Tokenised Public Float

Аlех Оsh
Mar 12 · 4 min read

Enterprises are rightfully perceived as hard-transferable — the business viscera is tethered to the personality, methods, and relationships of the owners. The normal, legitimate, humanly understandable and not-business-discrediting reason for the sale — “I’m just bored of it” — is never adequately accepted by the market. Sellers are assumed to be trying to get rid of some slag.

When shredded into many tradable shares, an asset can be sold partially, but for more money than one could get for the whole. The fundamental change of narrative, the strength of secondary markets, the reduction of the absolute value of risk for an individual buyer, the illusion (or fact) of a good audit — all this works for the seller, powerfully.

A few years ago, many jurisdictions introduced a simplified regulatory regime for the issuance and distribution of shares of startups and SMEs (equity crowdfunding), and last year, the tokenisation infrastructure began to develop, one that can significantly reduce the cost of secondary circulation of security tokens (some people call them digital shares). As a result, smaller business gets a new chance. It becomes transferable.

Securitisation and tokenisation allow to access capital markets through a security token offering (STO). STO is an initial placement of tradable tokens that are legally bonded with the underlying traditional securities or investment contracts. The benefits of the new capital market are high liquidity, low cost of registry and depository, and a plethora of sophisticated investors.

Theoretically, if regulators go on easing things at the same pace, by the end of 2019, we can expect the rudiments of new liquidity. The premium in stock prices already exists: tokens sold today (if there are corresponding ordinary shares) are more expensive than just shares. Issuers can sell these tokens to anyone around the world, and if certain requirements are met — in the United States too.


The History of Digital Securities

At the turn of the century, for the first time at the global level, the will of the mob worked through decentralisation. The torrents phenomenon has forced things across industries and the model of selling music, movies, and software was radically changed. As a result, we got “clouds” and subscriptions. Without torrents, we’d still be carrying disks and boxes.

During the last five years, the further development of decentralised ideas and relevant computer systems have inspired many people to try to break another [annoying] rule. There was an attempt to deprive the governments from the right and ability to directly control investments and gambling. It did not work out: after a short-term surge, the so-called ICOs (sale of blockchain tokens backed with nothing) were promptly banned in China and then in the US. As of today, ICO activity is small-scale, dangerous, and largely unprofitable.

The wick was put out, but the valiant community fuse and the strange category of investors — who entered into the taste-it-all phase — weren’t. Token selling was duct-taped to ordinary securities selling. It is sort of absurd, of course, but at the junctions of dissimilar materials, some new life has originated, quickly turning from mould into motley grass and bloom.

Pure technological reasonableness is never a necessity. After all, entire layers of our civilisation are built on outright nonsense. If something creates $100 worth of value, but costs less than $100, people will be doing it. It really is that simple. It is the basics of “economic rent” and “opportunity cost”. The dominance of frankly inappropriate technologies in many sectors is an evolutionary norm. Technologies evolve as species, for the sake of short-term survival and without long-term planning for the class, the order, or the family. This leads to grotesque results. Examples are numerous, both in biology and industry.

The simplest algae can feed itself with radiation of stars, that is, the most common fuel in the universe. Proud eagles and clever humans can’t live without an extremely rare substance — the flesh of the creatures from one particular planet in one particular galaxy. We suffer from hundreds of silly technical solutions in our bodies: as our spine was originally “developed” for horizontally living creatures, the pain never leaves us.

An obvious example of the technology evolution being vision-less is a car. In practical application, the internal combustion engine and the electric motor are the same age, and if investments during the 1900s went into the development of capacitors, not into the thousand patches for fundamentally inefficient micro-explosive-stoves-on-wheels, then today, modern Tesla would seem like a term project by a mediocre sophomore. We love our horrible multi-cylinder cars, though. We will learn to love the blockchain-based finance as well.

Programmable Economics

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Аlех Оsh

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Programmable Economics

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