Editorial

Erik Gibbs

DSV – nothing more than a bucket shop?

The U.S. Supreme Court defines a bucket shop as “an establishment, nominally for the transaction of a stock exchange business, or business of similar character, but really for the registration of bets, or wagers, usually for small amounts, on the rise or fall of the prices of stocks, grain, oil, etc., there being no transfer or delivery of the stock or commodities nominally dealt in.” This sounds very similar to what can be found on the Augur prediction markets platform, where users can place wagers on everything from assassinations to World Cup events. They can also bet on the state of securities and commodity prices, which might not sit well with regulators per the Supreme Court’s position.

The same concern is being raised over the OP_CHECKDATASIG, or DSV, op_code for Bitcoin BCH. The opcode allows for the integration of a third-party oracle—one that exists outside of the blockchain—that can publish prices for use in wagers of any type, including on the movement of Bitcoin BCH. By virtue of being an experiment in gambling against a cryptocurrency, this could ultimately prove to be a loser with financial regulators.

Several high-profile individuals in the Bitcoin BCH community, including Bitmain founder and CEO Jihan Wu and Bitcoin.com’s Roger Ver, support the integration of new tools on the blockchain in the upcoming upgrade scheduled for a week from now. Among these is DSV, which leads many to wonder what they’re hoping to achieve. If DSV is developed as intended and the Bitcoin BCH turns into a free-for-all gambling platform, this will not sit well with regulators and could ultimately lead to the demise of the cryptocurrency.

DSV also has another dangerous characteristic. It would enable the network to be halted. This means that Bitcoin BCH would no longer be available on exchanges, it couldn’t be traded through wallets and it would stop being useful as a currency.

The Commodity Futures Trading Commission (CFTC) has already started to take a closer look at Augur and believes that it could be operating in violation of the Commodity Exchange Act in that the platform is not a designated contract market. While Augur has tried to distance itself from being seen as a prediction market, it obviously realizes that there’s a connection. It even has a wager listed on the site, “Will the Forecast Foundation face an enforcement action from the SEC or CFTC before Dec. 21, 2018 for hosting unregulated derivatives markets?” The Forecast Foundation is the group behind Augur’s protocol.

If the CFTC is willing to go after Augur for not being a registered contract market, what is to stop it, or any other regulatory body, from doing the same to Bitcoin BCH?

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