Tag: Smart Contracts

Blockchain Use Case – Stocks

After the blockchain hype has subsided, the question arises as to which use cases for blockchain are conceivable for our society. Below we present a possible use case.

Contrary to popular belief, blockchain is not just a decentralized means of payment. The blockchain is more of a decentralized management tool. As a decentralized network, the blockchain is also able to manage assets without a central middleman. These assets are divided into many small units. These units are called tokens. These assets are managed with the help of smart contracts. A smart contract offers mechanisms that monitor previously defined events and trigger certain events when they are fulfilled. These events can be payments or even a change of ownership of a token.

Current State

Shares are currently traded on exchanges. Trading in stocks is already highly automated and is mapped almost exclusively via computer systems. If a company wants to go public, it has to meet many requirements. This usually means that only larger companies dare to go public and smaller companies (such as startups) avoid the stock exchange. Startups usually rely on VCs (venture capital) to manage their financing.

Stocks on Blockchain

With shares on the blockchain, a decentralized P2P network, startups can also offer their shares publicly without any problems and thus collect money for shares. Why does something work? The administrative effort that a company has on the stock exchange can be encoded in smart contracts, so that apart from computing power, there is no further expensive manual administrative effort. This clears the way for the democratization of the stock market. Individual citizens are thus able to participate in financing rounds of startups – individually or, which makes more sense in view of the risk – in a syndicate or as a participation in a fund. This fund then invests, for example, in young companies from certain areas.

 

Book Recommendation

In her book Token Economy, Shermin Voshmgir describes in great detail what the blockchain actually is, how tokens will be designed in the future and what use cases exist for these tokens. It highlights both the development of tokens on the blockchain to date and the future economy that can arise around these tokens.