With stockmarket crashes, Black Mondays and popped bubbles in the headlines recently, this news passed by pretty much unnoticed: last week Digital Asset Holdings successfully issued stock in a private company on a totally different sort of exchange.
Why is that even news, you ask? Because it’s the start of something potentially huge, that could increase investment overall, help the circulation of money, improve funding efficiency and give liquidity to previously illiquid markets.
Some background: Digital Asset Holdings (DAH) is a blockchain startup that aims to use the technology behind Bitcoin to improve trading settlement. Focussing mainly on digital assets, DAH has developed an efficient and secure exchange system for digitized shares, cryptocurrencies and more, and plans to offer the services of this platform to financial institutions. Technically it’s not Bitcoin, as instead of one decentralized, public ledger with a token of value (currency) attached, DAH offers many, centralized private ledgers with no currency attached. But the transmission method is based on the same principles. By encoding securities’ information onto something similar to a blockchain, the company can improve transparency of ownership, and speed of transaction, both of which will make regulators, investors and traders happy. And if regulators, investors and traders are happy, then financial institutions will be happy.
Last week DAH created shares in Pivit, an online betting platform that uses the power of crowds to predict outcomes of elections, games, or any other public event, and sold them to private investors. This is the first time that the blockchain principle has been used to issue and distribute shares in a company. Not a lot of details are available, as in how exactly it works, or even exact figures, but we will find out more over the coming weeks. What I find most exciting is the potential to make investments in private companies more liquid. With the “decentralized ledger technology”, ownership should be much more easily transmittable, without so many contracts, verification procedures and time-consuming steps.
A limitation is that this is still not open to “ordinary people”, as the stock market is. The investors in this latest crypto-round are all qualified investors. That is fair, as the risk in investing in private companies is even higher than investing in the stock market – less information, less liquidity. But it is a step towards improving the efficiency of the financing of private companies, and to potentially broadening the field of startup funding. Will this lead to a more creative business ecosystem? Let’s hope so.
fintechblue 