Masternodes & Blockchain Technology: How Masternodes Will Save Rural America | WE FARM NODES

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Ean Mikale, J.D. – Project Lead Tia Love – Intern and Research Assistant Contact: info@wefarmnodes.com Web: www.wefarmnodes.com Copyright©2018. WE FARM NODES. An Infinite 8 Institute Company.

TABLE OF CONTENTS 1. Securities……………………………………………………………………………………………………………………….1 2. Description of Activities…………………………………………………………………………………………………..1 a. PacCoin………………………………………………………………………………………………………………1 b. Masternodes……………………………………………………………………………………………………….2 c. Block Reward……………………………………………………………………………………………………..3 d. Private$PAC……………………………………………………………………………………………………….3 e. Instant$PAC……………………………………………………………………………………………………….5 f. X11 Algorithm……………………………………………………………………………………………………..5 g. Proof-of-Service………………………………………………………………………………………………….6 h. Block Rewards…………………………………………………………………………………………………….6 i. Staked PAC…………………………………………………………………………………………………………6 j. General Rules for Property Transactions……………………………………………………………….7 k. Capital Gains………………………………………………………………………………………………………7 l. Long-term Capital Gains……………………………………………………………………………………..8 m. Money Laundering Overview……………………………………………………………………………….8 n. Primary Criminal Culpability……………………………………………………………………………….8 o. Secondary Criminal Liability……………………………………………………………………………….11 p. Virtual Private Networks…………………………………………………………………………………….12 q. Legal Precedent…………………………………………………………………………………………………12 r. National Security……………………………………………………………………………………………….15 s. Social and Economic Impact……………………………………………………………………………….15 t. WE FARM NODES (Who Are We)……………………………………………………………………….15

Introduction Over the past three years, our organization, Infinite 8 Institute, has sought to create impact in the social finance space. Most of our experience has dealt with Cyptocurrency for Good as well as MicroSocial Impact Bonds. Our efforts have been met with many victories and celebrations, with equal amounts of setbacks. We have discovered on our journey the difficulty of vision and getting many different parties to invest hard-earned dollars for the ultimate benefit of strangers. This is indeed a tough task, especially when doing so within risky and unproven markets.

Furthermore, there is the short-term and risk-adverse investor and/or philanthropist, who may not completely understand the unseen and complex socio-economic and cultural dynamics that may make what appears to be obvious solutions to intergenerational poverty, completely obsolete.

Additionally, many social impact theoretical frameworks and financial models required raising capital from accredited investors or traditional financial institutions, which pose potential conflicts of interest by the vast influence wielded by certain institutions. Tracking down each of the essential parties to the deal, with enough capital behind them to realize a deal, often proved cumbersome and overly time-consuming.

Also, the sustainability of each project was questionable, when any major party could pull out of social financing contracts at any time, axing the entire deal. There needs to be a steady and reliable source of income to create sustainable impact, and the for-profit model is perfectly positioned to do so. We believe that Masternode Technology can fill this gap. Using our own nodes, purchased with our own dollars, we are able to create impact in a more agile way.

It is also true that rural communities have often been ignored behind the more populous backdrop of the urban segment of America. Infinite 8 has also focused mainly on urban populations and issues affecting the inner-cities across America. WE FARM NODES, will be the first time that we trek sincerely and enthusiastically into the heart of rural America, for the express purpose of reinvigorating it.

Now, more than ever, due to the instability of global trade, low commodity prices, unpredictable and abnormal weather patterns, urban migration and more, we are uniquely placed to add immense value, at a critical time, through the profit-sharing and productive utilization of unproductive agricultural land for the bulk farming of self-income generating Masternodes.

Sincerely,

Ean Mikale, J.D. Chief Innovation Officer/Owner Infinite 8 Institute, LLC/WE FARM NODES, LLC

This White Paper has been prepared on behalf of WE FARM NODES (“WFN”), a subsidiary of Infinite 8 Institute, LLC (“I8I”) in connection with WFN’s plans to assist Nebraska farmers, suffering from falling commodity prices, obtain passive income leasing their unproductive agricultural land for the placement of computer servers, hosting cryptocurrency Masternodes (“MN’s”). WFN proposes to utilize the cryptocurrency PAC Coin, which is a decentralized, peer-to-peer electronic cash system. Specifically, WFN seeks to conduct the following Masternode activities: Securities Although WFN’s is not aware of any direct precedent concerning the commercialization of Masternodes, we believe that WFN Masternodes are not securities, in accordance with the legal precedent set by SEC vs. Howard Co.,1 in which the U.S. Supreme Court held that a security regulated by federal law existed when “a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or third party.” WFN Masternode activities fall outside of the scope of securities regulations, due to the fact that WFN will utilize its own finances to fund Masternode activities, rather than entering into investment contracts, and thus poses no-risk to non-existent passive investors.2 Also, because Masternodes are the pillars of many decentralized community driven Blockchain networks, in contrast to Initial Coin Offerings (ICOs) with centralized models, it is highly questionable whether these decentralized and open-source models meet the definition of a common enterprise, with a centralized authority and horizontal or vertical commonality, such as with the Shareholder, CEO, Owner, or board Chair positions.

Description of Activities Below is a description of the Masternode activities WFN and its employees: 1.

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PAC Coin – PAC coin, is a third-generation cryptocurrency that is focused on Community, Charity, Content, and Choice. PAC is a community driven successor to Bitcoin, incorporating various improvements such as a two-tier incentivized network, known as the Masternode Network. The PAC is also operating under the MIT license for Bitcoin Core.3 The PAC source code is open-sourced, and available for reading (e.g., see Github link in footnote below).

SEC v. Howey Co., 328 U.S. 293 (1946)

See Supra notes 9-10. See also, Marc G. Alcser, Comment, The Howey Test: A Common Ground for the Common Enterprise Theory, 29 U.C. Davis L. Rev. 1217 (Summer, 1996).

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This work is license under a Creative Commons Attribution License. It is attributed to MIT and the source code can be found here: https://github.com/PACCommunity/PAC/blob/master/COPYING. 4 Wolf, Saul (2018). PAC | White Paper: A 3rd generation peer to peery cryptocurrency. Built for the People, lead by Social Governance [White paper]. Retrieved February 9, 2018, from the official PAC website: download.paccoin.net/PAC_White_Paper_2018_Final.pdf.

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As of April 30, 2018 1614 PACCoin Masternodes are active in the United States, with Japan having the second most active Masternodes at 382, and Germany coming in third at 222.4

2. Masternodes – Generally. Masternodes are a way for PACcoin community members to provide service to the network by putting up a certain amount of coins in their $PAC wallets in return for a reward known as POS (Proof of Service).4 This serves as collateral alongside an automatic ledger, which verifies transactions without risk. $PAC users will need 500,000 $PAC to run a Masternode. Shared Masternodes will also become available with the launch of Paclyfe in early 2018. Please see below for directions of how to calculate the return on investment for Masternodes: N – is the total number of Masternodes owned T is the total number of Masternodes on the network R is the current block reward B is the blocks on average day A is the average Masternode payment (75% of the block chain reward ROI = ((N/T)xRxBxAx365)/500,000

PACCoin Masternodes Map. Retrieved on April 30, 2018.

Website: https://masternodes.online/currencies/PAC/.

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3. Block Reward – The Block reward will be distributed as such: 5% to charity, 15% to the community treasury, 35% to the miners, and 75% to Masternodes.

4. Private$PAC – Private$PAC is a feature of the new PAC Coin that allows for the privacy of user transactions. Using the x11 algorithm, Private$PAC will employ a series of technical improvements, such as decentralization and a high degree of anonymity leveraging this chaining approach, where there is mixing that occurs well ahead of the future transaction.5 Furthermore, the Private$PAC, is based off of the DASH coin, PrivateSend feature.

According to DASH coin official documentation concerning the technical aspects of the feature, Private send processing involves the following: a. PrivateSend begins by breaking your transaction inputs down into standard denominations. These denominations are 0.01 DASH, 0.1 DASH, 1 DASH and 10 DASH – sort of the like the paper money you use every day. b. Your wallet then sends requests to specially configured software nodes on the network, called “Masternodes.” These Masternodes are informed then that you are interested in mixing a certain denomination. No identifiable information is sent to the Masternodes, so they never know “who” you are. c. When two people send similar messages, indicating that they wish to mix the same denomination, a mixing session begins. The Masternode mixes up the inputs and instructs all three users’ wallets to pay the now-transformed input back to themselves. Your wallet pays that denomination directly to itself, but in a different address (called a change address). d. In order to fully obscure your funds, your wallet must repeat this process a number of times with each denomination. Each time the process is completed, it’s called a “round.” Each round of PrivateSend makes it exponentially more difficult to determine where your funds originated. e. This mixing process happens in the background without any intervention on your part. When you wish to make a transaction, your funds will already by anonymized. No additional waiting is required.

PrivateSend is a novel, decentralized mixer for creating an on-demand system of removing history from coins on the network. This is mainly for fungability, which is the attribute of money that allows any token to be exchanged with any other token, without having a difference in price in the form of a premium for token with less or no history.

Without PrivateSend, tokens with less history would become increasingly valuable as the network grows, because of their lack of association with prior transactions. No one wants to hold money that was involved in illegal activity, yet after the activities take place, tokens re-enter the supply and pass to new users who had no connection with the prior illegal acts. This issue is removed with the implementation of PrivateSend, which is included in the core protocol of the DASH network. The technical details are included below:

Wolf, Saul (2018). PAC | White Paper: A 3rd generation peer to peery cryptocurrency. Built for the People, lead by Social Governance [White paper]. Retrieved February 9, 2018, from the official PAC website: download.paccoin.net/PAC_White_Paper_2018_Final.pdf.

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a. PrivateSend Status Codes: The system has various modes which allow servers to keep track of the current state of their mixing pool. These mixing pools are single use, allowing three people to use them at one time. Statutes are idle, queued, accepting_entries, finalizing_transaction, signing_transaction and transmitting transaction. b. Privacy Through Ambiguity - Mixing is the process of joining multiple transactions together, from multiple users, where all unique information about the users is removed from the transaction. Users send tokens to themselves through the system, and at no time do these tokens ever leave the users’ wallet.

Masternode operators are therefore completely separate from the process of mixing. Masternodes simply serve as a transit method for storing and signing transaction, allowing users a safe place to initiate the process in an anonymous way. Privacy is achieved by using denominated amounts of 10, 1, 0.1 or 0.01. Each session initiated on a Masternode only carries a single denomination, such as having 10x 10D input and 10x 10D outputs. Users can then individually sign their inputs to the collective outputs, allowing the transaction to be valid once complete and broadcasted. c. Fee Model Anonymity – In other implementations of mixing software, fees can be used to break the transactions apart and identify users on the networks.

On the DASH Network, this is avoided by allowing Masternodes a special type of message which allows them to broadcast fee-less transactions. [DASH] uses this technology to decouple the fees from transactions, so that for every 10 transactions using the PrivateSend technology, there is only one fee transaction.

This prevents a timing attack on the PrivateSend implementation. d. Phases of PrivateSend – please see the following phases included below: 1. The process beings when a user denominates some funds to be used as a “cash account”, then they simply tell a random Masternode they would like to mix a specific denomination such as 100D. The Masternode has no information about the transaction at this point, since the denomination carries no information about which inputs the user would ultimately like to mix. The Masternode receives the request and issues a message to the network saying that it is ready to mix that denomination and that there is a user waiting.

2. At this point if other users are wishing to mix inputs of that denomination, they can connect to the Masternode that is hosting the other user’s transaction. When three users queue themselves on the same Masternode, the next stage, “accepting_entries”, is initiated.

3. In this stage, all users send their inputs and outputs to the Masternode, where they are collected and put into memory until all users have identified the full list of inputs/outputs they would like to mix. Once this is complete, the process moves onto the next stage, “finalize”. At this point, the Masternode sends a message back to the users, showing the merged transaction they all jointly created. All inputs are from the user’s wallet and all outputs are sent back directly to the user’s wallet. The funds involved in this process never leave the user’s wallet at any time, allowing the Masternode to be completely segregated from users’ funds. This is how the process of PrivateSend remains trustless and secure, without risking the users’ funds or exposing Masternodes to excessive legal risk.

Once the finalized transaction is approved, the process moves onto the next phase, “signing.”

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4. Users sign only the inputs for which they have keys, and the funds are then released to all outputs simultaneously. It’s worth noting that input and outputs are not directly tied to each other in this process, since inputs are in a separated list and only tied to each other. Outputs are also in a separated list, only tied to each other. This means, literally, that all users are paying all users in this process. The users are not only paying themselves, but everyone else. This means you can’t say input #4 went to output #14 (e.g., you can’t trace the input to the output, they are processed in concert).

5. When all inputs are signed to all outputs, the transaction suddenly becomes valid, and the Masternode broadcasts using a special message called DSTX. The network keeps track of these messages, allowing Masternodes to submit one PrivateSend transaction every N hours without paying fees.6

5. Instant$PAC – PAC’s Masternode layer has additional benefits over simply reducing the participation costs for casual nodes. One major advantage of a Masternode layer is the ability to send and receive instant irreversible transactions in a ‘trustless’ manner.

Forming a quorum, through the selection of N randomized Masternodes, allows $PAC to replace what was used to require an entire network of nodes with only that small subset of trusted, bonded, Masternodes.7 6. X11 Algorithm – X11 is a widely used hashing algorithm created by DASH core developer Evan Duffield. X11’s chained hashing algorithm utilizes a sequence of eleven scientific hashing algorithms for the proof-of-work. This is so that the processing distribution is fair and coins will be distributed in much the same way Bitcoin’s were originally. X11 was intended to make ASICs much more difficult to create, thus giving the currency plenty of time to develop before mining centralization became a threat. This approach was largely successful; as of early 2016, ASICs for X11 now exists and comprise a significant portion of the network hash rate, but have not resulted in the level of centralization present in Bitcoin.

X11 is the name of the chained proof-of-work (POW) algorithm that was introduced in DASH (launched January 2014 as “Xcoin”). It was partially inspired by the chainedhashing approach of Quark, adding further “depth” and complexity by increasing the number of hashes, yet it differs from Quark in that the rounds of hashes are determined a priori instead of having some hashes being randomly picked.

The X11 algorithm uses multiple rounds of 11 different hashes (blake, bmw, groestl, jh, keccak, skein, luffa, cubehash, shavite, simd, echo), thus making it one of the safest and more sophisticated cryptographic hashes in use by modern cryptocurrencies.

There are many advantages to the X11 algorithm, including increased safety for currencies, increased complexity and sophistication of the chained algorithm, which Kiraly, Balazs “PrivateSend.” PrivateSend. DashPay, January 23, 2018. Retrieved February 9, 2018, from the official DASH website:https://dashpay.atlassian.net/wiki/spaces/DOC/pages/1146924/PrivateSend.

7 “Wolf, Saul. PAC Coin. PAC | White Paper. 2018. Print” download.paccoin.net/PAC_White_Paper_2018_Final.pdf.

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provides enhanced levels of security and less uncertainty for a digital currency, compared to the single-hash PoW solution that are not protected against risks like SPOF (Single Point Of Failure). For example, a possible but not probable computing breakthrough that “break” the SHA2565 hash could jeopardize the entire Bitcoin network until the network shifts through a hard fork to another cryptographic hash.

Finally, given the speculative nature of digital currencies and their inherent uncertainties as a new field, the X11 algorithm can provide increased confidence for its users and potential investors that single-hash approaches cannot. Chained hashing solutions, like X11, provide increased safety and longevity for store of wealth purposes, investment diversification and hedging against risks associated with single-hash currencies plagued

by SPOF (Single Point of Failure).8 The sourcecode for the PAC X11 algorithm is included here for your records: https://github.com/PACCommunity/PAC/blob/master/COPYING. 7. Proof-of-Service (POS) – POS was originally applied to the parent of the old PAC coin, Peercoin, designed by Sunny King. This was the initial dual method of securing the network and the creation of new blocks of coins. This system proved to be much more energy efficient compared to the traditional POW mining via ASICS and CPU powered miners.

The more coins that a specified node owns or locks up, the more they stake and protect the network. As part of the coin reward for this protective network service, nodes that stake coins would be allowed to ‘mint’ new coins (this is just like interest in the real world). Coin age is generally the requirement for staking and POS rewards.

In the old PACcoin for example, the minting period was set at 30 days. After this initial 30 day window is achieved, the coins will POS or mint new PACcoins at a rate of roughly 7-9% in the current PACcoin model. Since PACcoin’s implementation, POS has changed to be used separate from the POW system by significant number of other coin designs.

This is primarily to support a more efficient energy usage model. The use of POS specifically in terms of its use in PACcoin has caused quite a controversy as the model rewards large wallets with a majority of the future coin supply.9 8. Block Rewards – Block rewards are paid to Masternode operators in exchange for validating transactions on networks, such as the PAC network, or the DASH network. The PAC block reward distribution with 5% of block rewards going to Charity, 15% going to the Community Treasury, 35% going to the Miners, and 75% will go to Masternode holders.10 9. Staked PAC – A PAC user may demonstrate to the network, control over 500,000 PAC in order to run a Masternode. These tokens never leave the user’s control. If at any point during the user’s tenure as a Masternode operator, the user disposes of any or all of the 500,000 PAC, the network will automatically strip the user of his or her status as a Masternode. Under the US Internal Revenue Code, gain or loss is realized only on the “sale or exchange” of property. The term “sale” generally means the transfer of all right, Ibid., 14.

Ibid., 15.

10 Ibid., 16.

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title, and interest in the property transferred. A number of factors are considered to determine an actual sale, the most important being whether the benefits and burdens of ownership of the transferred property have passed from the transferor to the transferee.

In PAC, the Masternode operator retrains control of the 500,000 PAC and simply demonstrates control to the network. Therefore, holding of the 500,000 PAC for purposes of qualifying as a Masternode operator should not cause a taxable event to occur because the user has not transferred any of the benefits and burdens of ownership.11 10. General Rules for Property Transactions – The internal revenue issued a memo concerning the treatment of digital currency, stating that, “virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transaction apply to virtual currency. Among other things, this means that: • Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on form W-2, and are subject to federal income tax withholding and payroll taxes.

• Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply.

Normally, payers must issue Form 1099.

• The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.

• A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.12 11. Capital Gains – Generally. – Assuming that the 500,000 PAC are sold, whether the PAC is a “capital asset” will determine the tax treatment of the sale. Stocks, bonds, and other property are generally treated as capital assets. Inventory, depreciable property, and stock in trade, however, are not. Assuming the Masternode operator held the 500,000 PAC either for investment purposes or for purposes qualifying as a Masternode operator, we expect the IRS to treat any gains or losses on the sale of those PAC coins as capital in nature. As a result, PAC held for at least one year, will qualify for the long-term capital gains tax rate.13 12. Long-term Capital Gains – Whether a gain or loss is long or short term depends on how you own the property before your dispose of it. The time you own the property before disposing of it is called the holding period. If property is held for 1 year of less, there is a short-term capital gain or loss. If property is held for more than 1 year, then there is a long-term capital gain or loss.14

Ibid.

IRS Virtual Currency Guidance: Virtual Currency is Treated as Property for U.S. Federal Tax Purposes; General Rules for Property Transactions Apply. March 25, 2014 [Press Release]. https://www.irs.gov/newsroom/irs-virtual-currency-guidance. Retrieved on February 11, 2018.

13 Publication 334, Tax Guide for Small Business. 2016. https://www.irs.gov/publications/p334#en_US_2016_publink1000313304. Retrieved on February 11, 2018.

14 Ibid.

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13. Money Laundering Overview – WFN is well read on and seeks to comply with antimoney laundering regulatory guidance. Section 1956(a) of the U.S. Attorney’s Criminal Resource Manual states, “to be criminally culpable under 18 U.S.C. § 1956(a)(1), a defendant must conduct or attempt to conduct a financial transaction, knowing that the property involved in the financial transaction represents the proceeds of some unlawful activity, with one of the four specific intents discussed below, and the property must in fact be derived from a specified unlawful activity. Additionally, the prosecutor must prove that the defendant initiated or concluded, or participated in concluding, a financial transaction. A “transaction” is defined in § 1956(c)(3) as a purchase, sale, loan, pledge, gift, transfer, delivery, other disposition. A “financial transaction” is defined in § 1956(c)(4) as a transaction which affects interstate or foreign commerce and: (1) involves the movement of funds by wire or by other means: (2) involves the use of a monetary instrument; or (4) involves the use of a financial institution which is engaged in, or the activities which affect, interstate or foreign commerce. In conducting the financial transaction, the defendant must have acted with one of the following four specific intents: a. § 1956(a)(1)(A)(i): intent to promote the carrying on of specified unlawful activity; b. § 1956(a)(1)(A)(ii): intent to engage in tax evasion or tax fraud; c. § 1956(a)(1)(B)(i): knowledge that the transaction was designed to conceal or disguise the nature, location, source, ownership or control of proceeds of the specified unlawful activity; or d. § 1956(a)(1)(B)(ii): knowledge that the transaction was designed to avoid a transaction reporting requirement under State or Federal law [e.g., in violation of 31 U.S.C. §§ 5313 (Currency Transaction Reports) or 5316 (Currency and Monetary Instruments Reports), or 26 U.S.C. § 6050I (Internal Revenue Service Form 8300)].15 WFN’s addresses the subject of criminal intent, which is a necessary prong for Money Laundering activities considering lack of knowledge by Masternode owners due to the unanimous nature of $PACcoin transactions, a topic discussed in further detail in the following section.

14. Primary Criminal Liability – Mens Rea refers to criminal intent. The literal translation is “guilty mind.” This refers to the state of mind statutorily required in order to convict a particular defendant of a particular crime.16 Under the Model Penal Code, culpable states of mind are organized into four hierarchical categories: a. Acting purposefully – the defendant had an underlying conscious object to act b. Acting knowingly – the defendant is practically certain that the conduct will cause a particular result. c. Acting recklessly – the defendant consciously disregarded a substantial and unjustified risk.

U.S. DEP’T OF JUSTICE, UNITED STATES ATTORNEY’S MANUAL 9-2.031 (1999), available at http://www.usdoj.gov.

16 Staples v. United States, 511 US 600 (1994) 15

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d. Acting negligently – the defendant was not aware of the risk, but should have been aware of the risk.17 Currently, while we have two PAC Masternodes staked, we have yet to set them up, in an effort to comply and seek guidance from the SEC. However, this still does not address the legal question concerning the Mens Rea issue surrounding Masternodes.

Purposeful - Our commercial goal is to address our states macro-economic debacle as commodity prices hurt farm incomes, leaving farmers looking for alternate ways to supplement lost income. We hope to do good with our efforts in the space, sharing passive income while leasing unproductive agricultural land to farm Masternodes (e.g., server farms). The Masternodes will be purchased solely with the funds of WFN, through self-investment, as well as grant opportunities to trial the profit-sharing model with farmers in the State of Nebraska.

Knowingly - Additionally, we have no intention to participate in the hosting of a Masternode for the purpose of supporting criminal conduct, or the laundering of money.

The Masternode does not provide identifying information concerning the transacting parties, making knowledge of illegal transactions or illicit activities impossible. Also, while implementing Private$PAC, Masternodes used for mixing are randomized, thus preventing the acquisition of knowledge by the Masternode owner concerning the nature of each facilitated transaction.

Recklessly - We also do not believe the actions of Masternode owners are reckless, due to the risks of money laundering. We use commercial drone technology as an example. It is very well possible to utilize drones for the delivery of drugs1819, as well as open up our countries borders to malicious surveillance by rogue states19. In this case, the United States government would have to go after DJI, because of what illicit ways DJI consumers are using their drones. However, the FAA has continued to allow commercial drone operations under 14 CFR Part 107, in spite of the possible dangers, because of the good that could be accomplished as a result of innovations in drone technology, such as the saving of human lives20. Similarly, we believe in the security and future-proof nature of the x11 algorithm, as cyber security becomes an even more prominent issue for small and growing businesses, especially those in the internet-of-things (IoT) and Block chain industries. We believe that we can provide passive income for farmers, helping to assist the State of Nebraska, by increasing tax revenues, commercial bank loan solvency of farmers, and overall economic stability and productivity of the State.

Furthermore, according to a recent report from the Center on Sanctions and Illicit American Law Institute. Model Penal Code: Official Draft and Explanatory Notes: Complete Text of Model Penal Code as Adopted at the 1962 Annual Meeting of the American Law Institute at Washington, D.C., May 24, 1962. Philadelphia, Pa.: The Institute, 1985. Print.

18 Millward, David. Man Charged with Using Drone to Smuggle Drugs into the US. The Telegraph.

August 20, 2017. Retrieved February 12, 2018: http://www.telegraph.co.uk/news/2017/08/20/mancharged-using-drone-smuggle-drugs-us/.

19 Newman, Lily. The Army Grounds its DJI Drones Over Security Concerns. Wired. August 07, 2017.

Retrieved February 12, 2018: https://www.wired.com/story/army-dji-drone-ban/.

20 Ehrenkranz, Melanie. A Drone Just Saved the Lives of Two Teenage Boys in Australia. Gizmodo.

January 18, 2018. Retrieved February 12, 2018: https://gizmodo.com/a-drone-just-saved-the-lives-oftwoteenage-boys-in-aus-1822192109.

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Finance, a program at the Foundation of Defense of Democracies, teamed up with Elliptic, a cryptocurrency analytics provider, to study Bitcoin block chain data and illicit inflows of digital currency services. This study provides insights for policy makers and industry leaders who want to better understand illicit finance risks arising from Bitcoin and formulate ways to enhance Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) compliance among cryptocurrency businesses.

In summary, the report found that darknet market places, such as Silk Road and, later, AlphaBay, were the source of almost all of the illicit bitcoin laundered through conversion services that were identified in the study. For example, only 9 out of the 102 entities involved in the transfer of illicit funds, were the source of more than 95 percent of all laundered Bitcoin in the study. Mixing software was found to have 23.4% of all transactions accounted as coming directly from illicit sources. Only 16.88% of Bitcoin were converted in the United States, while 37% of illicit transactions are sourced from Europe. Overall, the vast majority of illicit activity, roughly 86% of all laundering activity occurred outside of the United States.21 Negligence - We believe we are not acting negligently, as we proactively seek direction from the SEC on a hot-button issue in a rapidly emerging sector. Additionally, we have created materials to assist current and future employees recognize money laundering activities. It is also our company policy to comply with any state of Federal regulatory body, in furtherance of any investigations, audits, or legal and formal requests, by sharing any requested data, logs, or other digital information by U.S authorities.

Finally, the study by the Center on Sanctions and Illicit Finance found, that from 20132016, only .61 percent of money entering conversion services during the four years analyzed were verifiably from illicit sources. This shows that there are a minority of cryptocurrency transactions that are illicit.

The report further provides the final recommendations, “Because cryptocurrencies are based on easily downloadable, open-source software and a decentralized network, it is unlikely that they will disappear as a digital method of payment option in the near future.

Alternative payment methods bring new illicit finance risks when they are introduced to the public, but survive and eventually flourish when safeguards develop to address (but never fully eliminate) their criminal use. Credit cards, online banking, wire transfers, and cash transactions all have been and continue to be used for crime. Academic researchers and government analysts should study the history of legacy payment methods, derive lessons learned, and articulate how financial regulators should approach risk mitigation…. Bitcoin is the first cryptocurrency, not the only one. In recent years, developers have created new cryptocurrency protocols, such as Zcash, Monero, and Dash, with privacy features that make them more difficult to track using blockchain analysis techniques…Better privacy may be a critical feature for cyptocurrency to grow, but this must be balanced with the need for law enforcement to be able to trace transactions in some circumstances.”22

Robinson, Tom. Bitcoin Laundering: An Analysis of Illicit Flows into Digital Currency Services, Center on Sanctions & Illicit Finance, Washington, DC. 12 January 2018.

22 Ibid.

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Likewise, we agree that there is a need to protect investors and consumers from the darkweb. In the same vein, we believe that regulation in the sector will be good for business and provide stability in the industry. However, we also believe that the majority of cryptocurrency transactions are benevolent in nature, and with the increased security of second generation cyptocurrency algorithms and security protocols, we believe the blockchain technology will add more value to society than harm. We realize that it is often criminals who are the first to innovate in a market, unfortunately. But we believe that a few bad apples should not spoil to pie for all who may benefit.

15. Secondary Criminal Liability – We also understand that in the event a person is not the principal actor in the commission of a crime, that they can be held secondarily liable for their involvement in it. In the United States, to convict an actor as a principal of aiding and abetting the commission of a crime, a jury must find beyond a reasonable doubt that the defendant knowingly and intentionally aided and abetted the principal(s) in each essential element of the crime.23 Each element of money laundering is not satisfied for the following reasons: a. Intent to promote the carrying on of specific unlawful activity: Our organization has made it clear concerning our intentions to build a business around the farming of PAC Masternodes, specifically, involving the socioeconomic impact on farmers across the state of Nebraska, as well as adding to the overall tax-base of the state. We also believe that our efforts to approach the SEC, show a good faith initiative. b. Intent to engage in tax evasion or fraud: Our organization is currently up to date concerning our Federal tax liability. The organization is aware of tax liability concerning short-term and long-term financial gains, and intends to comply with such laws, and all future regulations in the cryptocurrency space. We also have in place standards for reporting suspicious activity, and openly cooperating with Federal and State enforcement agencies. c. Knowledge that the transaction was designed to avoid a transaction reporting requirements under State of Federal law: If the transportation, transmission, or transfer was conducted with the intent to conceal the proceeds of specified unlawful activity or to avoid reporting requirements, the prosecutor must show that the defendant knew the monetary instrument or funds represented the proceeds of some form of unlawful activity. With the randomization of mixing activities from the Private$PAC services, and the complete anonymity of transactions, there is no way to know if the monetary instrument or funds actually represent the proceeds of some form of unlawful activity. Therefore, Masternode activity for the purposes stated by WFN would not meet the requisite standard of knowledge of unlawful activity. d. Knowledge that the transaction was designed to avoid a transaction reporting requirement under State or Federal law: Here, their test also fails, as each Masternode owner once again has no knowledge of the intent, identity, or unlawful activity of each transacting agent. As a result, WFN can only seek guidance from regulatory authorities, in an effort to innovate while also remaining compliant with U.S. law and State law, as well as governing Securities and Anti-money Laundering legislation.

23

United States v. Bancalari, 110 F.3d 1425, 1429 (9th Cir. 1997).

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16. Virtual Private Networks (VPN) – A virtual private network extends a private network across a public network, and enables users to send and receive data across shared or public networks as if their computing devices were directly connected to the private network. It is common of Masternode owners to utilize VPN’s as a cheap and fast alternative to setting up a physical local server. VPN’s also offer a way of side-stepping regulations by acquiring virtual servers in off-shore jurisdictions with liberal money laundering legislation. For example, Nord VPN, operates out of Panama, and is not subject to any laws that would require it to retain user data. VPN’s are completely legal in the United States, as these are often used for corporate cyber security. And with increasing threats to the cyber security of small business and corporate digital infrastructures, VPN’s will likely increase in use. However, we include VPN’s for legal consideration as they pose similar legal questions as Masternodes, due to their architecture as virtual gateways for data, similar to Masternodes, as well as the similarities concerning the complete anonymity of user information.

If authorities are to pursue Masternode users as money launderers, then there will be a justifiable connection and legal question, concerning the use of VPN’s, which ultimately would pose security issues to the entire infrastructure of the U.S. government, and critical Corporate interests across the globe from malicious actors. We believe the United States government would be better served treating Masternodes, as VPN’s.

17. Legal Precedent – Recently, the Securities and Exchange Commission brought a case against AriseBank, which alleges fraud, non-regulatory compliance, for a securities offering or Initial Coin Offering (ICO). The complaint further stipulates that the offering was illegal because there was no registration statement filed or in effect with the SEC, nor is there an applicable exemption from registration while the defendants promoted the creation of a “decentralized” bank.. Additionally, the complaint states that the ICO offering materials use many materially false statements and omissions to induce investment in the ICO.24 In September of 2017, in an action against REcoin Group Foundation, LLC, the SEC alleged that defendants made false statements in connection with the unregistered sale of two classes of crypto-tokens purportedly linked to investments in real estate and diamonds, respectively.24 In another action against PlexCorps in December 2017, the

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Complaint, CFTC v. My Big Coin Pay, Inc., 1:18-cv-10077 (D. Mass. Jan. 16, 2018). CFTC Chairman Giancarlo mentioned this case twice during his appearance before the Senate Banking Committee as an important example of the kind of anti-fraud cases the CFTC is pursuing. Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission Before the S. Comm. on Banking, Housing, and Urban Affairs, 115th Cong. (2018) (statement of J. Christopher Giancarlo, Chairman, U.S. Commodity Futures Trading Commission); Press Release, SEC Halts Alleged Initial Coin Offering Scam (Jan. 30, 2018), available at https://www.sec.gov/news/pressrelease/2018-8.

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Commission alleged false statements by “a recidivist securities law violator” in connection with an unregistered ICO for PlexCoin tokens.2526 In another suite, SEC vs. SG Ltd., the defendant’s operated a “fantasy investment” website where customers could deposit funds and invest them in certain “stocks” listed on the website.27 In reality, the defendants operating the website would unilaterally decide the prices of each “stock” from day-to-day. In this case, the SEC alleged that the defendants both operated websites that took customer or investor funds and provided in return non-existent digital products with arbitrary values set by the defendants.27 The Commodities and Exchange Act, defines a commodity as “all services, rights, and interests…in which contracts for future delivery are presently or in the future dealt in.” In the last six months, the Commodities Futures Trading Commission (CFTC) has brought three cryptocurrency enforcement cases that have target alleged Ponzi schemes with some connection to the purchase or sale of Bitcoin or other cryptocurrencies.28 The CTF

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Complaint, SEC v. PlexCorps, 1:17-cv-07007 (E.D.N.Y. Dec. 1, 2017). The SEC also has a recent settled action in connection with an unregistered ICO where there was no allegation of fraud. In re Munchee Inc., Securities and Exchange Commission, Release No. 10445 (Dec. 11, 2017).

26

F.3d 42 (1st Cir. 2001).

27

Further comparison could be made to another SEC case. In SEC v. Bitcoin Savings and Trust, investors allegedly interfaced through the defendant’s website, which reported investor balances. Complaint, SEC v. Bitcoin Savings and Trust, 4:13-cv-00416 (E.D. Tex. July 23, 2013). The defendant was not earning the returns he claimed and could not pay back investors the balances shown on the defendant’s website. In this case and in the CFTC’s case against My Big Coin, Inc., the defendants provided investors with website access to their accounts, but the account information did not match reality.

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Previously, in September 2017, the CFTC brought suit against Gelfman Blueprint, Inc. alleging a Ponzi scheme where the defendant solicited investments in a pooled fund that would buy and sell Bitcoin under the direction of a trading program called “Jigsaw.” According to the complaint, investors were told to expect 7- 9% returns per month. Complaint, CFTC v. Gelfman Blueprint, Inc., 1:17-cv-07181 (S.D.N.Y. Sept. 21, 2017). The CFTC brought two additional enforcement actions in January 2018 that were comparable, each targeting an alleged Ponzi scheme. Complaint, CFTC v. CabbageTech, Corp, 1:18cv00361 (E.D.N.Y. Jan. 18, 2018) (alleging fraudulent claims of trading expertise and promises to provide expert advice, and further alleging fraudulent promises to invest Bitcoin and other cryptocurrencies on behalf of customers); Complaint, CFTC v. Entrepreneurs Headquarters Limited, 2:18-cv-00345 (E.D.N.Y. Jan. 18, 2018) (allegedly accepting Bitcoin investments with false promise to earn profits trading binary options).

30

Complaint, CFTC v. My Big Coin Pay, Inc., 1:18-cv-10077 (D. Mass. Jan. 16, 2018).

31

Complaint, CFTC v. My Big Coin Pay, Inc., 1:18-cv-10077 (D. Mass. Jan. 16, 2018). CFTC Chairman Giancarlo mentioned this case twice during his appearance before the Senate Banking Committee as an important example of the kind of anti-fraud cases the CFTC is pursuing. Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures 13

has generally not brought enforcement actions against ICO’s, although one recent action may come closer to this line.30 On January 16, 2018, the CFTC brought suit against My Big Coin Pay, Inc. in connection with the company’s virtual currency called My Big Coin (“MBC”).31 According to the CFTC, the defendants marketed MBC as an easy-to-use cryptocurrency and falsely claimed MBC was backed by gold so that customers would believe it was safe to purchase.

Defendants also allegedly claimed that MBC was trading on multiple exchanges, which the CFTC alleges was not true. The CFTC alleged that the defendants reported arbitrary, unilateral increases or decreases in the price of MBC on their website, but no actual trading of MBC ever took place and that users had no way of withdrawing from the defendant’s website. According to the complaint, MBC did not exist on a Block chain as Bitcoin and other cryptocurrencies do: MBC existed only on the defendant’s website.

In conclusion, neither the legal precedence set by the SEC nor the CFTC have clear cut applications to the ownership and implementation of Masternodes, as a Masternode is not a security, in accordance with SEC regulations. The SEC has emphasized that a security is an investment of money in a common enterprise, with an expectation of profits form the efforts of others.32 During our activities to provide farmers with a share of Masternode profits, while leasing unproductive agricultural land to host server farms, there is not any taking of investment from the farmers or any passive investors, or any third parties outside of WFN, outside of State of Federal grants. The farmers merely allow WFN to lease their land at the local market rate, in exchange for a 20% share of the Masternode profits. Land has historically captured about one-third of total revenues from crop production. For example, on land that is rented for $295 per acre and yields 186 bushels per acre, this is a per bushel cost of $1.59.29 All costs to develop land and the construction of Masternode farming facilities will be 100% borne by WFN. As a result of our efforts, we will decrease the cost of land for farmers, allowing them to pocket increased revenues, and make use of unproductive agricultural land without the use of investment contracts.

WFN also argues that the $PAC decentralized community driven network, does not satisfy the definition of a common enterprise, one with a centralized authority and vertical commonality. With this business model in place and due diligence on our part, we believe WFN Masternode activities will increase rural business, create jobs, and create economic and social impact by operating and owning Masternodes. Not only do we believe there will be many socio-economic benefits, there is also a dire National Security risk at stake.

Trading Commission Before the S. Comm. on Banking, Housing, and Urban Affairs, 115th Cong. (2018) (statement of J. Christopher Giancarlo, Chairman, U.S. Commodity Futures Trading Commission).

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SEC v. W.J. Howey Co., 328 U.S. 293 (1946).

Gunderson, Michael. 2015 April 06. It’s Not Just About Costs per Acre, Even in Tight Times. Retrieved from https://ag.purdue.edu/commercialag/Pages/Resources/ManagementStrategy/CropEconomics/Costs-per-Acre.aspx.

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18. National Security – According to the Bitcoin Laundering report by the Center on Sanctions and Illicit Finance, only 7% of known illicit conversion services occur in the United States. While only 16% of total Bitcoin volume is converted in the United States, roughly 83% of Bitcoin conversions occurring outside of the United States.30 If the United States wants to gain better control over the cryptocurrency markets, through increased regulatory oversight, then it would behoove the United States to gain a majority share of the underlying infrastructure of the cyptocurrency networks by localizing a majority of Masternodes within the United States to address any concerns regarding the direction, legality, and criminal intent behind emerging cryptocurrencies and the accompanying technology.

As a result, the United States is not only vulnerable to cyber-attacks a result of so much of the cryptocurrency market infrastructure being located overseas, but the U.S. is also vulnerable to economic warfare from malicious state actors as well. Therefore, we argue that the United States has more of an incentive to provide business friendly regulation concerning Masternodes, then to force the niche industry to remain underground where it currently resides.

19. Social & Economic Impact – Generally. Across the heartland of America, farmers are seeing tough times as farmers struggle with low crop prices. In particular, farmers are seeing incomes decline, forcing them to cut expenses, and some are even looking for second jobs or to exit agricultural farming altogether. The government is forecasting that 2017 will be the fifth-consecutive year of lower corn sales, and many growers worry the 2018 growing season will bring another year of limited profitability and losses. Low crop prices and depressed farm incomes are also affecting many agricultural communities, where farmers are laying off agricultural workers, and farm machinery dealers are not selling equipment, car dealers are having tough times and furniture stores are also feeling the impact. And even for those who want to bow out of Agriculture altogether, it is tougher to sell farmland today in many parts of the heartland, where prices of ag land have fallen 20 to 25 percent from the peak.31 As a result of the dire socio-economic implications of the current agricultural challenges that many rural farming communities are facing across the heartland, these communities could greatly benefit from an infusion of passive capital from WFN Masternodes and the leasing of unproductive agricultural land, to provide relief to many farming communities while diversifying local economies, providing jobs, and revitalizing domestic industry.

20. WE FARM NODES – Generally. WE FARM NODES, incorporated in 2018 in the State of Nebraska, as a subsidiary of Infinite 8 Institute, LLC. WFN’s specializes in the commercialization of Masternode and Blockchain Technology for the increased overall productivity of agricultural and urban land use.

Infinite 8 Institute, LLC, operates as a limited liability company, incorporated in 2013, in the State of Michigan. However, I8I, is currently headquartered and incorporated in Omaha, NE, as an LLC, with a second office in Kansas City, MO. Our Omaha office is located out of the Commerce Village, located at 950 S. 10th Street, Suites 007, 008, 009, Robinson, Tom. Bitcoin Laundering: An Analysis of Illicit Flows into Digital Currency Services, Center on Sanctions & Illicit Finance, Washington, DC. 12 January 2018.

31 Daniels, Jeff. 2017 December 27. Tough Times in the Heartland as Farmers Hit by Losses Weigh Exiting the Business. Retrieved from https://www.cnbc.com/2017/12/27/some-crop-growers-hitbylosses-are-weighing-exits-from-agriculture.html.

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012, and 013. Our Kansas City office is located out of the Spring Accelerator, located at 210 W 19th Terrace, Suite 200, Kansas City, MO. I8I is also a U.S. Federal Contractor (DUNS: 079253346).

I8I’s mission is the design and finance of social impact systems and technologies. Since 2015, I8I has explored the cryptocurrency space, conducting research and development with the University of Nebraska’s Mavic Innovations Accelerator. I8I, in collaboration with Alpha Bitcoin, conducted over 200 interviews with citizens of Omaha, NE, concerning their knowledge of and use of Bitcoin as a cryptocurrency.

As a result of our findings from conducting the Lean Business Model Development Process, in which the vast majority of research participants responded negatively to inquiries concerning cryptocurrencies as an alternate currency, I8I decided to change courses away from the use of Bitcoin as a currency.

Subsequently, I8I continued the Lean Process involving Social Impact Bonds (SIB’s) and hoped to integrate SIB’s for the purpose of increasing the speed and transparency of international philanthropic giving, while also reducing transaction costs, ensuring a higher percentage of the philanthropic gift goes towards the intended beneficiaries. I8I went as far as presenting the concept to the SEC in-person in November of 2015.

Subsequently, I8I aborted all initiatives surrounding SIB’s, due to the complexity of the deal structure, as well as lack of investor interest in the new market.

Since then, I8I has moved into the commercial drone space, and is currently running a successful Drone School in the state of Nebraska, entitled Infinite 8 Aeronautics: The Drone School. I8I’s Drone School is currently licensed by the Nebraska Department of Education in Nebraska, and is actively engaged in the licensing process in Missouri. The Drone School is also actively contracting with government agencies, such as the Nebraska Department of Labor and Nebraska Vocational Rehabilitation to provide workforce development opportunities to underserved populations. Infinite 8 Aeronautics: The Drone School is a trademarked name of Infinite 8 Institute in the State of Nebraska.

I8I is also a graduate of the Accelerate with Google program, the IBM Global Entrepreneur Program, Nvidia’s Inception Program for Artificial Intelligence Startups, and has partnered with honorable organizations, such as Georgetown University Law, the Nebraska College of Law, as well as contracting with the U.S. Department of Education for Educational Services. I8I has a history of working collaboratively with highperformance agencies, and proactively so, in order to assure regulatory compliance in high-growth emerging markets. It is I8I’s policy to be open, forth-coming, and transparent into the future.

I8I currently has 12 full-time employees. WFN currently has 1.5 full-time employees.

WFN actively continues to explore research and development in the area of Blockchain technology, including the concept and feasibility of using Masternodes to create social impact.

I8I, in an effort to diversify and re-enter the social finance space, created the subsidiary WFN’s, with the intent to engage in activities related to the hosting of MN’s on unproductive agricultural land, while profit-sharing passive income with Nebraska-based farmers to subsidize falling commodity incomes. The primary purpose of the organization is to create and design effective social impact systems and technologies.

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Blockchain technology is one of those technologies that we believe will have a significant impact on the American economy. Currently Blockchain technology is being used by companies, such as Walmart, who is partnering with IBM to bring transparency to food supply chains around the world.32 As a result, technology companies and retailers are making money from the produce of farmers, however, little or none of the profitability of Blockchain technology is being passed down to the farmers themselves. WFN’s seeks to change this paradigm through our efforts, and assist the American financial system to adapt to the current and coming waves of systemic and technological change.

Aitken, Roger (2017, December 14). IBM & Walmart Launching Blockchain Food Safety Alliance in China With Fortune 500’S jd.COM. Forbes. Retrieved from http://www.forbes.com.

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