Subject: File No. SR-NYSEArca-2016-176
From: Alen Lee

May 18, 2017

Dear Committee,

Cryptocurrencies, smart contracts, and thousands of decentralized applications are very promising and existing tech addressing important issues such as censorship resistance, removal of middlemen for the benefit of the people, and allowing easy permissionless access for new tech to the public. However, and I cannot stress this enough, Ethereum that the EtherIndex is based on is representing one of the most misleading, harmful, and questionable existing large projects in the cryptocurrency space. Ethereum is very likely an unregistered security who's rules were changed while profiting the foreign group in charge while damaging the properties and value proposed to the investors.

The rule change requested in favor of EtherIndex is designed to protect the public from fraud. In most cases, cryptocurrencies cannot be responsible for fraud as they are simple decentralized assets where trust is distributed to enormous amount of people to function only under majorities best interest under no one group's control like a global or someday terra nullius public utility. However, this is not the case for Ethereum.

Ethereum was sold in an initial coin offering (ICO) by a Ethereum Foundation (EF) group in Switzerland with a very marketed promise of being a "decentralized platform that runs smart contracts exactly as programmed without any possibility of downtime, censorship, fraud" with "unstoppable applications" still visible to this day on their website. Ethereum Foundation created about 72% of all coins for themselves, sold off about 60% to raise money for a product they didn't yet have, kept remaining 12% split between early contributors, and are letting the public use computer calculations to acquire the other 30% or so coins expected for distribution and security of the network. It was clearly understood the sold Eth coins for Ethereum platform will be traded and with use cases turn profit - which most likely registers it as an unregistered security.

Early version of the network was finally released few years later and other people began building these presumed "decentralized" "unstoppable" "without ... censorship" apps that "run exactly as programmed" including one called the DAO. On top of the statements of the platform by the Foundation, the DAO stated boldly and uniquely in their apps that their code is the terms and conditions. Unfortunately poorly programmed DAO app executed the code and suddenly began the process of giving away almost 50m usd worth of investments of Eth coins to an unknown DAO user. Code of the app and of the platform executed flawlessly, but it just happens it wasn't the intended behavior by the developers due to an overlooked coding mistake.

What happened next shocked the entire cryptocurrency community and turned them away from Ethereum forever. The Ethereum Foundation, a central entity, helped their closely connected developers in the DAO by stopping the application, censoring the user by preventing his transactions to take place thus taking away his pending money, moving the money in such a manner that allowed the developers in the foundation, DAO, and others invested in DAO to claim the money back and profit from it. Not only did they break multiple of claims made of the product during the initial sale and also broke the promise of the app terms and conditions while profiting from their rule change. Additionally, to this day the broken claims are displayed on their website misleading investors continuously into buying and increasing the value of their assets, thus profiting personally.

The investors and holders of the coins ended up with two damaged clones - the old version without ICO funded developers or clear path forward and a new version where the bailout occurred that broke the original advertised premise and expected rules of the project. Foundation public choice not to update the old asset by declaring 100% allegiance to the bailout version was damaging strongly to the value of the old asset. I believe there is strong possibility of securities fraud by these actions, the type of actions the rule attempted to be changed above is designed to protect against. I urge to research more into the matter and not let what is considered the onecoin of blockchain applications represent and subject the public to trade of securities with constantly changing rules, foreign centralized leadership, and clear harmful actions. It would give the public a misleading bad image of many excellent blockchain and cryptocurrency communities as a whole.

I won't bore you with details of actions designed to hurt the market value of the old asset which somehow survived through community resistance, as there are plenty of other reasons given already. All the information is publicly available online and known by many in the field, especially those who chose not to participate in promoting Ethereum for moral reasons.

Additionally, there is absolutely no reason to believe Ethereum or any cryptocurrency is traded mostly in a regulated manner as we simply don't know how much is traded over the counter, person to person, or on unknown exchanges. Furthermore, it's simply impossible to regulate the trade of even the exchanges due to existence of numerous decentralized exchanges that are possible thanks to blockchain technology.

Decentralized blockchains and trustless cryptocurrencies are the future, but none of those describe Ethereum - an unsecure, trust-requiring, centralized, mutable platform that runs stoppable apps and censors people Swiss based Ethereum Foundation dislikes, and opposite of their advertisement.

I urge strongly to vote against the rule change that would allow EtherIndex to hurt investors.