[RFC] Underwriter (Galactic Milieu)

[markm]

An interesting (to me anyway) approach to certain concerns regarding trust in the deployment and use of exchanges has been suggested, which I have written up on the Devtome wiki and am interested in commentary upon. I am considering adopting the policy for my Digitalis Open Transactions server, so although the wiki page places it in the context of the Galactic Milieu game it is potentially not restricted to use in games.

-MarkM-

[becoin]

An interesting (to me anyway) approach to certain concerns regarding trust in the deployment and use of exchanges has been suggested, which I have written up on the Devtome wiki and am interested in commentary upon.

From the point of view of the public, the tradition of underwritten IPOs creates risk-free investment opportunities, because the "IPO price" of an offering is secured by assets provided by the underwriters and held in escrow by the exchange.

I don't see how this helps in avoiding trust in deployment? What this approach is suggesting is simply moving the 'trust' factor from the issuer on to the exchange. Why do you think that an exchange should be more trustworthy than the issuer of a currency unit?

[markm]

I don't see how this helps in avoiding trust in deployment? What this approach is suggesting is simply moving the 'trust' factor from the issuer on to the exchange. Why do you think that an exchange should be more trustworthy than the issuer of a currency unit?

By deployment of exchanges I meant a person thinking of deploying an exchange; how is such a person to trust others to issue assets, or not end up being seen simply as an enabler for scams.

So basically it is not about how to have others trust the asset-exchange, it is about if you run an exchange how can you insure yourself against becoming an enabler of a bunch of scammy "assets".

I had originally figured I just would not let anyone else issue any assets on my server, or possibly I could open a wild west server separately with a "buyer beware I have no idea whether any of these assets are scams or not" policy.

This underwriting concept seemed it might offer a way to "vet" folks who want to issue an asset on my server.

-MarkM-

[becoin]

it is about if you run an exchange how can you insire yourself against becoming an enabler of a bunch of scammy "assets".

You can't. Exchanges are just intermediaries between sellers and buyers. Exchanges must ensure time, quantity and standard quality of the delivery, not the investment grade of assets exchanged.

The idea behind every IPO is to offer to the general public asset "B" in exchange for asset "A". There is no point for the issuer to give a promise (sell asset "B") in exchange for nothing, because proposed approach suggests not the issuer but the exchange will be asset "A" owner. In other words, to put some economic logic behind this proposition, the issuer and the exchange must be part of one and the same entity!?

[markm]

Being the issuer and the exchange was my original plan.

This "underwriter" concept is part of an attempt to convince me to actually allow entities other than me aka my own Corp (Digitalis Data Services) to issue assets on my server (aka exchange).

Even in the game context it is not the issuer and the exchange that would approach being one entity but, rather, the exchange and the underwriter.

That is, since the underwriting can be proposed as a for-profit business in itself, the exchange could have an underwriting department attached as an additional profit-centre if it chose. Or, possibly more commonly, the exchange and the underwriter would be long term associates, a symbiotic relationship, profiting together in the business of helping Corps to "go public".

It also interestingly creates a moat or barrier in that an ordinary commercial loan would be a cheaper way of raising capital; I admit I am still puzzling out why a Corp would go public via an underwritten IPO instead of simply borrowing money without involving the public. I suppose though that the lure is the possibility of raising far far more capital than the nominal "IPO market cap". That and, of course, the prospect of in effect having a "currency" of your very own to play with.

-MarkM-