Cutting out the middle man

Shareholder activism is widely assumed to improve returns, and some evidence exists for this—but what if you have a highly technical business model and don't expect your investors to understand?

Suppose your business involves mortgage-backed securities, distressed debt, swaps, or other contrivances? Some of these involve fiendishly complicated financial models, and there's a real risk that the shareholders (or token holders) won't understand. What does that look like in this brisk, brutal environment? Could the stakeholders kill the entity prematurely?

Fortunately, the tokens need not be shares. No technical barrier exists that would prevent the tokens from being other securities.

A token could be a revshare (a form of debt that represents a share of the entity's revenue until some multiple of the principal is paid back), a note, a bond, or another interest-yielding instrument. The interest could be paid based on a price in fiat or a fixed rate in Ether or another common, fungible cryptocurrency.

It could even represent a share of revenue or profits from a specific asset, a future derivative providing a return from an underlying crypto portfolio, a hard asset portfolio, rents or royalties. At the time of writing, a firm called Swarmsales is currently preparing to create an asset that would take a percentage of the income from the sales of thousands of units of software sales by a large and growing decentralized, freelance sales staff. The expectation is that paying that staff with this instrument will give sales professionals a new source of income, replacing their base salaries and providing a source of income extending even beyond their term of employment. Swarmsales expects to be able to use this approach to create the largest B2B salesforce in the world.

This is what blockchain makes possible. Raises that would involve securities transfer agents, endless meetings, and very specialized, expensive staff can now be accomplished on the internet with a modest amount of technical and legal work and marketing budgets that would be laughable on Wall Street.