Ownership vs Possession. Blockchain and economy. Blockchain and business.
When talking about blockchain, records and raising funds via initial coin offerings it is important to distinguish between ownership and possession.
For example, when someone invests in a company during a regulated initial public offering on a stock exchange in a country such as the United States, or when someone buys stock in an officially publicly traded company, they own a part of the company. This ownership is represented by a stock. When a person invests in an initial coin offering, the person doesn’t own any shares in a company. The person possesses tokens, but not a part of the company.
This distinction doesn’t only exist with digital materials. It also exists in the offline world, it is just that many people do not pay attention to it. For example, according to the United States Code of Federal Regulations, a United States Passport is the property of the United States government (proof: 22 CFR 51.7, https://www.law.cornell.edu/cfr/text/22/51.7). This means that the country maintains a ledger of the citizens that have the right to travel under the laws of the country. Citizens that do have this right can get a passport, but they do not own their passports even though they possess the passports. A passport, therefore, is like a token that refers back to a ledger and is a way of status verification. Obviously, the paper way of status verification is subject to all kinds of fraud, including fraud with tokens, such as passports and other official documents, and fraud with ledgers.
In the pre-digital world, possession of a token often served as identification of an owner of a right. This is why it is so easy to confuse these two terms. In reality, while possession implies ownership of something, it is not the same as ownership and this difference is becoming more and more obvious in the digital world. For example, a border agent in a modern airport can instantly scan a passport, match the passport with a national database and determine the validity of the passport. If the passport is valid, the holder of the passport does have a right to travel, but the government still owns the passport itself as 22 CFR 51.7 clearly states.
One of the novelties that the Bitcoin network has brought to the world of money was the application of the concept of ledgers to peer-to-peer transactions between people. Bitcoin has shown that money is a ledger, too. It also has shown that distributed blockchains can actually compete with governments and large corporations on every level, from allowing people to transact directly, to creating independent tamper-proof databases of information that governments and corporations can’t modify.
How blockchain could change the global economy
The blockchain technology is putting pressure on all markets and governments because it offers new approaches to a whole myriad of processes, operations, and industries, from taxation to delivery and monitoring of services to voting.
Many of the current systems and controls in societies have evolved to protect the public because there was no transparent and objective way for third parties to observe the inner workings of entities. For example, banking regulations exist because in the past government regulators, depositors and shareholders were not able to see the ledgers and even when they were able to see the ledgers, they needed to make sure that the ledgers have not been tampered with. One obvious and possible application of the blockchain technology would be to allow shareholders and account holders of banks to monitor the financial ledgers of banks, including information about reserves, deposits, and loans. Such monitoring and transparency could significantly improve trust and communication between shareholders, account holders, regulators and bank management.
In a world where such communication exists, it would actually be possible to have discipline and order in the markets. Markets could have public trust and actual public supervision and monitoring of the blockchains could ensure that there is no foul play. In such a world, regulations could be very effective because they could be limited to the rules about the structure and implementation of blockchains. From there, blockchains would be regulated by shareholders and by account holders and sometimes by the public. This being said, such blockchains would not necessarily have to be public. Some blockchains would be private, but the same regulation and trust principles would apply.
How blockchain could change big business
The implications of the growing popularity of blockchain technology for big businesses are as profound as they are profound for the governments all around the world. Many businesses spend a significant amount of money by developing and maintaining business hierarchies. This includes creation and management of contracts between a business and its employees, its partners and vendors. With blockchain, it is possible to create smart contracts that would regulate the relationships on auto-pilot, without a need for a third party to provide monitoring and enforcement.
The possibility to create initial coin offerings is now open to any person in any country in the world. Previously, to get access to capital, entrepreneurs had to be physically located in a small number of geographic locations such as Silicon Valley, New York City, Hong Kong, London, and Singapore, because that’s where the capital was. Today it is possible for an entrepreneur to run an initial coin offering and to fund an idea without having to get to investors in the Silicon Valley or any other startup hub. The ability of entrepreneurs to connect with customers directly will significantly limit the role of third parties in the economy.