Is blockchain the future of business?
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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I 100% agree that Blockchain technology can be used to fundamentally change business, especially practices like the exchange of stock/securities.
However, why do we need to replace traditional shares in a corporation with tokens? I'm all for using blockchain tech to make trading and purchase of these shares easier, but I don't really see the need to have businesses use tokens instead of shares in some cases.
Like you've pointed out, I think we are already seeing some of the issues with unregulated tokens as "shares" in a company with all the concern around scam ICOs. Sure there are some amazing ICOs out there, but there are also a lot of people getting conned out of their money.
Regulations around investing in a corporation are there for a reason. To protect the investor.
I'm all for stuff being streamlined, especially by Blockchain technology, but we also need to recognize the need for regulation to protect investors from being taken advantage of.
The biggest issue is that an ordinary person can't log into the NASDAQ (for example) to buy and sell shares directly, yet anyone can purchase or sell tokens.
With a strong Proof of Stake (like Cadano proposes with Oroboros for example) a token could represent an exchangeable stake in a company that could behave similarly to stock.
I'm not against regulation, but I think decentralization helps to more equitably distribute power.
For sure, and I'm 100% with you when it comes to opening stuff up to more people. I just want to avoid scenarios where things are too open and easy and we get a ton of pump and dump ICOs clogging up the market rather than real companies.
Purchasing stock in the traditional sense isn't that difficult once you're in, but it's a pain to setup, takes weeks sometimes to get an approved account with a brokerage, and more days to clear funding etc.
Honestly, I see huge opportunity in helping streamline the brokerages/exchanges themselves rather than the companies. Make it easier for people to trade stocks, while still keeping safeguards in place to protect investors.
With today's technology there really should be no reason we shouldn't be able to buy and sell stock at "book" directly through an exchange, except that it could end up having the volatility of the crypto market (which would be bad for the firms and the rich).
Instead of brokers, we should have regulated exchanges and anyone should have access to the exchange. If "XYZ corp" is trading at $1, I should be able to buy a share for $1.02 (assuming a fair transaction fee) the same way I just bought 499.8 ADA for about $15US the other day. Conversely I should be able to sell my shares at book through the same exchange.
YES, IT IS!
How would you apply blockchain technology to say, a local startup?
Even if this blog vaporized into thin air -- let's not and say it did -- I'd be perfectly okay. Not entirely, cuz I like it here, but still okay. Definitely here cuz I wanna be. This is my best advice to people interested in cryptos these days.
The law in the United States actually requires that anyone giving advice that could be construed as investment advice warn users that investing has risks and that profit is not guaranteed.
Investing more than you can afford to lose 100% of is dangerous because ALL INVESTMENTS ARE VOLATILE. Even with something as stable as say gold, there is the possibility that it will lose all of its value and you will be left with nothing.
Personally, I invest time and profits (both of which I am willing to lose) to build my crypto portfolio. So far, my holdings are small but profitable, but I understand that may not remain the case and I may lose out on the venture.