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From Crypto Equity to Crypto Commons:
Shared Ownership on the Blockchain
Raffaele Mauro
Intesa Sanpaolo
Corporate & Invest...
Background
• This is a preliminary work -> looking for inputs
& brainstorming
• On-going research topics: Crypto-equity,
c...
What is Cryptoequity
• Cryptoequity:
– Secure and tradable tokens via distributed
networks
• Current form:
– Blockchain-ba...
Cryptoequity typologies
1. Shares in a project that serve as a function similar to
stock, allowing participation in the de...
Building blocks 1: The cryptoledger
Distributed public ledger
A network of communicating nodes sharing a public
transactio...
Building blocks 2: The Blockchain
• Aimed at proving
transactions
• Contains all
transaction history
• Blocks record
recen...
Building blocks 3: Smart Contracts
• Algorithmically based contract settlement
• Self-executing & Self enforcing
• Indepen...
Building Block 4:
Decentralized Organizations,
Corporations & Applications
• Redistribute digital assets & privileges – co...
Example of a technical frame
• Cryptoequity = Coin + Smart contract + Enterprise
• How:
1. Registering a tailor-made crypt...
Funding platforms
(examples)
10
-
Swarm.fund
• Crwdfunding platform with crypto-based equity shares
and collective due dil...
Protocol & Infrastructure platforms
(examples)
11
-
Mastercoin
• Blockchain based communication protocol for financial
tra...
Cryptoequity as a component of the
new wave of “2.0” blockchain projects
12
Cryptoequity benefits 1:
Effects of the blockchain on the Bitcoin
• Decentralized, peer to peer trustless system
• Full tr...
Cryptoequity benefits 2:
Lower transaction costs
• In principle: free from bureaucratic and
regulatory burdens
– Speed
– C...
Cryptoequity benefits 3: Accountability
and Open Due Diligence
• Public nature of the ledger -> Greater
transparency if al...
Cryptoequity benefits 4:
Flexibility
• Dynamic allocation of privileges and duties
(harder with traditional contracts)
• T...
Potential applications
• Crowdfunding
• Venture Capital & Angel Investing
• IPOs
• Digital asset exchanges
• Other seconda...
Criticism
• Cryptoequity not related to “real”, legally
approved, corporate equity stakes
• Diverting resources from the i...
Regulatory issues
• “Contract” Vs “security” ambiguity
• Disconnection from official corporate registration
systems
• Tran...
What are cryptocommons
• Crypto-commons are the application of
DAPPs, DAOs and CryptoEquity schemes to
shared resources
• ...
Typical limitations of commons-based
systems
• Free rider problem
• The “tragedy of the commons”: indiscriminate
resource ...
Why cryptocommons
• Need for robust “non-hierarchical governance”
with intelligence spread on the edges
• Simple P2P netwo...
Cryptocommons typologies
1. Equity-based:
• Collective ownership of crypto-assets
2. Contract based:
• Set of smart contra...
Future research
• Cryptoequity regulation & law
• Cryptocommons software & applications
• Decentralized Autonomous Organiz...
Thank you !
rmauro@post.harvard.edu
pdefilippi@cyber.law.harvard.edu
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From Cryptoequity to Cryptocommons

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"From Crypto Equity to Crypto Commons"
Conference Presentation at the P2P Financial Systems Workshop
Bundesbank, Frankfurt - January 2015
https://www.ecurex.com/p2pfisy/

Published in: Economy & Finance
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From Cryptoequity to Cryptocommons

  1. 1. From Crypto Equity to Crypto Commons: Shared Ownership on the Blockchain Raffaele Mauro Intesa Sanpaolo Corporate & Investment Banking Division Primavera De Filippi Harvard University Berkman Centre for Internet & Society Deutsche Bundesbank – January 2015 1
  2. 2. Background • This is a preliminary work -> looking for inputs & brainstorming • On-going research topics: Crypto-equity, crypto-crowdfunding and crypto commons • Early research performed at the HKS, HLS and the Berkman Center for Internet & Society 2
  3. 3. What is Cryptoequity • Cryptoequity: – Secure and tradable tokens via distributed networks • Current form: – Blockchain-based ownership shares -> beyond currency applications • Different potential technical implementations • New regulatory challenge 3
  4. 4. Cryptoequity typologies 1. Shares in a project that serve as a function similar to stock, allowing participation in the decision making and participation in financial upside (i.e. BitShares) 2. Tokens which represent ownership in something other than a company, for example intellectual property (i.e. CommonAccord) 3. Product tokens which are redeemable for some product, perhaps one consumable in the context of a decentralized technology (i.e. Ethereum) 4. Access tokens which provide access to a particular set of benefits within a network, similar to a membership (i.e. Swarm) 4
  5. 5. Building blocks 1: The cryptoledger Distributed public ledger A network of communicating nodes sharing a public transaction database 5
  6. 6. Building blocks 2: The Blockchain • Aimed at proving transactions • Contains all transaction history • Blocks record recent transactions + connected linearly • Longest chain enables verification / trust • Robust & resilient 6
  7. 7. Building blocks 3: Smart Contracts • Algorithmically based contract settlement • Self-executing & Self enforcing • Independent / Non relying on third parties • Not based on traditional legal systems/institutions • Examples of applications: notary, company formation, insurance, voting, shared ownership 7
  8. 8. Building Block 4: Decentralized Organizations, Corporations & Applications • Redistribute digital assets & privileges – coins, equity, coupons, voting power, revenues - according to a binding set of rules • Open source and autonomous • Based on a public, decentralized blockchain • Data and operations cryptographically stored • Flexible, transparent and resilient nature 8
  9. 9. Example of a technical frame • Cryptoequity = Coin + Smart contract + Enterprise • How: 1. Registering a tailor-made cryptocoin 2. Generate a smart contract on the blockchain which links each coin with a set of rights (for instance, revenue streams from a commercial activity) 3. Set up a corporation (or NGO, project, etc.) 4. Distribute the equity stakes (= the coins) according to a set of pre-determined rules 9
  10. 10. Funding platforms (examples) 10 - Swarm.fund • Crwdfunding platform with crypto-based equity shares and collective due diligence Koinify • Crypto-funding platform for the creation of Smart Corporations Bitshares • Platform for the creation of Decentralized Autonomous Corporations
  11. 11. Protocol & Infrastructure platforms (examples) 11 - Mastercoin • Blockchain based communication protocol for financial transactions Counterparty • Platform for free and open financial tools on the Bitcoin network -> Powering Swarm and Koinify Colored Coins • Smart Property Platform for creating “colored” bitcoins with new attributes (i.e. representing ownership) Ethereum • Platform for executing user generated smart contracts and decentralized applications
  12. 12. Cryptoequity as a component of the new wave of “2.0” blockchain projects 12
  13. 13. Cryptoequity benefits 1: Effects of the blockchain on the Bitcoin • Decentralized, peer to peer trustless system • Full transparency + pseudonomity • Cryptographically secure • Not dependent central banks / governments • Resilience to marketplace failures • Viral growth • … But other limitations: 51% attack vulnerability, high Gini coefficient, rigid monetary policy, extreme volatility, third parties still relevant 13
  14. 14. Cryptoequity benefits 2: Lower transaction costs • In principle: free from bureaucratic and regulatory burdens – Speed – Cost – Data disclosure – Complexity • In fact: at scale, some form of regulation likely to be implemented • Nowadays: Significant regulatory challenge - Trading legal rights with cryptotokens 14
  15. 15. Cryptoequity benefits 3: Accountability and Open Due Diligence • Public nature of the ledger -> Greater transparency if allowed by the system • Crowdsourced due diligence (i.e. Swarm) – Pre funding – Post funding monitoring • Reduced pricing power for traditional gatekeepers (i.e. VCs) 15
  16. 16. Cryptoequity benefits 4: Flexibility • Dynamic allocation of privileges and duties (harder with traditional contracts) • Tailored evaluation, management and monitoring • Faster deals • Expansion of: – Deal types – Potential sets of backers/investors – Fundable project/corporation typologies 16
  17. 17. Potential applications • Crowdfunding • Venture Capital & Angel Investing • IPOs • Digital asset exchanges • Other secondary markets • Collective ownership & Commons • Other 17
  18. 18. Criticism • Cryptoequity not related to “real”, legally approved, corporate equity stakes • Diverting resources from the improvement of the core Bitcoin network • Likely regulatory backlash 18
  19. 19. Regulatory issues • “Contract” Vs “security” ambiguity • Disconnection from official corporate registration systems • Transnational nature and money laundering regulation • Identification / Anonymity • Taxation • Litigation On-going research: Legal workshop on “Crypto-Equity & the Law” at the Berkman Center, Harvard University 19
  20. 20. What are cryptocommons • Crypto-commons are the application of DAPPs, DAOs and CryptoEquity schemes to shared resources • Resource management, monitoring and distribution are set up with algorithmically binding rules • Rules implemented on a publicly auditable open-source software 20
  21. 21. Typical limitations of commons-based systems • Free rider problem • The “tragedy of the commons”: indiscriminate resource exploitation and inefficiency • Potential creation of Enclosures / gates • Sometimes reliance on centralized structures • Trade-offs in terms terms of flexibility, democracy and evolutionary potential 21
  22. 22. Why cryptocommons • Need for robust “non-hierarchical governance” with intelligence spread on the edges • Simple P2P networks are not enough in terms of security and network IQ • Decentralized blockchain technology brings intelligence, trust and coordination to shared resource pools • Reversing the size problem: “big” commons are harder to coordinate than smaller ones => with Distributed Smart Governance bigger size equals a bigger “brain” and an increased network IQ 22
  23. 23. Cryptocommons typologies 1. Equity-based: • Collective ownership of crypto-assets 2. Contract based: • Set of smart contracts with sharing/coordination rights & duties • Single smart contract with collective participation 3. Token-based: • Crypto-coins with embedded collective ownership 4. App-based: • Decentralized apps focused on resource sharing 23
  24. 24. Future research • Cryptoequity regulation & law • Cryptocommons software & applications • Decentralized Autonomous Organizations design and implementation • Creations of standards and protocols for smart contracts • Service design for consumer applications 24
  25. 25. Thank you ! rmauro@post.harvard.edu pdefilippi@cyber.law.harvard.edu

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