Here’s my prediction. Sometime in the indeterminately distant future, someone will publish a book. The work, a thick and weighty volume, will be titled: “A History of Capitalism”. It will chart the evolution of global debt and equity markets: its humble origins in the first offering of shares to the public, when the Dutch East India Company effectively conducted the first IPO in 1602, to the tulip bulb craze that resulted in the first market crash. It will cover Adam Smith, the founding father of free trade who laid the intellectual framework that explained free markets and coined the phrase “the invisible hand” which explains how self-interest is the guiding force of an economy.
It will journey through the Industrial Revolution, the Roaring Twenties, the Great Depression, the forming of monopolies, oligarchs and government intervention. It will regretfully recall when Nixon decided the U.S. Dollar should drop the gold standard, and certainly lament when the hundred-year-old modern banking system plagued by fractional reserve lending failed the world in 2008, as property prices plunged shortly after the leading financial institutions reaped enormous profits by betting against their underlying debt.
Though all the ups and downs of this obviously flawed system may become an exhausting read, it will depict the light at the end of the tunnel when a digital virus begins to spread. The virus would eventually lead to economic equality and heightened living standards for millions who previously faced slim chances in the pursuit of these basic liberties.
Of course, I am referring to decentralized, cryptographically trustless systems like Bitcoin and other open-source blockchains that changed the lives of those who saw, not just a revolutionary breakthrough in cryptography and computer science, but a paradigm shift in the use case for the internet. Until then, the internet was a highly efficient place to share information, whereas Bitcoin proved it can also be an efficient means to transfer value in the form of scarce digital assets.
The rest of the book is yet to be written but the early indicators are beginning to show. Individuals are now taking money from their local productivity and spreading it around the globe effortlessly to invest in the networks they speculate will have more value in the future. Some are predicting a world where money is circumscribed not by borders, but by industry. It has become clear that as Hal Finney phrased it, “Blockchain is not a bubble; Blockchain is the pin”.
In the last couple years, a new trend has formed in the emergence of easily tradable, scarce digital assets that contain equity of a business, asset or venture. A share in the project, with voting rights, dividend payouts and 24/7 liquidity for its holders. Some of the companies leading the way are:
BnkToTheFuture
tZero
Swarm Fund
Securitize
Open Finance Network
Polymath
CrowdFundx
Coinbase
Once these platforms launch in their entirety in the coming months, we will have reached a turning point in the history of global commerce. Once every company can securitize their equity with a liquid token, several paradigm shifting advantages become apparent:
- Company employees, now paid with cash and liquid shares, are incentivized to perform at their optimum knowing their efforts will have a direct effect on their own wealth, not just that of the company’s partners. This wealth appreciation can be realized immediately due to the liquid nature of 24/7 markets (tZero Platform plans to operate around the clock with zero settlement time)
- Eventually a set of universally accepted laws cuts red tape and speeds the process of growth and realization of self determination for those looking to raise capital and invest in a broad array of ventures, regardless of size or geographic location
- Monopolies erode as the barrier to entry of business is lowered
And here’s the kicker. While the network effect of cryptocurrencies is viewed as exclusive to utility tokens, the truth is that it extends to securities, arguably becoming one of their most valuable features. Currently, public companies hold annual shareholder meetings where investors are invited to hear out the executive team and pose hard-hitting questions to management. It makes for a good show, especially if the company has endured a rough few quarters and the investors are looking for a forum to vent, but they rarely achieve much beyond that.
What was previously a spectator sport, investing becomes filled with active participants all looking to pitch in to increase the value of their holdings.
Companies looking to run STO’s, on the other hand, are expected to set up an actively managed Telegram or Discord group with an open invite to all potential investors and participate in regular AMA’s. With the help of an “Investor Relations Manager”, investors maintain an ongoing and transparent dialogue with management. What was previously a spectator sport, investing becomes filled with active participants all looking to pitch in to increase the value of their holdings. Perhaps an Australian investor who owns tokens in a Canadian based mesh networking company would like to introduce the executives to a family friend who recently invented a mesh antenna that can rapidly improve the company’s service and speed up the roadmap. She reaches out on the Telegram group with her intents, and within 24 hours is setting up a Skype call between her friend and the company’s CTO. As distributed networks extend to invaluable human resources the global degree of separation is reduced, therefore enabling founders to accomplish their goals faster and more efficiently.
This dynamic new technology makes the world a smaller place and enables millions to realize their dreams. Whether it’s a founder in an emerging economy with an entrepreneurial spirit, or an investor looking to start his own venture capital firm, these goals are getting closer by the week, painting the picture of a serene future where ideas and their actualization are plenty and those who believed in them from the very beginning are exposed to as much upside as Peter Thiel when he invested $500,000 in Facebook, almost a decade before their IPO.