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The Value Proposition of Blockchain-Based Equity Fundraising
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Most industry experts agree that the future financial infrastructure will to a large degree be based on blockchain elements. This seems intuitive given that any transfer of value can be made immediately and with less reliance on middlemen than today. This is an advantage for ordinary consumers and corporates, but also an advantage for banks in their own right, to optimize international transfers, etc. Over time it will lead to more efficient systems and lower transactions fees for everyone.<\/p>\n\n\n\n

Industry experts also predict that everything will be tokenized in the future. This means that anything of value will be represented on the blockchain, or rather the ownership rights to anything of value will be represented on the blockchain, be it stocks, bonds, currencies, and assets, such as works of art, real estate, ships, expensive cars, etc. We are seeing thousands of teams world-wide working on this, all in a feverish haste to become first movers in getting some of the pieces in place. Already now the first 20-30 projects have managed to tokenize some type of value and hundreds are expected to follow in 2019.<\/p>\n\n\n\n

New terms have been defined such as “security tokens”, meaning tokens representing a security (stock, bond, etc.) \u2013 also termed “tokenized securities”. As ICOs are becoming less popular, they are now being replaced by STOs (security token offerings) \u2013 meaning a capital raise conducted by offering security tokens for sale as either a private or public offering. These terms are very blockchain-centric. As blockchain becomes a standard part of the financial infrastructure and nothing unusual in itself, we expect these terms to be replaced with others such as “digital securities”, “digital shares”, etc. A blockchain-based fundraise may just be termed a good old-fashioned private or public offering of shares (possibly “digital”).<\/p>\n\n\n\n

This article will focus on blockchain-based capital raises and tokenized shares (digital shares) as this is the focus of our business: GoSecurity DigiShares.<\/p>\n\n\n\n

Why should a company choose to conduct a private or public offering using blockchain technology rather than existing methods? And why should an investor buy token-based shares rather than good old-fashioned shares on a stock exchange?<\/p>\n\n\n\n

Below we will list the main reasons for why companies should raise capital via the blockchain:<\/p>\n\n\n\n