The document discusses emerging applications of blockchain technology such as cryptoequity (secure ownership shares on blockchains beyond currency) and cryptocommons (applying cryptoequity and decentralized apps to shared resources). It outlines the potential benefits of lower costs, transparency, flexibility and accountability of these applications, as well as technical implementations and open challenges around regulation. The research aims to explore further development of protocols, standards, and applications for cryptoequity, decentralized organizations, and cryptocommons.

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
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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
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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
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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)
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5. Building blocks 1: The cryptoledger
Distributed public ledger
A network of communicating nodes sharing a public
transaction database
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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
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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
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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
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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
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10. Funding platforms
(examples)
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-
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. Protocol & Infrastructure platforms
(examples)
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-
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. Cryptoequity as a component of the
new wave of “2.0” blockchain projects
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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
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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
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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)
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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
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17. Potential applications
• Crowdfunding
• Venture Capital & Angel Investing
• IPOs
• Digital asset exchanges
• Other secondary markets
• Collective ownership & Commons
• Other
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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
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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
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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
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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
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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
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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
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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
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25. Thank you !
rmauro@post.harvard.edu
pdefilippi@cyber.law.harvard.edu