Understanding Render's (RNDR) Regulatory Positioning

By Michael @ CryptoEQ | CryptoEQ | 25 Jan 2024


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Render (RNDR)

The Render Network is a decentralized GPU rendering network that is built on the Ethereum, Polygon, and, soon, Solana blockchain. The network allows users to share their unused GPU power with others, and in return, they earn rewards.

The Render Network is designed to solve a number of problems for digital creators. First, it can save them time and money. By sharing their unused GPU power, they can avoid having to purchase their own high-end GPUs, which can be expensive. Second, the Render Network can help to reduce the environmental impact of rendering. By decentralizing the rendering process, the Render Network can help to reduce the amount of energy that is used for rendering.

The Render Network offers a number of benefits to users. First, it can help them to earn profits. By contributing their rendering power to the network, they can earn RNDR tokens, which can be traded on exchanges. Second, the Render Network can help them to save money. By using the network to render their projects, they can avoid having to purchase their own high-end GPUs.

RNDR token Source

The Render Network (RNDR) is an innovative platform that leverages blockchain technology to provide an efficient, powerful, and capable alternative in the GPU rendering market. Its business model is designed to scale up linearly to meet growing demands for GPU rendering services, offering users the ability to process intricate files that would be difficult to complete locally. By utilizing the Render Token (RNDR), the network ensures a seamless and decentralized rendering experience for its users.

render diagram Source

The Render Network's unique proposition stems from its ability to harness the power of blockchain technology, which enables a more efficient and transparent rendering process. This approach not only reduces costs for users but also allows for greater accessibility and scalability of rendering services. Additionally, the network's use of the Render Token (RNDR) as a form of currency facilitates transactions and incentivizes participation, further strengthening the platform's ecosystem.

 

The Howey Test

The Howey Test, the primary case law on the features of a security, remains the best measuring stick despite its many shortcomings when applied to cryptoassets.  For this analysis, understand that the degree of decentralization of a protocol is a significant factor in determining which, if any, United States securities regulations apply.

“When a promoter, sponsor, or another third party (or affiliated group of third parties) (each, an “Active Participant” or “A.P.”) provides essential managerial efforts that affect the success of the enterprise, and investors reasonably expect to derive profit from those efforts, then this prong of the [Howey] test is met.

There are essential tasks or responsibilities performed and expected to be performed by an A.P., rather than an unaffiliated, dispersed community of network users(commonly known as a “decentralized” network).”

-SEC guidance “Framework for ‘Investment Contract’ Analysis of Digital Assets

Increased speculation of crypto assets is leading to an attempt by agencies like the SEC to separate what’s considered a currency and what’s considered a security. Cryptocurrencies can be deemed a security if it satisfies specific properties based on the standard definition and interpretation of the Howey Test, the standard legal test applied to assets to determine if they're securities. The four-component questions of the test are: 

  1. Is there an investment of money? 
  2. Is there an expectation of future profits? 
  3. Is the investment of money in a common enterprise? 
  4. Do any profits come from the efforts of a promoter or third party?

In October 2021, the Commodity Futures Trading Commission (CFTC) chairman stated, “Nearly 60% of cryptocurrencies are commodities” and that his team is positioned to lead regulations over the market. Meanwhile, SEC chairman Gary Gensler has continually commented that many cryptocurrencies, including stablecoins, are no different than securities and, as such, should fall under his sphere of influence in the name of “consumer protection.” 

The SEC announced in Q2 2022 that they're doubling the personnel within their Crypto Assets and Cyber unit in a move intending to fortify their position as a crypto regulator. Talks of regulation have increased dramatically following the 2022 collapse of the Terra Luna ecosystem. 

Regulatory Rulings

Other tokens created by large centralized companies have recently run into opposition from US regulators, such as Telegram abandoning its project entirely after a multi-year battle with the SEC. Several landmark cases by the SEC set a precedent for them to evaluate initial coin offerings (ICOs) as securities retroactively, while a recent ruling in November 2022 against LBRY tokens further strengthens the SEC’s case against many altcoins. 

In 2022, SEC Chairman Gary Gensler made comments on CNBC’s Squawk Box about being prepared to label only Bitcoin a commodity, meaning the Commodities Futures Trading Commission (CFTC) would be able to regulate it. However, Gensler also said that many other tokens on the market have ‘’key attributes’’ of securities. Gensler has called for full and fair disclosure in the crypto market while stating ‘’the U.S. is open to having hundreds if not thousands of tokens on its market if they complied with SEC laws.’’ 

The fact that Render held public and private sales for RNDR tokens (like many projects in the space pre-2019) will open it up to scrutiny from regulators. While there are nuances, one comparison that can be made is to a token/company like LINK/SmartContract. The biggest argument for LINK being classified a security, according to the Howey Test, is its dependence and centralization around the “common enterprise” and “third party” parent company, SmartContract. Other tokens created by large centralized companies have recently run into opposition from the US regulators, such as Telegram abandoning its project entirely after a multi-year battle with the SEC. A recent landmark case by the SEC sets a precedent for them to evaluate ICOs as securities retroactively, but this does not affect Ethereum itself, even though it had an initial token sale in 2015.

From the FAQ on the Render Network website

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Michael @ CryptoEQ
Michael @ CryptoEQ

I am a Co-Founder and Lead Analyst at CryptoEQ. Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.


CryptoEQ
CryptoEQ

Gain the market insights you need to grow your cryptocurrency portfolio. Our team's supportive and interactive approach helps you refine your crypto investing and trading strategies.

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