Beacon Cycle idea / invention facilitates the forming of agile, adhoc federations in lieu of formal mergers and acquisitions,
then, it provides a simple framework for exchanging state meta data snapshot changes in for example, distributed ledger values
across the diverse systems
of systems of Bitcoin and current currency, stock, commodity.. systems and provides metrics / meters useful in establishing
smart contract Service Level Agreements. CREDIT TO: COIN TELEGRAPH ARTICLE
The New Frontier
after Cryptocurrency: Cryptoequity
by Susanne Tarkowski Tempelhof :
You may have come across the word Cryptoequity before - it has been written about in mainstream media, from the Wall
Street Journal, to The Economist. However, few understand what cryptoequity really mean, the different forms and purposes
of it, and how it’s likely to evolve in the financial and legal landscape around the world. Hence, here’s a brief
introduction to the concept - some food for thought for people curious about this embryonic and exciting industry.
In almost all jurisdictions, incorporating
companies tends to be a tedious bureaucratic process. Afterwards, once the incorporation is done, you’ll be subject
to both taxes and regulations which will limit your ability to successfully grow your company. Instead, imagine for a second
if you could start a company without all of that burdensome government interference?
Well, thanks to the blockchain technology – i.e. its function as
a cryptographically secured, distributed public ledger - that’s now possible. Essentially you start a “coin,”
let’s call it mycryptocompany.com - and then you decide how many individual coins you want - 100, 1000, 10 Million etc.
Through registering a smart contract on the blockchain you then attach an equity stake of whatever commercial activity mycryptocompany.com intends to do
- whether it’s building apps or selling cupcakes.
Each individual “coin” then entitles the owner equal amount of equity percentage in
the company. The “coins” - or rather equity shares - can then be used to raise funds through equity crowd funding, and it can be traded on like stocks on a stockmarket through exchanges.
DAOs and DACs
Arguably, Bitcoin could be described as the first so called Distributed Autonomous Organization (DAO), if one looks at it as primarily a payment system, rather than a currency - everybody who holds Bitcoin effectively becomes
a shareholder in the payment system, and ‘the shares’ are then used as a currency.
Now a host of different organizations offer services to “incorporate” on the blockchain, through creating a coin, everything from Colored Coins,
to Counterparty, BitShares, NXT, Noir Group, Swarm, Mastercoin and Agora. When Ethereum - an alternative to the Bitcoin blockchain
– is released (probably in Q4 2014), the number of applications facilitating DAO creation and management is likely to
multiply very rapidly.
expression Decentralised Autonomous Corporations (DACs) was first coined by the US based company Invictus Innovation in 2013. Decentralized means that’s it’s spread
out over it’s users on the Blockchain and Autonomous is the ambition that the user base eventually will take over and
run it (like Bitcoin, for instance).
then evolved into quite the acronym soup, starting with Decentralized Autonomous Organizations: (DAOs) created by Ethereum
in 2014* - essentially the same as a DAC, but the word organization leaves more room for different types of entities. That
prompted the creation of yet one acronym: Decentralised Organisations (DOs): Same as DAOs, but without the autonomous part.
Needless to say, not all organizations can or should be run by its user base.
For instance, if you have a cupcake bakery in your basement, incorporating it as DO would
be the rational decision. A further evolution of the now rather standard DAO acronym is Decentralized Applications: (DAPPs) - also sometime called appcoins. DACs and DAPPs are essentially the same thing, although DAPPs are a more narrow definition
since it specifically refers to tech applications, which are currently the most common form of DAOs.
DAPPs may successfully avoid the regulatory system,
since it’s designed to not require a physical location, and can therefore be both anonymous and distributed. However
the largest adaption of DAOs/ DOs is likely to happen in the developing world - where the shadow economy, the so called System
D - an economy of $10 trillion - is the most significant in size.
for instance a fruit seller in Indonesia: currently the fruit vendor operates outside the law. He isn’t incorporated,
and doesn’t pay taxes - which is caused by a combination of overly complicated bureaucratic processes and the inability
of the government to enforce regulations.
the fact that the fruit vendor isn’t incorporated also makes it more difficult for him to raise capital to expand, since
he can’t offer much guarantees to investors. He does not have a registered entity, and he can’t sell equity. A
DO solves this problem for him - it’s quick to register, nearly free, cryptographically secure and user-friendly. And
besides, the prospects of legal repercussions are close to none.
Prospects of cryptoequity
In developed markets,
specifically US, the cryptoequity sphere is likely to quickly gain the attention of regulators, as it attracts investment
and media buzz. Hence, the regulatory environment is likely to make it harder for DAO’s / DOs operating in the Western
hemisphere as opposed to developing countries.
Over time however, the economic competitiveness of DAO’s/ DO’s may push western government
to adopt a looser regulation regarding cryptoequity to stay competitive. It’s also a possibility that some emerging
markets, governments, or economic free zones, will come to use this method to incorporate companies, as it’s more secure,
cheaper and more time efficient than keeping paper records.
Within the Bitcoin community, some of the criticism raised against cryptoequity is that it will
simply create more altcoins, which according to many is bad for the Bitcoin infrastructure because it detracts attention from
Bitcoin itself. This view seems slightly misguided since equity shares do not compete with currencies; that would be like
claiming that Microsoft stocks compete with the US Dollar.
Further criticism raised against cryptoequity consist of the usage of the word ‘incorporation’
-- critics mean creating a DAO/ DO shouldn’t be called ‘incorporation’ since its very different from incorporating
in a government backed jurisdiction. In a government backed jurisdiction, you as the creator of the entity may enjoy limited
liability, and the investors are protected by enforced regulations. But while that is certainly true, it’s a question
of personal preference. Cryptoequity is, as the saying goes, high risk and (potentially) high rewards.
Personally, I believe cryptoequity will do to business
and entrepreneurship what Bitcoin has done to money - it will propel us towards a much greater personal and economic freedom.
*Although the term DAO was used in a RAND Corporation report in a military context in 2000 (http://www.rand.org/pubs/documented_briefings/DB311.html)
- however, Ethereum first used it in the crypto sphere.