Crypto Equity

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Recent block chain projects like [1] made it possible for everyone to issue digital tokens/assets based on the (Bitcoin) block chain consensus network. This provides a whole new range of possibilities: from selling tokens for crowdfunding to describing equity in a token. In the following I've collected some background information on this topic.

Introduction

“A corporation is a company or group of people authorized to act as a single entity”

So if you think about it, a corporation is a group of people working together under a set of specific rules. From the board of directors to the employed personnel certain contracts are used to enforce these rules. Depending on the size of the company the releationship between the group of people is more or less personal and open. (for example: shares of a publicly traded company can be easily bought and sold on a stock exchange)

The basic idea behind a decentralized Organization (DO) is to take the set of rules and specify these in code enforced by the/a blochchain. Instead of having a hirachical structure managed by a set of humans controlled by a legal system a DO is decentralized and people are interacting with each other acording to a protocol specified in code with no single authority that enforces these rules.

Having these rules implemented in code brings a huge amount of flexibility and removes the need of trust that everyone involved follows these the defined rules. (think internationally, with people involved from different juristrictions that do not know each other)

Even though some of the ideas have beed discussed for years this is a rather new topic and a possible new capability that is emerging from the distributed ledger and consensus technology that Bitcoin introduced. And the rising popularity of Bitcoin allows the implementation of these ideas and a real world usage.

That said, the implementations are still very much at the beginning and here and there be dragons.

The following collects ideas and resources on how we could apply ideas of crypo-tokens to KOSMOS.

Terminology

  • Blockchain: the public ledger that records all (bitcoin) transactions. The decentralized, distributed, unchangeable database of all transactions.
  • Smart Contract: computer protocols that facilitate, verify, or enforce the negotiation or performance of a contract. (coined by Nick Szabo probably around 1993)
  • Decentralized Organization: a decentralized organization takes the concept of an organization and decentalizes it and uses a protocol specified in code to enforce its rules.
  • Decentralized Autonomous Organization: a decentralized network of narrow-AI autonomous agents which perform an output-maximizing production function and which divides its labor into computationally intractable tasks (which it incentivizes humans to do) and tasks which it performs itself. It can be thought of as a corporation run without any human involvement under the control of an incorruptible set of business rules. (Bitcoin is a DAO)
  • Digital asset / token / coin: user-created currencies that are stored inside a blockchain.
  • Crypto-Equity: a crypto token that represents “equity” in a project or corporation.


Goals and Use cases of tokens

Incentivize and reward participation

The individual ownership of a token that describes some stake in the project is used to incentivize any kind of participation. - from voting for new features to contributing code or providing funds. Because such tokens can be traded on open markets early participation will be rewarded as the application grows in popularity and demand for the limited amount of available tokens.

Provide funding possiblity

While traditional crowd funding campaigns often solely ask for money - sometimes in exchange for unrelated goods like merchandize - the issued tokens can be sold and traded on open markets. The initial sale raises funding for the project.

Coupons for the service/product

Tokens can also be used like a “coupon” for paying for a product or service. These can be easily issued, transferred, traded etc. and can be used as a payment method for a service

Equity / Shares serving as stock of the company (with an legal entity or without an legal entity)

Tokens can be used as a stock of a company which is a legal entitiy. The token thus represents a real-world share of the company.


Possible platforms / solutions

Issues

Further reading