Topic: Is Bitcoin Better Suited to Replace Stock Markets? - page 2. (Read 1698 times)

I don't really think stock markets will ever be fully replaced.   They are too ingrained into our society.  A lot of the old money is already injected into the stock market, and it is too big of a part of people's wealth for it to be completely replaced.

In the distant future, BTC could very well be a significant part of people's savings/retirement, but we are far off from that now...

As pointed out it is important to separate the concepts of asset ownership and asset trading.  Stock exchanges exist because they provide very low latency trading.  From a technical (but not legal) standpoint colored coins (or other blockchain technologies) are a replacement for shareholder registries.   However today the overwhelming majority of shares in publicly traded companies are not registered to an owner but instead are "in street name".  The broker registers a number of share in street name and then upon proof is allowed to trade an equal number of shares on the exchange.

Exchanges aren't a requirement for recording ownership of companies.  You could remove all exchanges today and brokers could still (crudely) facilitate transfer of ownership between individuals.  That is the portion that blockchain type technologies replace.


I would recommend a good securities lawyer.  There is no technical requirement for conventional exchanges to use underwriters and broker dealers.   There are plenty of legal and regulatory requirements.   Switching to using a blockchain doesn't exempt you from existing laws.  Namely SCOR has certain know your investor requirements and major shareholders (10%+) must be free of regulatory problems in the past.   This could be done with a blockchain but it would require linking public keys to identities and limiting transactions only to authorized participants.

To answer your general question, is a blockchain useful for recording changes in ownership of "smart property"?  Of course.  The harder question is can smart property be done in a manner that doesn't violate existing laws and regulations?  Maybe but not in an open pseudo anonymous manner as bearer shares are no longer legal in most (all?) jurisdictions.  Ironically bearer shares use to be very common and they could be seen as a paper equivalent of modern smart property.  So the blockchain technology of the 2010s has a good compatibility with the security laws of the 1900s. 

The concept of colored coins won't replace the stock exchange because trading on the Bitcoin blockchain is not feasible. It will replace the clearing house because there is no need for a third party to keep track of who owns what. It also has the potential to replace the broker.

With the advent of "colorcoins" it seems like we're on the verge of having a credible replacement to just about every stock exchange on the planet.

The Proof-of-Stake model combined with a completely pre-mined coinbase is looking like a solid model for just about any company that wants to issue a security.

IPO's would no longer need underwriters and really only shareholders would benefit from running any kind of mining related software -- if at all.

It seems to me that the fast block times aren't really that beneficial and if you actually slowed it down to say once an hour you might have something that more accurately represents a shareholder ledger.  Since all exchange activity happens "off block" anyway you can let it run as fast as you want -- however once you declare your ownership stake by committing to the chain you'd have to wait for verification.  Not that different from the current "settlement period" after any stock transaction today.

We've been considering filing for a SCOR (Small Company Offering Registration) in Minnesota and then leveraging a blockchain of our own to track the owners instead of listing on a bulletin board.

Your thoughts?

David V Duccini
Executive Director
doabitofgood.com