As discussed before in How Bitcoin will change the voting systems
, the power of the blockchain enable us to do much more than simply exchanging bitcoins.
I think dacoinminster has somewhat grasped this power (see [PROPOSAL] The ticker and the hole (path to bitcoins worth $1M each)
) but try to use it in sub-optimal application. (Or I didn't quite understand it, which is more than probable.)
Proof of ownership, such as the stock market, is probably the most fertile ground for the blockchain power.
With my broker, it costs me 30$ per stock related transaction. That's per transaction, so 60$ to buy and sell. Even by doing so, I don't ever see any proof of ownership of any company. I have to trust that my broker didn't simply write a bogus number in my account. [tangent = on] Bitcoins make you realize how much you trust everyone around you. [tangent = off]
Can I sell directly to a friend? No sir, I must contact my broker who will then sell - and I don't even think I can decide to whom he is going to sell, not in the usual web interface for sure.
What Bitcoin offers is a way to avoid all that, and in addition make it even more secure - by a wide margin.
What bitcoin actually offers, is the opportunity to transact in a digital currency over the internet without the need for third party intermediaries like banks. I don't think it offers (in it's present form at least), the posibility to represent anything other than the distributed value of a single commodity, that being the bitcoin currency itself. YES!!
It provides the principal enabling a ubiquitous, digital proof of ownership, but that ownership only pertains to bitcoin itself
and the amount that specific commodity that each node posesses at any given moment.
My company, Acme inc, wants to go public to finance a big project. We organize a big press conference and publicly announce a master BTC. (see How Bitcoin will change the voting systems
When someone buy a part of the company, we send him a part of the master BTC. (100% ownership = the whole master BTC).
How then is the value of your company allowed to float in the market as a free market entity? Unless I have something horribly screwed up, it seems that your shares are not independent units of value representing a share in the net equity of your company, but rather they are linked to the fluctuating market value of bitcoin. If I buy 1000 shares in IBM today, I will have to surrender a particular amount of money that represents the value of IBM shares by comparison to the units of currency I am using to exchange for them. 1000 shares of IBM may cost me X USD today but in one week it may be X + 3%. That's because the value of the company floats independantly of the value of any currency. It's effectively traded as a seperate comodity. Now if your company releases a fixed number of shares, represented as a bitcoin value, but to trade in those shares the shareholders need to retain ownership of the equivilent percentage (say 5%) of the master BTC value, then it seems to me, that what they have hold of is either worth whatever that sum of bitcoin is worth, or whatever 5% of your company is worth. If your company looses realworld value compared to BTC, then it needs for those bitcoins (held by the shareholders) to drop in value accordingly.
How can your company demand that somebody elses bitcoin not be used just as bitcoin instead of company shares? How can you demand that the value of those bitcoin rise and fall acording to the value of the company? How would anybody even evaluate the value of your company, if you have fixed the number of fixed value shares and use bitcoin to represent them? Doesn't that mean you have pegged the value of your company, to the value of bitcoin? If the value of bitcoin goes up inordinately, while your company is making bad manegment decisions, then surely you can't expect it to ride the coat tails of the currency. That's not a level playing field. That's like floating a company, by saying that you'll release 10,000 $10 bills, recording all of their serial numbers, so they can be 'earmarked' as belonging to your company. All you have to do is pay for them with unmarked/unfixed (independantly valued) $10 bills. The $10 bills will still be worth what they are worth at face value. There's nothing legitimate you can do to them, that requires anybody to regard them as belonging to your company. Nor is there anything legitemate you can do to your company that bestows upon it the right to decalre one of it's shares as being worth $10. That's something for the market to decide.
How then can something that used to be a $10 note, now become an Acme inc. share, unless you are taking $10 notes out of circulation and using them as recipts for what was initialy floated as $10 worth of equity in Acme inc.? If you expect the face value to remain fixed, ie: $10 worth of
Acme inc shares, then obviously the number or amount (and therefore the percentage of them represented by the recipt) must be alowed to float. That would be an unusual way to trade shares. The value could be fixed but the quantity or percentage would need to be a floating quantity, determined by the market. I'll have to think about that one.
That's what you seem to be saying with this scheem. Not only 'This ($10) is what my shares will be worth' but that is what they will remain. Otherwise you're hijacking the face value of the currency OR
you must implement a system by which the face value of the unit of currency and the value of a share is pegged, while the market is allowed to determine how many total shares of Acme inc. exist at any time.
This distribution of currency for shares BTW, is not a good finance strategy, because your company must already have $100,000 worth of $10 notes to 'earmark' for shares. If you sell $100,000 worth of notes for $100,000, how does this generate finance. If I have a business worth an estimated $100,000 and, say I'm a plumber who wants to turn my lucrative enterprise into a franchise, then I may only have $5,000 in working capital between the business bank account and my petty cash jar. I might decide to float some shares in my buisness and offer the future proffits to potential shareholders. They will want to see evidence for what I am claiming as being worth $100,000, including the legitimate legal documentation, that demonstrates the profitability of my business model. It's going to be a bit futile, if I have to find $100,000 to buy $10 bills so that I can sell them as shares. I already HAVE
an investment worth $100,000 I am looking for capital that dosnt already belong to me to exchange for shares in future profit. If I sell half my buisiness in shares I should be able to raise $50,000, but I dont need to find $50,000 extra dollars in order to sell shares in existing equity. Besides, as I said, I only HAVE
$5,000 of working capital. The $50,000 is tied up mostly in company assets and goodwill etc.
The purpouse of selling shares, is to raise some finance for expansion. If I already had $50,000 for the planed growth, then I wouldn't need to sell $50,000 worth of equity. Besides which, my company would then actually be worth $150,000. The idea is to exchange money for shares, not money for money. Sorry,
but I just dont see how this using money to piggyback existing share equity could work. In any financial transaction, the money is supposed to go one way and the equity in what is being traded for it, is supposed to go in the opposite direction.
What we have with the existing bitcoin network/protocol, is a store of value in a singular commodity of exchange and a means by which financial transactions can be represented electronically and ubiquitously varified for their uniqueness. It's a free floating store of value and a transparent public record of transactions within it. What we dont yet have, is a digital counterpart network/protocol, to provide a similar public record of the various comodities/stocks/shares etc. all free floating with their own independant values, that can move in the opposite direction and be traded for bitcoin. The bitcoin network/protocol/blockchain, is a single ledger accounting for a single comodity. The next generation should rightly implement a double entry system of accountancy, for multiple comodities/budgetary categories, wherein evey transaction taken from one comodity, is matched by an oppsite defficit in another. The current bitcoin blockchainm, represents a floating realworld value in a shared comodity called bitcoins.
Today, the whole bitcoin network, is worth a finite amount, in terms of any other currency or comodity. That can be used to represent only ONE thing. THE TOTAL VALUE OF ALL BITCOINS. If you want to have multiple comodities/assets, with floating values. that can move in the opposite direction, reflecting both sides of a complete transaction of bitcoin for any other comodity/asset, then you need seperate blockchains each allowed to increase or decline in value seperately. It would almost go without saying, that there nededs to be one universal currency against which all of them are traded, so there will always be a universal common denominator. There needs to be a singular currency or store of universal value, that always moves in the oppisite direction when equity in any other comodity/asset is being exchanged. Needless to say I vote for bitcoin to represent that universal standard of exchange. It's not just the first, but it's the coolest and already most accepted digital P2P curency.
I expect a multi-blockchain client/network/protocol, will eventually be implemented to provide for the digital exchange of a plethora of comodities/shares/assets and bitcoin, will be the unit of universal value that goes in the oppisite direction of every other comodity/asset, to independantly represent payment for an arbitrary myriad of other units of value being exchanged. That will be tantamount to replicting a double entry system of accountancy, but one that is implemented over a P2P network.