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“Without the need to trust a medium of third parties, money can be safe and transactions effortlessly.”
– Satoshi
Property rights are not sacred in traditional finances.
Even on the US stock market-where the rights of the shareholders are treated with nearly religious reverence, the management of a company sometimes repels an unwanted shareholder of their shares.
In 2009, for example, the wrestling software company Selectica used poisoning of poison pills to cut the importance of a single shareholder in two.
When the pill was activated, all shareholders other than Versata, a hedge fund, received rights that effectively doubled the number of shares they owned.
In fact, this has again distributed half of the share of Versata in the company for the other shareholders of the company.
Versata complained, but a Delaware judge chose the side of the company – which shows that a board can grab a shareholder under some circumstances, just like a government that calls an eminent domain.
In contrast to an eminent domain, the company does not have to compensate for the expropriated owner.
It is not done lightly.
Selectica had to prove in court that her action was a “proportional” response to a threat of a hostile shareholder.
But the fact that it is possible is part of what crypto and decentralized finance has inspired: a new type of financial system where ownership rights are enforced by code, not the whims of a Delaware judge.
On Friday, however, World Liberty Financial – a Defi protocol, “ruled by a distributed community of WLFI tinkers” – has effectively earned a large token holder of their tokens.
Justin Sun’s substantial retention of WLFI was frozen (perhaps temporarily) when his tokens were added to a blacklist that prevents them from being moved.
In total, World Liberty has put 272 reports on the blacklist this weekend, usually in an attempt to stop phishing attacks that is commendable, but not exactly in the spirit of non-keys-niet-your-coins consentless crypto.
The tokens of the Sun, however, were frozen in the midst of reports that he shortened the WLFI tokens that was borrowed from a stock exchange that he checks.
Someone at World Liberty took the exception and froze in response in response – something they can do without consulting the ‘distributed community’ of token holders that apparently rules the protocol.
Tradefi leaders of course do not appreciate a short sale either.
Companies that are attacked by short sellers will sometimes publish special dividends to make short positions more difficult, which contribute to the fact that large holders recall the shares that they have explained, or even lobby the government to ban the practice (as banks did successfully in 2008).
But crypto makes this so much easier: smart contracts can give protocols the opportunity to prevent their tokens from moving.
Few protocols give themselves this ability, presumably because it is contrary to the spirit of a decentralized, permissionless Financial system.
Black lists are usually only found in centralized stablecoins, where issuers need the possibility to freeze the funds of criminals at the request of law enforcement.
But a blacklist for tokens?
World Liberty is perhaps unique to give itself the opportunity to extinguish ownership rights with only a position call to the blacklist (address).
This seems to contradict the spirit of his founding mission.
As co-founder and CEO of World Liberty Zach Witkoff tells, the project was inspired by a conversation he had with the Trump, Eric and Donald Jr. brothers, shortly after their accounts were ‘ended’ by two of the largest American banks.
“So we started to discuss solutions, and the conclusion was that we needed a more democratized system,” he explained. “The origin of world report was to really give users back financial control.”
But not, apparently, for users of the World Liberty token.
The gold paper of the project states: “WLF is of the opinion that the ability to transfer private and without intermediaries is an American value.”
But World Liberty itself is an intermediary – and an unusually powerful one.
They warned us.
Later in the gold paper it warns that in a “material side effects or security risk”, governance power can be “fully located in the multisigs”.
This makes an unwanted token holder much easier compared to performing a complex poison pill defense that a shareholder can appeal in a Delaware court.
Justin Sun, on the other hand, can only appeal against the seizure of his property to the Court of Social Opinion: “My tokens were unreasonably frozen,” he posted X after refusing allegations of short sale.
That is not how this alternative financial system was intended to work.
Exactly the opposite: World Liberties Multisig seems to give its founders a level of control that Tradfi founders can only dream of.
Traditional founders sometimes retain control of their company with special voting rights, but how much easier is it when that check is ingrained in a smart contract?
The control of World Liberty seems to be absolutely.
Their token, WLFI, is strictly for governance – “the only usefulness of keeping WLFI is the board of the WLF protocol” – but world report can ignore the decisions that Token holders make.
At the end of last year, WLFI holders voted to grant the Aave DAO “about 7% of the total stock of $ WLFI -Tokens” (because the world was originally considered a fork of Aave).
Eight billion tokens voted for the proposal, versus only 187,000.
Despite that overwhelming consensus, World Liberty seems to avert over the deal and is said to call it ‘fake news’.
This is also the dream of a Tradfi founder.
Crypto -founders have all the magical ability to attract capital without giving part of their future profit (by spending governance tokens).
And in this case, the founders did not have to give up administrative rights either.
Can something be a better deal than that?
To be honest, selling a token that people consider to be fair, but is actually more on a collective object, is hardly unique for the world report – there are many such cases.
If there is something, World Liberty deserves the honor of being there in advance: only the fact that it employs a CEO, you tell that what idealistic language is used in its gold paper, the lake is a company than a protocol.
But on the blacklist of shareholders is a level of centralization that even surpasses Tradfi.
“Tokens are sacred and inviolable,” wrote Justin Sun on X, “this should be the most basic value of every blockchain.”
Sun is not generally known as a champion of decentralization, but he argues concisely.
“It is also what makes us stronger and fairer than traditional finances,” he added.
