Chatham Financial RFI Crypto-asset Mechanics and Markets

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February 25, 2019 Page | 1 Chatham Financial ("Chatham") thanks the Commodity Futures Trading Commission ("the Commission") for the opportunity to comment on this "Request for Input on Crypto-asset Mechanics and Markets." Chatham is the largest advisor and technology provider to derivatives end users, serving over 2,500 clients worldwide. Chatham serves both financial end users, including regional and community banks, and non-financial end users, touching virtually every segment of the economy. As a service provider in the derivatives field, Chatham is particularly intrigued with the opportunities presented by blockchain, especially smart contracts and crypto-derivatives. Among other initiatives, Chatham has been involved in the International Swap and Derivatives Association's Common Domain Model (ISDA CDM) initiatives. Chatham seeks to be prepared to advise and support our clients as these technological developments move from the realm of the most technologically advanced to more mundane, everyday uses. Chatham has answered the questions posed by the Commission as our expertise allows. Purpose and Functionality 1) What was the impetus for developing Ether and the Ethereum Network, especially relative to Bitcoin? The development of blockchain and distributed ledger technology (DLT) that undergirds Ethereum and Bitcoin reflect a desire to reshape some of the norms, such as centralization and data ownership, that had been unquestionably accepted by most internet users. Users have only recently started questioning the efficacy of a system that grants ownership of data pertaining to them to third parties. Centralization of the internet, in particular as it pertains to where users' digital information is held, used, and monetized by companies who have shown themselves to be poor stewards of the data they have amassed with little oversight or control given to the users themselves, have made it such that a few large companies hold the data of many. Blockchain was created counter to those norms. It is decentralized, with data replicated across several unrelated nodes with users maintaining control over their data through encryption keys. Smart contracts reflect a similar desire to reshape legal processes by establishing a process that removed any question of whether the parties will perform. The self-executing smart contracts seek to create a system that makes trust irrelevant. As stated by Dr. Gavin Woods in "Ethereum: A Secure Decentralised Generalised Transaction Ledger", one of the key goals of the development of Ethereum was to "facilitate transactions between consenting individuals who would otherwise have no means to trust one another. This may be due to geographical separation, interfacing difficulty, or perhaps the incompatibility, incompetence, unwillingness, expense, uncertainty, inconvenience, or corruption of existing legal systems." The technology seeks to create one truth—one that cannot be corrupted or changed by bad actors, a system that cannot be manipulated or controlled by any outsized presence. While Bitcoin functions as a store of value, Ethereum is a technology that leverages many of the core features of DLT (fully

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