no central party responsible for the custody of tokens and operations. Rather, the tokens are typically transferred by traders in advance to a smart contract which holds them until the trade order can be processed, i.e. until both transaction parties sign both sides of the trade with their private keys. While traders remain in control of their tokens transaction settlement happens on the blockchain network (on-chain). However, much like in the case of icos, the level of decentralisation in such models depends on the technical implementation of the smart contract, specifically, on the level of encoded technical controls allowing the crypto exchange operator to exercise residual influence on confirmation, approval or blockage of trading orders. ### 2.3 Operational Model of a Typical ico An ‘initial coin offering’ or ‘ico’ can be generally defined as ‘a kickstarter-style crowdfunding campaign that allows the public to participate in an early-stage project’ and a project team to ‘raise financial capital to support the development of its project’ across the globe.22 In a typical ico individual retail investors (as opposed to individual qualified investors)23 and the Issuer enter into a bilateral contract whereby investors transfer funds in government-issued money (fiat) or in the most liquid protocol tokens, such as bitcoin or ether, to the Issuer and receive app tokens (or the right to have them delivered in future) in consideration. As explained in the sections above, a smart contract is programmed by the Issuer to receive ether from investors, to generate app tokens and deliver them to the public addresses (digital wallets) of the investors. icos are often preceded by ‘pre-sale’ – raising funds from qualified investors in return for a promise to generate and deliver app tokens at some future point in time which may coincide with the timing of the ico or development of the Platform. A similar pre-financing model may be operated through a sale of pre-functional tokens to investors which upon development of the Platform are to be converted into fully operational tokens. However, even a delivery-versus-payment ico model may be viewed as pre-financing if the generated app token is not fully functional on the Platform at the point of its delivery to the investor. This is why the ico is a type of fundraising campaign rather than a mere purchase-and-sale: by running an ico campaign Issuers plan to raise funds for the purpose of financing the development of their Applications in accordance with a defined business plan, roadmap, technical specifications and projected functionality of the app token. Information of this type is made publicly available to investors in a whitepaper document and may have an influence on their investment decisions. On receipt of the app tokens investors in most cases have only a claim against the Issuer which is linked to the future rights attributed to the app token by the contract concluded with the Issuer. Until the Issuer develops the Application and the app tokens become fully functional investors may either (1) hold the tokens and speculate on a gain in value; or (2) exchange the tokens for other tokens or fiat on a crypto exchange platform. 2.4 Economic Functions of Application Tokens In contrast to the general function of protocol tokens (medium of exchange on the native blockchain network) application tokens may have multiple functions within an individual application or organisation.24 Protocol tokens do not entitle someone to any rights per se – network users agreed that they have value because of their underlying infrastructure. App tokens vest their holders ‘with predefined rights, privileges, and rewards within a particular online application or service’25 which may be triggered either by their transfer or mere holding. Some of the app tokens are colloquially called ‘utility tokens’ and entitle their owners to access and consume products of the Platform26 or commit work to the Platform.27 Others are colloquially called ‘security tokens’ and provide their holders with economic interest such as a share of profits of the Platform.28 In general terms, the structure of an ico and the rights assigned to tokens together may have implications for the legal qualification of the app token as a utility or a security. [1] ## References [1-Burilov, V. (2019). Regulation of Crypto Tokens and Initial Coin Offerings in the EU, European Journal of Comparative Law and Governance, 6(2), 146-186. doi: https://doi.org/10.1163/22134514-00602003] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/608850/ncc-natural-capital-valuation.pdf https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0164460 https://medium.com/earthtokens ## The process of planning ### The magnitude of intensification of human activities is now so vast that operate on a planetary level re-shaping the surface of the Earth and affecting the deep structures of the Planet. No one can self-isolate from environmental health threats such as water, air, and soil pollution that endanger the wellness and longevity of the entire world population. Yet the capacity of our institutions and international organisations to plan for responses has been limited. Several fundamental problems in the current state of global systems explain the inability to planning rapid adaptation to changes such as those caused by intensification. Markets generate the data to use in planning which are given to the planner by the owner through a message transfer system. There are significant limitations in the above system in terms of latency, transparency, guarantees and delegation of power. Latency emerges as an inherent problem of public planning since there is an arbitrary delay-period between data production and transfer to planning centres. The other point of failure is related to the messaging value-transfer system used in which Involved parties, maintain complete control over it. The system has the absolute power to delegate the process of planning to related industries creating monopolies. Centralisation of authority over the control of networks limits the ability of society to utilise the knowledge of available resources, weakening the capacity to resist on attacks and manipulation by adversaries intermediaries. THE PLANNING SYSTEM PROTOCOL DISTRIBUTED, CONSENSUS-BASED, COUNTING SYSTEMS, ON STATE MACHINES Project’s radical shift from "sustainable development" practices is to de-centralise the process of planning. We provide a framework that allows any community and its delegated architects to plan and deploy their own environmental markets as part of their Ecosystems and Urban planning projects where the community creates every market of a particular project. The —project development— together with the environmental market constitute a powerful design tool that today does not exist. The system implements a unit of value in a generalised manner, over a public blockchain value-transfer network, to communicate information about the state of the world in a format to empower people from different disciplines to engage in the complex and urgent process of planning for our planet. a transaction-based state-transition machine The new planning system paradigm is a transition system, where projects are designed as a sequence of project-states. A formal relation, termed here as, transition function f(y), specifies how the system transitions from one state to another. A system-state is a mapping between interactions in the physical world and an account of natural capital resources. The system-state contains information about account balances of Ecosystem Services, computing primitives of property rights structures among other. The World-state is a mapping between contracts and project-states Transition functions The project-transition function f(y) contains the incentive-compatible mechanism to drive the transition of the system from one state to another in the physical world. The World-system transition function f(Y) secures the decentralised transaction ledger. The —state— together with the transition function constitute a powerful design tool. Trust, triple entry accounting, and co-operative networks The system implements the Bitcoin paradigm to generate several novel functionalities in the form of computing primitives, that are not generally available. The core is a triple-entry accounting system that provides for tamper resistance, redundancy, and transparency in addition to real-time monitoring, verification and auditing of transactions. Cryptographically enforced trust has also demonstrated its potential as a significant force for human cooperation without the need for a central authority. We use these primitives that form the backbone of the Bitcoin technology to build a new planning system paradigm. END-TO-END SYSTEM The project provides an integrated end-to-end platform for building projects and environmental markets on a currently unexplored planning paradigm: a decentralized value-transfer computing system. --------------- Y--Layer, a decentralized computing platform, provides an end to end system to enables any community in the world build their own projects to meet the Global Goals and create every environmental market associated with the particular targets. > Y--Layer is an integrated end to end system that enables any community to build their own projects to meet the Global Goals and create every environmental market associated with the particular targets. Y— a Research by Design Studio on a Blockchain is the space where people come together to raise awareness for the beauty and fragility of our Planet and build credible responds WHAT THE WORLD SHOULD EXPECT? INCENTIVES VS GOVERNANCE We claim that responds to ecological and urban systems threats can be designed as cooperative projects, on user-owned and community-operated, distributed networks without the need of a central planner. Credible design of incentive structures in the system would allow for new forms of self-organised, and self-coordinated, asynchronous collaborations to emerge, bringing together governments builders, thinkers, and consumers to actions. governance ruthlessly minimised Nick Szabo the inventor of smart contracts A TOOLSET TO BUILD CITIES AND ECOLOGIES A library of tools to DESIGN, DEPLOY and OPERATE DECENTRALIZED projects on the ground and on Blockchain at the scale of the planet. Reduce barriers to entry by securely implementing standards and specifications for building solutions on uncharted fields. The borderless and transparent nature these new computable specifications can offer will allow for the assembly of digital infrastructure systems which will assembly in projects in the physical 3-dimensional world. building the Y— movement ------------ A system of open source accepted standards for planning and building, ensuring any market, contract, etc. built using them are accessible when interfacing with Ethereum. --------------- Many systems such as the Minecraft game and the Bitcoin computer are built on the foundations of a unit of account which is a To solve the problem the design provides access to a decentralised planning system that connects many individuals into a network (Hayek 1945) In this context, the system issues a unit of account, to communicate messages of the cost/value of goods, to measure input/output of transactions and build incentives structures, among others. a decentralised secure social operating system to plan for the planet use the internet to make a decentralised value-transfer system to design an efficient planning system. defining a desirable future . We will use a metaphor to build some intuition on this. The Planet in its entirety is a state transition machine. Transactions on Earth’s natural capital and energy sources executed by evolution and human activity shift the Planetary-system from one state to another. #### Building intuition ## System components ### a unit of account The interface communicates information about the state of the system in a format to empower people from different disciplines to engage in the complex and urgent process of planning for our planet. In this context, the system issues a unit of account, based on natural capital accounting to communicate messages of the cost/value of goods, to measure input/output of transactions and build incentives structures, among others. ### Natural Capital accounts These data structures count natural capital assets and ecosystem services, following the classification of the global standard of “System of Environmental-Economic Accounting”. These assets may or may not be subject to market transactions and don’t necessarily have well established market prices. Using natural capital accounting we can extract a variety of views about a system and plan actions more informative. programmable futures Using this planning system we can design the desired futures of the Anthropocene epoch as account balances of the state and program the process to arrive as transactions to modifiy the account balance of natural capital: To initiate a project, we start by designing the desired state of the future we want to arrive at and work backwards. At the building phase, we begin with a state and incrementally, execute transactions, to form it to the desired future-state. shaping the consumer mindset building a movement Consumers can turn a successful action into a movement and multiply impact. We believe that only the consumers have in their hands enough power to confront the vast magnitude of intensification that's operating at a planetary level and we want to provide the tools. link to our markup editor where the project lives PLAN THE PLANET 2020 --------- MULTIPLE DIMENSIONS The interface to the planning system has to satisfy the The Interface to the Planning Protocol should be understood as an Integrated Development EEnvironment that its primary task is to serve information to the user about the state of the system in such a manner to icrease the user experience, enabling people from a multitude of disciplines, with varied levels of information to engage in the complex process of planning for the planet. In this context the system issues a unit of account, based on natural capital accounting to serve for a multitude of purposes suchs as measuring cost/value of goods communicating messages and building incentives structures among others. that has to satisfy the needs of different knowledge domains, with varied levels of information. . in the complex and urgent process of planning for our planet to allow for measuring the input/output of transactions in terms of Natural Capital assets. we are implementing a planning system paradigm as blockchain computer over the internet network to build a protocol with the capacity to operate at the planetary level. which is consumer-owned and community-operated. At the core of the system are a project specification and certification standard which is governed by its users. PLAN-THE-PLANET is a user-owned and community-operated computing platform to enable Individual participants, to plan for our Planet collaboratively with hundreds of millions of people. is a user-owned, and community operated network that has the unique capability to create trust between users, developers, and the Institution itself, to enable Individual participants, to plan for our Planet collaboratively with hundreds of millions of people. a consumer-owned and community-operated decentralised Institution for building credible actions to confront the health and climate threats, and Plan for the Planet collaboratively with hundreds of millions of people. We will use a metaphor to build some intuition. The Planet in its entirety, can be viewed as a state transition machine, The State of the Planet transitions, through executed transactions, on Earth’s capital, by evolution and human activity. a transaction-based state-transition planning system This unexplored planning paradigm is a transaction-based, state transition system. A state transitions from an initial condition through the execution of a transaction that is formally expressed by the transition function Y. We will use a metaphor to build some intuition on this. The Planet in its entirety, can be viewed as a state transition machine, The State of the Planet transitions, through executed transactions, on Earth’s capital, by evolution and human activity. A System-state contains information such as: Balances of Ecosystem Services Accounts, computing primitives of property rights structures and others. planning a new city, solutions for the homeless or the clean water problem of developed countries. This would aarchitectural, economic or any planning narrative we choose to implement and is technology agnostic. Natural Capital accounts These data structures count natural capital assets and ecosystem services, following the classification of the global standard of “System of Environmental-Economic Accounting”. These assets may or may not be subject to market transactions and don’t necessarily have well established market prices. Using natural capital accounting we can extract a variety of views about a system and plan actions more informative. a unit of account The interface communicates information about the state of the system in a format to empower people from different disciplines to engage in the complex and urgent process of planning for our planet. In this context, the system issues a unit of account, to communicate messages of the cost/value of goods, to measure input/output of transactions and build incentives structures, among others. ------------------- Consumers can turn a successful action into a movement and multiply impact. is the blockchain space where creative ecologies emerge, from people coming together to raise awareness for the beauty and fragility of our Planet and build credible responds -------- programmable futures-- how it works Project planning starts with the design of a future state to define the conditions to a desirable future in units of natural capital accounting. It then works backwards to identify the Transition function f(Y) that will connect that specified future to the genesis state, the initial conditions. Incrementally executing the programmable transactions on the physical world, we morph it into some final state. -------- ## survey intro sample This survey will help the Jenkins X maintainers understand how it is used and what’s missing. It’s important to hear feedback from the community to work out any problems and improve the Jenkins X experience. The survey will be sent out on a quarterly basis. It doesn’t take long to answer the questions so voice your opinion!