Bitcoin Forum

The startups who are creating market places where they use their token for services, could in fact replace the means of investing in equity? The reason, while the business increases their customer base and profits, the token also increases in value. And with the token, you can liquidate anytime, unlike equity. The only value equity has now would be ownership. Unless you have a buyer who wants control of the company, I see it difficult to actually sell equity when the token is there. Let me know your thoughts. Cheers.

You are right. The introduction of the idea of an Initial Coin Offering (ICO) is not anymore an equity-based but on the idea of a token resulting into not categorizing them as securities. And we have an eager market for ICO these days...though I find it somewhat uncomfortable that some of these ICOs can just be pretentious and not really serious of what they are offering.

equity tokens will be popular form of ICO just after government regulators will allow that =) sorry
good news - it will be more hype as it will allow any coffee shop go public world wide instantly - and this is the true decentralization. That will be a good chance for small business and individual entrepreneurs. It will attract more money to crypto and will make it more popular.

Not sure what equity you are discussing here really. Are you talking about stock market kind of equity?

I believe equity is similar. If you buy stocks over a company, if its value goes up so will its stocks values. Then if that price goes up then you can sell it for more than what you both it. Isn't that how most stocks work in the stock markets?

token buybacks works as dividends, but shareholders have some rights that tokenholders do not

I don't get what you mean by equity not being as easy to liquidate as a token? Stocks can be easily traded. Or are you thinking of VC-style equity?

Also keep in mind that some people actually want to own part of the company and not just to be able to redeem a token for services rendered.



If you look closely most tokens are not even legally binding. Many token holders don't have any rights at all. So shareholders having more rights than tokenholders is an understatement.

it's not legally now, but will be in next few years
that will make crypto way to invest more popular than even now =)

Tokens are way more different and complex than equity. I never really traded in stock but did know some basics equity shares can only be issued at a limited supply and it is governed to prevent scams.
In case of tokens they are just some bullshit which companies give in place of funds after keeping the funds with them they claim to have another 15% of total supply. Meaning tokens are illegal way of raising money

By equity, do you refer to mortgaged property? In a way yes, tokens may replace equity as a means for investment because technically it is more liquid, I think it would be more convenient for the investors. However, I think on the legal side there it is still somewhat problematic, and shares are still more secure. Perhaps in the future ICOs would revolutionize and improve.

There is a large infrastucture around traditional shares, like auditors, SEC regulations, investment banks, etc. It will take some time to build such infrastructure for the ICOs.

I didn't mean legally binding as in legally recognized. I meant "not legally binding" as in ICO projects explicitly denying any legal rights to token holders in their terms of agreement. You're not guaranteed to actually be able to use these tokens, even if the ICO project turns out to be successful.

you are right. I'm saying that with regulations some ways to legally bind rights to tokens will appear, attracting even more people to crypto-funding new businesses.

With the smart contracts on the ethereum network, can't equity be programmed into the contract. Can't dividends, splits, votes, and everything else be done autonomously? It seems the only difference is that the smart tokens are not controlled by state regulatory agencies because they're not needed.

Well it's not that ICOs couldn't give their tokenholders more rights, it's just that many don't choose to.

Apart from that, you're right. While not all crypto-enthusiasts are fans of regulation, there's probably a significant amount of people from the mainstream markets that would be willing to invest in ICOs if they had a stronger legal foundation. Assuming there are ICOs that would be willing to succumb to a regulatory framework ;)

I agree with Bry. There is much risk with ICO's and anytime there could be a scam that is happening which we dont know. They could pretend everything is complete even if it is not. Even the people who claims they are the developers or whatever job they have there.
Also the tradition in equities. People got used to it plus it is being offered also by the companies which is not in the crypto industry. We just advertise here hoping we could get more investor.

nobody needs to be fan of regulations. cryptocurrency are able to be transferred in a single click and this possibility remains despite any regulations.

but.

today I cant legally make US citizens my investors just because lack of regulation.

I mean, I want to have an ability to make my tokenholders to become my investors giving them rights if I want to do so. Currently I have technical possibility to do that, but not legal.

I agree with this line of reasoning when it comes to transfer of equity in the business but a deeper look also will mean equity could also be sold because the highest number of tokens represent the one who owns the control which is equity as well. So, if tokens are readily converted, so also my equity because if I want out, all I need to do is to sell all the tokens allocated to me and that's all l, while I still retain my job as probably COO or manager, I already lost ownership.

Why not? What's stopping an ICO from registering with the SEC? Sure, there's a lot of paperwork to be done, but apart from that I can't find any legal or regulatory reasons not do so?

If a small business can register with the SEC, then so can an ICO project. If securities can be traded OTC, then so can tokens.

I will for sure second you. Tokens and equity are something proportional to each other. If someone owns the Tokens, he owns equity. But if he sells them out, he does not own equity any more.

Yes. But some tokens can be both depending on their contracts. They can return dividends to their contract holders AND they can store value based on supply and demand. I guess it depends on how the interaction between the contract and the token holder is executed. We are in some very interesting times. We are right in the middle of a "rethink" and "redefine" period of investment economics in some jurisdictions.

The idea for tokens is to be used in the platform. In Ethereum, ETH is used to pay for fees when you send ETH or an ERC20 token. Its the same with other dapps built inside Ethereum. Some of them require you to use the token to use the dapp. Without the token the dapp will not work.

If you see a dapp that has no use for their token except as a form of stake to buy and sell in the exchanges then this is a pure ponzi. With dapps that require the token for the dapp to work, at least the people behind it are creating a use case for their tokens.

In conclusion owning a token with a use case in a dapp is also like owning a part of the dapp.

I do not think that coins or tokens will replace equity since equity or shares are part of a company and coins are actually considered as a currency. Equity also gives you dividends since you are a part owner of the company.

It is more likely that we can able to buy equity using our couns.

I have had the honor of regularly fielding questions from intrigued friends, colleagues, and family members on all things blockchain. While I’ve played the role of expert or, at the very least, slightly more informed seeker, I have found that I have learned far more listening to and answering questions than my questioners have from my answers. Every conversation helps illuminate those aspects of blockchain that both are interesting and confusing enough to inspire probing questions from smart, intellectually curious people.