This is just equity crowdfunding with the word blockchain involved, and as a result probably more dishonest or deluded companies and a greater likelihood the securities aren't even legally valid never mind attached to genuine prospects of profit, never mind attached to prospects of profit adequate to make up for the asset's lack of liquidity.
(Reading more details in their terrible white paper, the only difference between this and a completely standard security is that in order to pretend it's a "loan" they've offered to "repay the principal" at "maturity" i.e. buy back the security in 10 years' time at the price you paid for it. Which would theoretically be a good idea for an stock in a low growth business, and also a great way of creating a relatively stable Ponzi scheme...)
Seriously though, just look at this utter nonsense: https://blockhive.ee/ilp
One can structure preferred stock to walk like a bond and quack like a stock (as well as the other way). This structure is an incredibly stupid solution to a regulatory problem.
But now maybe it's order of magnitude or two cheaper and so you can do a whole bunch of them where you used to be able to only do a few. Does that change anything? I really don't know, maybe, maybe not. Maybe it makes it practical to break a company up into many many smaller pieces and allow investors to provide more specific investments, or many smaller companies in general, due to greatly reduced legal/operational fees? And maybe that let's you do something cool? Imagine if facebook (or more likely whatever is post facebook) had hundreds of smaller investment vehicles that mapped to teams and projects, and we could all choose not to invest in the privacy invading ones? Or at least had to more explicitly do it?
Sure, it's not philosophically completely novel: structural changes like this fractalize throughout technology and ultimately boil down to "that's just this, but one level of abstraction up," which makes it easy to understand, but doesn't necessarily make it useless. Sure, there's nothing new under the sun, the internet is, after all, just a really fast xerox machine, and we already have libraries.
I don't look at crypto currency and think, "Oh this is obviously the future, fiat currency and banks are bullshit" and I don't even fully buy the argument I made above myself. But when I look at all the criticism to crypto, it looks a helluva a lot like 1993 and "The internet is a fad" all over again. "It's slow, it's shitty, it wont scale, it doesn't solve any real problems for real people, it's better having publishers/banks intermediate this stuff anyway" etc. etc.
We'll see.
Keeping track of investors and paying them dividends isn’t even close to the most expensive part of fundraising. This is akin to starting a car company differentiated solely by the material of the muffler.
Even for large companies: say we want to do my crazy invest at the team level idea: I don't really agree it would be simple to operationalize all of that money flow, and I do actually think having a blockchain could help if that is your goal, which is a big if.
I'm not here to hard sell anyone on crypto, but I also am not comfortable with the wholesale dismissal of it either, so I'm definitely hoping a lot of people disagree with me and we can tease some of this stuff out.
Edit: Since we have the downvoters here, does anybody want to defend accredited investor laws? Here is some stimulus material - https://qz.com/431198/this-is-not-a-typo-only-3-of-americans...
These are unrelated. You can hold stocks, bonds and commodities in your own name. It’s inconvenient and carries no advantage over owning them in “street name”. But that isn’t an accredited/un-accredited difference.
I was just stating that the former is a form of discrimination to restrict opportunity and increase wealth disparity. The latter is just a preference. Both were being discussed in the parent comment.
Kickstarter brings some value (e.g. neat landing page, network effects etc.), but 8% is a lot to leave on the table.
It sounds like the principal and interest paid back is a fixed and predetermined value, rather than proportional to the company's revenue, which would make it a loan.
The innovation here I believe is conditioning repayment obligations on the company having sufficient revenue.
So in a sense it's like a loan contract with a clause allowing you to get a repayment holiday when your business is not earning enough.
This, like all loans, has much less upside potential than equity.
Since the trading of the ILP stock happens on-chain, a chain traded virtual "crypto" currency comes in very handy.
> That sounds more like equity to me than a loan.
I agree wholly.
IANAL, but I also wouldn't equate ILP to non-voting shares. There's still a significant difference (especially in cases where there's bankruptcy, or company liquidation, or other n cases and exceptions.
> Two Estonia-based companies, Blockhive and Agrello, have formed a partnership to provide the first ILP of its kind, 'Blockhive'. Blockhive's model removes the issuance of tokens (in the anticipation of future appreciation of those tokens) and replaces it with a contractual entitlement to 20% of their annual operating profits.
That sounds more like equity to me than a loan.
Whatever the structure, it isn't new. Putting it in a fancy blockchain is new, but the agreement to pursue some endeavour and share in the revenues, either as an obligation or as a percentage of profits, is ages old.
And just as old is the fact that you have to actually do what you said with the money, or else it's fraud.