Bitcoin Forum

I've been seeing projects in development that have "decentralized stock exchanges" as one of their features. I don't see how it would work. Though, I'm confused about how real stock markets work too.

So, this is my understanding of why stocks have value: A stock represents a slice of equity in a company that could be used in a takeover or buyback.

Without government support, how do enforce company ownership? For example, suppose some guy runs an ASIC mining "company," and he sold shares representing 95% of the company to other people. Now, suppose someone buys all the 95% shares. What's stopping the guy who owns 5% from just ignoring the guy who own 95% and running it like he owns it all? With real companies, legal charges can be filed.

Then there's also the issue of regulation. Things like quarterly earnings reports help the market determine how much the company and stocks should be worth. If a real company gets caught lying (too much) about earnings, legal action can be taken. A guy who runs a "company" listed on a decentralized exchange can pretty much make anything up. If dividends are payed, the guy could run a Ponzi scheme.

Also, I'm guessing issuing "shares" in a "company" on an exchange not regulated by a government would be illegal in most countries, so all people involved with the company would have to stay pseudonymous.

Stock exchanges have existed without government intervention, so it definitely works, though now it is mostly illegal.

Governments damage exchanges more often than support them. USG has crippled MtGox. Government permitted HFT is distorting the futures markets as ZH constantly reports using analysis from Nanex.

Don't forget that the absence of a singular, coercive regulatory agency does not preclude multiple, competing regulatory agencies. 

Think good housekeeping seal of approval and consumer reports vs. consumer product safety commission.

Yeah, that's possible. But, I was thinking more along the lines of the problem of not being able to take legal action when things go south. Since issuing "stocks" on a decentralized exchange is probably illegal in most countries, I don't think you could take the management of the "company" to court for being uncooperative with the shareholders. And they'd probably have to remain pseudonymous anyways.

As another example, say someone who runs a website issued shares for his web-based company. If someone else acquired a majority stake in the company, there's nothing guaranteeing that the guy who runs the site will give up the administration passwords, domain name, profits, etc. In this case, this could somewhat be mitigated by giving credentials to a "trusted" third party. But again, the same problem exists if there's no way to take legal recourse against the third party if they are uncooperative with the shareholders or management. If a similar thing happened to a company based more in the physical world, the trusted third party would need its own police force/mafia to physically take ownership of the property.

The more I think about this, the idea of a company itself is a legal construct. If a company is not recognized by a court, then I don't think the title of "company" has any meaning.

true; nice analogy ..
Thinking about distributed algorithm to replace the central authority thats recognizes the "company" ....it could be something like,
each company is a block;
each block is recognized as true/real via net consensus;
each block is made by 100 shares;
whos control more than 51% share checked by transactions on book is the boss; and claims the master key, bla bla

sorry if it's bit confuse, probably wrong; worked 12 hours straight, drink 2 glasses of wine and go to sleep now ...