legal risks memo document

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+# Peercoin legal risks memo
+
+The Peercoin Foundation has hired U.S. based attorney at law to estimate the position and the legal treatment of Peercoin under U.S. Federal securities laws.
+
+```This is a digest of the delivered documents made for unofficial and public use. You may refer to this document for educational and informative purposes.```
+
+## Summary
+
+In brief, Peercoin, though an innovation, is at very low risk of being classified as a security. Peercoin is one of the original cryptocurrencies, there was never an
+[initial coin offering](https://www.investopedia.com/terms/i/initial-coin-offering-ico.asp), [premine](https://www.investopedia.com/terms/p/premining.asp) or sale of coins and there is/was no central authority or issuer. It is a decentralized p2p network based on a hybrid proof of work and proof of stake algorithm. There is a very low risk the Securities Exchange Commission (“SEC”), or another regulatory agency or plaintiff would recharacterize Peercoin as a security.
+
+## Securities Analysis of Peercoin
+
+### 1. Investment of Money
+
+There was never an investment of funds to launch Peercoin such as a token sale or initial coin offering. Peercoins are generated by the users validating transactions through the Hybrid Algorithm. Users secure their own Peercoins and the Peercoin Network. Thus, the first prong of Howey is most likely not satisfied as there was no initial coin offering or token sale. Peercoins were produced from the Hybrid Algorithm since the first block of the Peercoin blockchain, which was 2012-08-19 at 18:19:16.
+
+### 2. Common Enterprise
+
+The Peercoin Foundation was legally established in 2017 by the Peercoin community, approximately 5 years after the Peercoin Network was launched.
+The Peercoin Network did not require pooling of assets and the Peercoin Foundation did not accept any bitcoin, ethers, virtual currency or fiat currency in
+an initial coin offering, token sale or pre-mine. The purpose of the Peercoin Foundation is to advance the Peercoin project.
+The Foundation does not require anyone to send funds to us nor the Peercoin Network. Specifically, the Network handles Peercoin transactions, balances and issuance through a hybrid SHA-256 proof-of-work scheme and proof-of-stake system designed to address vulnerabilities that could occur in a pure proof-of-work system. No one party conrols the peer to peer Peercoin blockchain network or the Hybrid Algorithm.
+
+The eventual success of the Peercoin project depends on the open-source Peercoin community. Specifically, horizontal commonality likely does not exist because the Peercoin project existed before the Foundation was established and the Network has been sufficiently decentralized for some time. Anyone can run the Hybrid Algorithm to secure the Network. In addition the Foundation does not take custody of any funds belonging to any Peercoin user or the Network.
+Vertical commonality likely does not exist because the Peercoin Foundation contributions are under the open source MIT License and the Network/Peercoin community are not bound to the Foundation’s efforts.
+
+### 3. Expectation of Profits from the Efforts of Others
+
+As per section 1 and 2 above, there was not an initial coin offering or token sale and likely not a common enterprise. The Peercoin project is an open network
+that anyone can contribute to at any time by dedicating their compute power to run the Hybrid Algorithm to secure the Peercoin Network. Only if compute power
+is dedicated to secure the Peercoin Network, can a party receive fees in Peercoin, very similar to the Bitcoin network. Peercoin was inspired by bitcoin,
+and it shares much of the source code and technical implementation of bitcoin. The U.S. Commodity Futures Trading Commission (the “CFTC”) stated
+that “Bitcoin and other virtual currencies are . . . properly defined as commodities.” The CFTC’s position bolsters the likelihood that Peercoin would
+not satisfy the final prong of the Howey test, as an item cannot both be a commodity regulated by the CFTC and a security regulated by the SEC.
+Peercoin and the Network existed without an issuer or promoter receiving capital from third parties in an initial coin offering, or any other offering or token sale.
+
+While it is possible for investors to speculate on the market rate of Peercoin, any profit derived from market speculation is based on the success of the open
+source Peercoin community or other events exogenous to our efforts.
+Pseudonymous users created Peercoin and like Bitcoin, the identity of the person(s) who started Peercoin is uknown. It is a community based project of which its success depends on the community, of which anyone can join.
+Thus, the Peercoin would likely not satisfy the final prong of Howey.
+
+# Conclusion
+
+Since there was never an initial coin offering or token sale with the expectation of profit derived from others, Peercoin likely fails the Howey test and therefore does
+not constitute a security.
+
+_______________