A corporation is governed by its stakeholders, a combination of stock owners, employees, suppliers, customers and the community. Whatever a corporation does affects these stakeholders in some way, but only the stock owners, or their delegates, have control over the choices of the corporation.
Most corporations are centralized. The power of the corporation belongs to a few executives that make up a board of directors. This centralization distributes a disproportionate reward to a few people in top positions and meager to no rewards to the driving force of the firm, the employees.
A smart contract is like the bylaws of a corporation in the sense that it is a governing document. It is, however, unlike bylaws in the sense that it can be changed by a stake of token holders by way of a “fork”. This kind of contract gives majority power to the majority stakeholders. In an ideal smart contract, the stake is distributed in such a way that many people hold the majority stake rather than a few.
Tokens, or coins, act in two capacities. First, a token has a monetary and instantly redeemable value. Second, many tokens represent a stake in the project or firm backing the token. This is unlike either fiat or stock because of a few factors. It is unregulated (although regulations are being considered in many countries), it is unbacked, and it has no real value.
Real value is the value of an asset that can be immediately redeemed for some real property or fiat at an agreed upon and consistent rate. A house, for example, has real value. The value of a token is imaginary, especially since many smart contracts state that tokens do not represent an interest in the issuing firm. Moreover, the firm does not back the value of the token in anything other than faith that it is a tradeable asset.
The lack of backing to a token is what makes it an ideal instrument for companies, and not so ideal for stakeholders. If a company bears no fiscal responsibility for the asset, yet receives something of value in exchange for the asset, they can raise funds quickly and without risk to the firm.
How then is the token holder protected? In the ideal case, the token holder is protected because the issuer wants the token to retain value. If the issuer cannot sell more tokens, they stop making money. While we would all like to believe in ideals, a person masquerading as a firm could just as easily amass millions of dollars in an ICO, shut down operations and disappear forever with the money. This is what makes unregulated currencies such a high risk.
Given this knowledge, I still pose the original question. Is blockchain the future of business? I believe it is. The power of distributed fundraising and governance reduces the risks involved in centralized decision making and gives more power to stakeholders. In the “everyday” business environment this means businesses that are more socially responsible because they become accountable to more stakeholders than just the wealthy.
As for which tokens and coins to invest in, I would give the same advice as any qualified investment counselor would. Do your own research, invest in what you feel comfortable with and build a portfolio of diverse holdings based on your risk tolerance.
Legal Disclaimer; I am not an investment professional. None of the material presented here is financial advice. All investments bear risk. Cryptocurrencies are a particularly HIGH RISK investment. Only invest what you can afford to lose 100% of.
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