Topic: stock coins? p2p virtual stock & debt equity / cryptostocks - page 2. (Read 9345 times)

Legality aside, I think an important first step would be not to get wrapped up in the legality of all this and instead get the underlying concept in place - than consider the legality of trading "Shares" as block-chain entries later if an exchange actually wants to implement it or we'd like to build our own...

That is a good point you bring up. Most likely the answer depends on jurisdiction.

Ultimately it is every individuals responsibility to abide by the tax laws of their jurisdiction, and each company's directors' to abide by the laws of the jurisdictions under which that company is formed.

And I suppose due to bitcoins nature we are presuming that this p2p network is completely anonymous.  If what is needed to make this kosher is peer recognition at the network level for the issuing entity I am sure no CEO will care as long as he can raise $1m for LatestGreatestIdeaCo.

Just because something is p2p does not mean the identities of participants are anonymous.

But at this point all the companies on btc-tc are likely breaking the law somewhere and they are not even using a p2p network making stock transfer a pain for shareholders.  So we can only improve the legal status of some companies and/or their shareholders by working on this and creating an infrastructure they can use.

I do think we need a lawyer to help out, otherwise we are like blind men stabbing in the dark.  Someone who is familiar with the new crowd funding exemptions and pink sheets.

for example, using registered identity and public blockchain tx record maybe just what is required to ensure these rules are enforced

http://www.sec.gov/info/smallbus/qasbsec.htm

Under JOBS Act crowdfunding, companies will be limited to raising $1 million in any 12-month period. Companies cannot crowdfund on their own, but will have to engage an intermediary that is registered with the SEC. These intermediaries will be subject to a number of requirements.

Individual investors will be limited in the amount they can invest by way of crowdfunding in any 12-month period to:

if your annual income or net worth is less than $100,000—the greater of $2,000 or 5 percent of annual income or net worth, or
 
if your annual income or net worth is more than $100,000—10 percent of annual income or net worth up to a maximum of $100,000.
(When calculating your net worth, you should not count the value of your primary residence.)

I am pretty sure you have to know who owns your stocks, and that they are not "bearer instruments" thus people passing them around changes nothing, in essence the certificate they are passing around either says on it that it certifies that some specific person owns so many shares of whatever stock or it implicitly "says" that due to some kind of serial number or stock number specifying which share it is so the company or their share-tracking agent can look up who it is exactly that specific instance of the stock belongs to.

That is part of why it can take three days or so to "clear", the shares being exchanged have to be looked up to check who they belong to, then updated to reflect who they belong to now, and maybe the company the shares are shares of might even have to be notified, though maybe they might not need to know every minute, maybe they just have to submit at year-end or something an up to date list of who their shareholders are and how many shares each holds.

It does not seem likely that a company is going to be able to claim like "oh we are innocent, we trusted money-and-stock laundry unicorporated, a p2p network, to do all that legal paperwork for us, if its not done right you should go see them about it...

See for example http://www.quatloos.com/bearer_shares.htm

-MarkM-

so you bring up 2 issues, one whether p2p is required and two whether color coins are the answer.  let me know if i misunderstood.

#1 why p2p for this

addressing your question regarding the big deal about p2p. perhaps i misunderstood what you wrote but there are regulatory or legal requirements for running an exchange. no company wants distraction from their focus on their mission. thus they outsource stock issue and exchange operations.

if one is running exchange services for stocks one need to fulfill certain legal requirements, this is true in most countries.  however, the large exchanges are not going to do an IPO for JoeSmoe's ASIC Fund.  thus places like btc-tc pop up. and get shut down.

however people have always been able to take a stock certificate and sell it to another person, as far as i am aware that is still legal in most places.

so p2p allows a person to person exchange of stock, while ensuring that there are no forgeries, and the issuing company need not be involved in the exchange operations. and i presume then the regulatory issues that come with running an exchange.

it may be that miners however are somehow legally obligated under SEC regulations and other national securities authorities to do something.  i have no idea on this.


#2 regarding color coins.  

is it absolutely necessary?  or is there another way to handle the problem of bad actors?  

has anyone done a real analysis of the risks of relying on another blockchain where core developers are not necessarily concerned with other, one may call them parasitic or perhaps symbiotic, applications utilizing the network for tangential purposes?

someone needs to evaluate whether the entire bitcoin network of miners would fall under SEC jurisdiction as well as every other securities exchange governmental entity.  so it may be better to have separate networks for this purpose.  again there is the issue of all our eggs in one basket.

some alternatives:

one way is not to use sha256; bitmessage for example use sha512

another poster proposes limiting the initial miners. possibly the issuing company would be responsible for paying these miners, not sure how that works but if it is possible it is another solution.

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i don't think it is about just throwing money at something, that has never been the solution to a problem

i appreciate you taking the time to write all this, i think it is important to understand all of the issues technical and otherwise (bad actors, legal, etc.) that can come up

Crapcoins of the day are not "ready for use" either. They are "ready to hand over your loot to anyone with more hashing power", which is NOT the use you hopefully want?

It'd be a massive amount more work to and sheer hardware and electricity cost to secure even just one blockchain let alone one per IPO, compared to just throwing money at programmers to get coloured coins finished off.

Do you want a pretend toy crappy little mickey-mouse pretend thing or some serious financial application software?

Also, what is the big deal about p2p / distributed? You have to trust the issuer regardless, else the crap is worthless. So might as well trust them to keep their server online, whether on Tor or whatever, and transact directly with them. (e.g. using Open Transactions, or Cyclos, or whatever the heck. Open Transactions has markets, altcoins, off the rack, don't and nor does Cyclos really,  just for sale / want to buy ads type of thing.)

-MarkM-

i posted some questions to killerstorm who i beleive is the main perosn working on that concept, and he has some responses here

https://bitcointalksearch.org/topic/m.3214545

so overall it seems that it sort of works (but only on testnet?), but i do not understand yet how far away it is from actually working on the real blockchain.  

yeah I'd be interested to see what the options are around "coloured coins" and if it fits the needs no need to "reinvent the wheel" - Any recommended reading??

Yes, been talking to a few people how to bring something like this into the platform. Obviously, using the blockchain/decentralized type system with color coins or something along those lines. I'm glad to be part of this!

Yes but is the implementation ready or not?  From what I can tell it is not ready for prime time.  

I am looking at this from a market development perspective and my own research into uses of p2p tech, I could care less whether the car has a honda or chevy engine when only one of the engines is available today.

If colored coins cannot be done today but there is a need to handle p2p transfer of stock and debt equity, then the market need has to take precedence and people can deal with a migration later if color coins materialize as viable and a more efficient means.

Note that I agree that it would be better to use colored coins, due to the pre-existing network, but I just do not see any evidence of it being ready for use.

The problem of how to secure a block chain is why coloured coins are so suitable for this kind of application. The whole blockchain thing is already taken care of for them.

-MarkM-

It was only a matter of time before the centralized stock exchanges would be targeted. I wrote about this a while back and still cannot believe that people did not think to put these on Tor....

And I agree about the controlled environment,  and in the future guys like bitcoinstarter or the ipo company can manage keys for mining service providers who are paid either in stock or btc fee for mining services. Perhaps some perpetual mining fund will find this as an extra source of income.

Note that professionalized mining operators would suffer legal and reputation repercussions if they were found to have launched or aided a double spend attack.

Awesome, I have actually had you in mind as I think this would be very useful for you.

awesome!

Let me know how I can help. If you want to leverage any of my brand name toward this let me know as I'm currently seeking a way to integrate IPO's/Stock into the platform .  I'll be watching this thread.

Think we really need to get moving on this (not sure if you've seen but: http://thegenesisblock.com/btc-trading-corp-shutters-operations-cites-regulatory-environment/)

Obviously the need for a blockchain supported securities environment is necessary as the majority of the issues on these site crashed following this announcement, revealing one of the fundamental flaws we have previously identified.

I am also aware of "bitshares" and "colorcoins" though I have spoken to the creator of "Bitshares" I believe his projects differs in scope than this.

I will read more into your questions later -

Just a thought I had over the weekend - I think using a BTC or LTC blockchain clone would be fine with modifications to support initial "issuance" as a "genesis block" or "pre-mining" determination. The issue being that having multiple sets of securities running their own block-chains exposes them to all sorts of attacks due to the disparate nature of their mining (thus lower difficulty) - so it might be necessary to consider a sort of "controlled" mining environment where a key is used to "unlock" the mining so to speak for trusted miners whom earn as a payout of shares...

Just some thoughts I had, if any cares to comment. 

Also I will be putting up a google doc soon, turns out it is the easiest solution for collaborative writing (there is a comment feature I found which I was previously unaware of)

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I know there is the concept of colored coins and open transactions and now bitshares, but none of those are really working yet.  Or not as adopted as the qt client we are all used to.

What are your thoughts on issuing coin  based on a clone of btc or ltc, etc that is representative of a company's stock?  This would be the easiest way to test market to do a proof of concept with an imaginary company stock.

Essentially since the coins would be representative of shares they would need to be almost completely premined and the network supported by just network fees.  Do you think that would work economically? How large would the tx fees need to be if so?

How difficult is it to pull off a clone in man hours?

And how to ensure that the blockchain for the stock is secure from attack?

If sha256 is used it would seem that someone pointing  a few asics at a particular stock could easily do a double spend attack right?  Or would users need to up the number of confirmations to ensure that stock transfer confirmations were legit?  How can this be addressed?

Cool, I would love to start developing and spend more time programming on "core functionality" of a POWBC system. Right now, I mostly write trading software / engines.

I have also discussed ideas related to integrating BTC into common messaging systems that exist in real world trading protocols, and I think these area is "related" so this would be a good cross section.

I for one am happy to participate so put me on the list and we'll get it going if there is some interest (:

Thanks for posting this.  It lends more economic credence to why adapting the bitcoin code base to "shares" would hold some new productive value. 

My short term goals are two-fold: to gauge people's interest and to produce a paper via crowd effort to flesh out the concepts, such the ones as you have mentioned as well as the technical aspects. 

Def. think this needs to happen, otherwise, it appears to me that ownership in "shares" of these companies are just database entries, and can't be moved or traded accross multiple exchanges.

I would like to contribute to this project if you get it going.

See my post about creating a centralized list of these virtual exchanges: https://bitcointalksearch.org/topic/m.3039773

Furthermore, this idea also hints at a larger issue that block-chaining can solve: replacing the system of "Clearing", "Settlement" and "Chain of Custody" that is one of the biggest inefficiencies in interparty exchanges today... ever bought a house and signed a mortgage and paid for insurance on the "title" to your "title agent"? Or bought a stock and waited 3 days for it to "settle"? It's imbecilic in the 21st Century - but it gives plenty of useful idiots something to do for a living 

Its refreshing to see this type of new thinking!
Good idea, It could be profitable..

Ill be watching