2019 — It’s time to Walk that Blockchain Talk
In the awakening of 2019, after some ups and downs in the crypto market (okay, mostly downs), it’s time to take a good look at the Blockchain community and explore its real-world applications.
We’d like to take a step further in the game, and start the conversation about use cases of a Smart Company (SC).
A quick pause — what is a Smart Company?
Simply put, a Smart Company is a hybrid of real-world International Business Company (IBC) and Decentralized Autonomous Organization (DAO). Whereas a DAO is not legally recognized, a Smart Company is. Needless to say, this is an important distinction.
As legally compliant entities, Smart Companies can provide significant advantages in the ownership structures of a company. Having all your shares as tokens offers a method to transfer ownership and liabilities over real-world assets with actual value, enabling not only tremendous gains in speed, technical resilience and costs, but a foundation to a radically different business models.
How? You ask. Fair enough, let’s dive into a few real-world examples.
Case 1. Illiquid Assets
One of the most prominent use cases for Smart Companies is the ability to tokenize assets across industries. As previously illiquid assets can now be legally converted into tokens, fractionated, stored and traded on the Blockchain, the sky’s the limit for the possibilities this kind of liquidity unlocks for business owners.
Say, your name is Bob and you own a hotel on in an urban city. You used to dominate the market area, but your sales have been declining heavily due to recent trends in hospitality and rapid growth of competitors like Airbnb. You have responsibilities in life and are in an urgent need of cash. But as a small business owner, your options are limited.
Selling your hotel during its decline means losing a significant amount of desired valuation. Developing new revenue models is slow and costly. And maintaining status quo is not really a option for you.
What can you do, Bob?
While previously a restraining scenario, registering your business as a Smart Company means your hotel is now physical asset that can be tokenized in a legally recognized way. In other words, your illiquid assets can be converted to smart contracts on the chain. Instead of falling victim for the typical barriers in the real estate sector, such as inaccessibility, high transaction costs and poor liquidity, you now have the option to convert every single room of your hotel into digital shares that can be invested in individually.
Instead of selling access to rooms the way traditional hotels do, you can now create hybrid models of owning and renting your rooms to accredited investors or home-buyers, and still reserve your top floor to rent to your best travel clients. All of this in real-time, secure, transparent and cost-effective ways. This allows you to have more agility in liquidity. And most importantly, this unlocks possibilities to build entirely new business models around your traditional hotel. And it’s not just real estate. This applies to all illiquid assets from cruise ships to jewelry and arts to land.
To give you some figures to understand the magnitude of this shift in potential, it has been estimated that the total value of illiquid assets, including real estate, gold etc., is no less than $11 Trillion. That’s roughly the nominal GDP of China in 2018, the world’s second largest economy. So how’s that pool for tapping into?
Case 2. Chains
This may seem like a low hanging fruit but stay with me, it’s a great fruit. Blockchain is ultimately a technology for shared databases, multiple writers and transactions with a shared absence of trust. Any industry that would benefit from these characteristics?
Global supply chains — look no further. Covering everything from the chicken salad you ordered yesterday to the worldwide distribution network that moves our global goods and services around, supply chains are golden ripe for disruption.
Not only is this industry inefficient and poorly trackable, most business owners simply have no transparency over their supplier sources. In our market economy today, a business owner is incentivized to press down production prices as low as possible, while no transparency on the quality of their material sources. Consumers only see what brands want them to see, leading to an easily exploitative system that benefits no party in the long run.
In the era of Blockchain, any model linked with chains can be changed to public, transparent and error-proof set of transactions. When you operate through Smart Companies, you can streamline your workflows for all stakeholders part of the supply chain. This stretches from your original sources to the end users. Furthermore, we wouldn’t need due diligence the way we understand it today.
We could also define our operational costs as well as product value in new ways. Restaurants could allow their customers choose their favorite sources of origins while patients’ health information could be recorded on individual encrypted chains allowing conditional access for healthcare providers.
As an example, today we mainly use terms like INCOTERMS® to manage liabilities and risk on our supply chains. Human errors, different levels of insurance coverage and misinterpretations happen everyday. Through a Smart Company, you can now tokenize each cargo individually. This provides all stakeholders transparency across the chain with real-time data. The point of contact would happen once your shipment arrives to its destination, not only through agreed terms but through actual shares transfers of the assets in your containers. Depending on your agreements, you can collect your payments in seconds, and voilà — you are now part of a smart chain.
Case 3. Ecosystems
Here we go. Now, this is where the potential of Smart Companies starts getting interesting for our existing ecosystems and innovation cycles. Traditionally, to start a new company, conventional wisdom would frame you to incorporate with financial structures and stock options in mind.
In the exponential growth curve of technological advancement however, tomorrow’s successful businesses will have to respond to this speed — not with five-year plans, nor one-year plans, but with perpetual agility of constant adjustment and perpetual ability to innovate as we go.
This trend alone calls for new models and new ways of defining our businesses.
Let’s take a little journey down your imagination. Remember that idea that’s been nagging in the back of your head for a while now? Yes, we get it. Having a great idea is one thing, but incorporating a company and making it work in the real world is another. But what if you had alternative ways of building your idea?
We hate to be cliché but you guessed it — with Smart Companies you can. And here’s how it works. Within 24 hours, we will be able to help you set up your business idea as a legally recognized entity. You’re alone with your idea? No worries, one shareholder is enough and that is you. Your team can be geographically as diverse as you’d like. Teams working within Blockchain today are already some of the most disperse arrangements we’ve seen, essentially changing how things are run.
Whatever your business is, you can tokenize all your shares and therefore slice them into as many different units, projects or models as you’d like. Decision-making and voting in a Smart Company can be conducted just as flexibly as your imagination. Need funding? Great — why not include your investors in the chain? As all your hard work will be transparent down the process-level, you can say adios to the lengthy due diligence processes. Picture all your agreements as smart contracts, now you can transfer ownership to your new investors in real-time and error-proof ways, costing you just about as much as you paid for that cappuccino this morning.
If you take one thing from this with you today, take this. We now live in a world of asset-light, real-time, secure and decentralized model where your innovation cycle can be boundless. With a seriously diverse and geographically unlimited pool of talent at your fingertips, and with the ability to slice up your assets down into individual projects, this will fundamentally change the way we understand HR, finances, compliance, payments and sales of our businesses.
Therefore, the potential of Smart Companies is not only disruptive, it will rewrite the norms and rules we live by every day.
We are more than happy to get you started on your journey, helping you to set up a new venture doing what you truly love.