Nicolas, I've been following your work and I think you are doing good things. I agree that colored coins is the best choice for the share certificates, and you've come up with some useful ideas.
However, perhaps you are trying to take too big a leap with your proposal. The issue that I see is that for a company to be taken seriously, it needs to be recognized as a legal entity in Common Law and Civil Law jurisdictions. As far as I can tell, this means that subscribers must file a Memorandum of Association with a recognized authority. The memorandum sets out the name of the company, and the authorized share capital, together with the subscribers (who become the first directors and shareholders of the company). So I'm not sure it would be possible for the founders to remain anonymous if the company was to be recognized as legally distinct from the individuals in our present legal system.
I know a lot of people here would say "to hell with the status quo," but I believe such thinking would be problematic:
- Are serious investors going to invest in a company without legal standing?
- How can the company own property if its not recognized as a legal entity?
- If you hit it big and Google wants to buy you for $1 billion dollars, but then your realize that the company doesn't really exists, then there's nothing for Google to buy.
I actually just started a thread on the topic
here of what the absolute minimum filing requirements would be for a company to form in such a way that it is recognized as a separate legal entity. I still think we can use colored coins, cryptography, blockchain voting, no fiat bank account, etc., but at least for the next decade or so, we'll still have a few legal hoops to jump through...
I agree on most of your points. Thanks to share your thoughts, this idea is fresh for me, so there is things I need to iron out.
Such "Open Business" would not be legal, in current legal system, this is specially why I propose a way to bypass the legal system so Investor can still ensure themselves they are not cheated or limit risks if they are.
Without justice recourse and in a trust less system, the best thing we can do for investor is to put economical boundaries and incentives that make Founder acts rightly.
This is why I say "let's make in economically profitable for the wrong people to do the right thing". (inspired by Milton Friedman that replaced economically by politically
)
My guess is that such business will never be legal as long as there is no incentives for the state to do so.
The only way to give incentive to the state to legalize that is to spread Open Businesses, then, most of them will want to pay taxes, but they will be prevented to do so.
At which point the government will move to make it legal, so entrepreneurs can pay their taxes.
I don't think there is another way to make it legal. This sounds like not politically correct to do so... but I don't see any incentive for the state to legalize that through another way.
So for now, lets suppose such system is not legal, as you rightfully said :
Are serious investors going to invest in a company without legal standing?Yes, they would and here is why.
Such investement are completely open world wide. Initially, investors will not trust the Founder, as you said, so, I expect them to buy very few CC.
The amount of CC invested per investor will reflect their trust.
But remember, such CC are distributed worldwide without regulation, for as small as 1 satoshi (or whatever minimum txout).
Moreover, the incentive to earn money in real time for each sell is strong, there will be not so much time after which they will see if they can break even or not.
The small investment per investors in the early stages of the business will make a failure hardly noticeable for the investor, but will quickly break even if it works.
How can the company own property if its not recognized as a legal entity?Legally speaking, for now, the property (what I call ProductLine) would be officially owned by the Founder.
This is an important point you make.
It means that such Open Business can only works for business whose value depends more on the network of contacts/providers and knowledge assets, than physical assets.
The increase in physical asset would give incentive to the Founder to fraud.
However, I talked about some measure Investors can take to limit the power of the Founder in "Risk Mitigation".
When Investor starts to think that it is dangerous to accept another funding round to the business because it will give bad incentives to the founder, he can requires him some measure of protection.
Investor can require Founder to transform CCKey and PaymentKey to a 2-2 wallet, whose other key would be held by a third, trusted party.
And also, to invest himself in its the CC of the company, a sort of "proof of stake".
Such trusted party can be chosen by lazy consensus vote of investors, and based on its "public CV of other open business" of the trusted party.
If you hit it big and Google wants to buy you for $1 billion dollars, but then your realize that the company doesn't really exists, then there's nothing for Google to buy.Yes, this is true, but I think the if the Open Business have a reliable proof of profitability, which is open to all to see thanks to the block chain and published PaymentKey, then other investors will be more confident to invest more.
Don't forget that a CC is not a simple share. It is a right for direct benefit from sells.
If the business is profitable, former investors already broke even, and are likely to accept any expansion to increase sells, and prevent dilution.
There would not be "1 billion" Google investing in such business. But a multitude of anonymous "1 million" ones, worldwide.
As I said, the invested amount of BTC per investor directly reflect the trust in the open business, which in turn, depends on past, public performance.
What do you think ?
