The crypto future of shares

Trade: ages old

We humans have been exchanging goods since ages. The bear hunted down for meat was divided over the cave men whereas clothes were repaired by that particular person who knew best how to use a needle and string. There probably was not an official tally held. Everything done in that small community was necessary for survival. No time and opportunity for keeping and increasing personal hoards. Trade was more like sharing as a necessity in order to obtain the basic stuff for survival.

Money takes over

Gradually, men was able to create excess supply of things. Bread, butter, tools, etc. This encouraged the exchange of things and provision of services. But how did people started to exchange things of different nature? The usual projection of this problem is the idea of exchange of a cow by person A for a seasonal product held by person B. Size nor availability match very well. Such examples are used to describe men's invention around this problem: money. Or actually 'debt' if David Graeber is right.

In essence, money is about people keeping track of who has claims on goods and claims ( COGAS) and to which degree. It does not matter much what the money itself is, as long as it has the properties that money should have (durable, portable, fungible, a unit of measurement and - somehow - in short supply). It works because of trust. Trust that the recipient thereof will be able to exchange it for other things again in a subsequent transaction.

Money = Power

Since money is half of every transaction in our society, it is a tremendous powerful handle. He who controls money, controls the flow of goods in an entire economy. This fact has been exploited by governments and financial interests. There have been centuries of stride between the interests of the public in sound money and the interests of the vested establishment. The creation of money remains a mystery and is misunderstood by many. Whatever the background is, nowadays money creation emanates from our banking system in the form of (mostly) debt.

No debt, no money in our economy .

The erosion of power starts...

The adaptation of the Internet has gradually but increasingly changed the nature of our society. Since the mass adoption of the Internet as from the 1990's, it has had a tremendous effect on many sectors of our economy. The main element that comes into mind is the increased free flow of information. Free news, free exchange of ideas, free information. Darker aspects are the free exchange of harmful or dangerous ideas and piracy.

But the Internet has not stopped there. Its inherent property of seeping through thick walls of protection of once safely guarded monopolies, is starting to have effect on other businesses as well. It's not about information only anymore, but also about trade in general and - as its inherent property - moving around 'obstacles' that once were deemed inevitable.

Bitcoin, it gets exciting

Above, I already briefly touched the power associated with money. In our society, money is controlled to a large extent by the banking system under the veil of government supervision (central banks, regulations). Every movement of money (if not actual cash), must go through that system and is thus subject to fees and processing time. I must admit that this system, old fashioned as it may seem, does work quite efficient (in Europe with SEPA ). But the power of the Internet is already banging on the door.

Looking at our money system and financial infrastructure from a distance, it is more and more starting to look like a dinosaur. With current technology, it is no longer necessary to give someone the power to issue money, to guard its value and to provide an infrastructure for payments. Software and the Internet can do all of this. 24/7, against virtually no fees and without blockades. Banks won't go away (and for good reason) but they are theoretically not necessary anymore for making or receiving a payment. No bank account required, just a piece of software. Crypto currencies are only in their infancy, but their disruptive power is huge.

Anything that can be done cheaper, will eventually be done cheaper. The same will apply with finance. Better get ready for this crypto-wave.

Crypto and the concept of markets

Recently, I stumbled over the site Crypto Stocks . I was fascinated because of its Wild West character. People from all over the world can literally post and issue shares in their project and reward the shareholders with dividends. Registered users can deposit crypto currency and buy shares in those projects, earning dividends. A perfect example of near frictionless exchange and trade without usual barriers.

Of course, something can be said in favour of protection of the public against scammers and frauds. In the specific case of Crypto Stocks, an investor has no idea whether the issuer of shares lives up to his promises and how the project is managed. In its current state, it is more a working experiment than a serious investment opportunity, but it holds a big promise. Whatever its course will be in the future, its existence is possible because of the easy inflow of money. Crypto currency of course. It's only in its infancy. Crypto currency makes it dead easy to create an online market totally outside the bounds and barriers of the traditional institution and - for now - regulations.

This site got me thinking a little further than just an example of the liberating force of crypto currency.

Getting the money

In the traditional system, the entrepreneur seeks money to develop his idea into something great (the next big thing…). This can be structured in the form of a company issuing shares to investors, who pay money in exchange. Money with which the company can execute the business plan and become successful.

This road is full of official hurdles. Setting up a company, seeking investors, receiving money, issuing shares. It involves a lot of red tape and paperwork, not even touching the concept of trade on an official exchange. Especially for smaller projects, an easier route should be available.

Imagine you have a great idea and you are looking for investors. Setting up a fancy website is easy nowadays, no problem. Getting cash is easier as well, since no bank account and ties with the traditional banking system are required anymore if funds can be acquired in the form of crypto currency. Of course, this may in breach of several regulations on seeking investors, but the Internet does not stop for the traditional regulations.

Subsequently, 'shares' are issued as imaginary tokens reflecting the investors' share in a company, an online project. These shares are then traded on a particular website. This is basically the idea of Crypto Stocks.

Taking it a step further: Crypto Stock

As per Crypto Stocks name, one could take the idea a little further. Taking this one step further, one could also envisage that not only the funds are acquired by means of crypto currency, but that the stock itself is also structured as a crypto currency. The entire stock of the 'online' company could be reflected in a block chain, with the 'shareholders' having the private key to one or more 'shares' in that block chain (thus being the 'owners' of those shares).

Dividend payments can be send to the addressees from time to time in accordance with their balance. Stock issue can be done through software. Share trading could be done on any website or even between individuals (with mobile client software). No central exchange necessary, although some big trading websites would naturally come into existence.

Of course, this needs some tweaking and necessarily the company would be in charge of the software routines. However, it avoids the traditional road blocks or 'normal' funding via shares. Perhaps this idea has already been tested in real life.

An idea is worth nothing without action

The idea of literal Crypto Stock would circumvent another layer of friction as present in the traditional system. Another example of the Internet doing what it does best: destroying monopolies by circumventing it with ultra efficient applications.

I look forward to the first companies venturing in this new field of finance, stepping over boundaries and generating better opportunities for tomorrow.

Cryptocurrency | Currency | Economics | E-currency | Business | Social Sciences


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