Clearly this is a value-add for new/small companies which don't yet have a reputation as it reduces risk for the investor. It's also a value-add for investors of big companies as it prevents them from being mislead about quarterly profits.
In our specific case, we applied it to a real estate rental business. We use the token as the primary store of value for the profits of the underlying economic activity. We have a holding company but the share was made worthless as part of the company's memorandum of incorporation. This can be achieved with a couple of simple clauses.
The token is a much more transparent and more reliable financial instrument to represent ownership of some economic activity than the share.
Being able to then trade it on decentralized exchanges is another advantage but more of a convenience at this stage.
The next phase for the community will be to build search engines which can crawl blockchains and decentralized exchanges to find tokenized businesses.
Wonderful, so when the proprietor starts embezzling from the real-world operations, I’m sure you have that sorted out. Just sprinkle some blockchain on it.
Your comment seems well meaning, but you do not seem to understand the real issues with due diligence. Source: ran US equity book for large hedge fund
Since each person can verify the profits on-chain independently, it would raise raise flags if the amount if profits did not correspond to the expected amount of profits based on the assets which the business claims to have. All assets are disclosed publicly.
You can verify what you _think_ the profits are. What I’m saying is that you’re verifying something that isn’t relevant.
Do you think there aren’t sophisticated accounting systems, auditors, banking checks, etc to accomplish what you describe? And yet people will always find a way with enough incentive.
A director could potentially do something elaborate like buy a lot of tokens at a low price anonymously, then take a bank loan and use it to pump up the price through fake buybacks then dump for a higher price some years later hoping that they don't get caught by their bank in the meantime for misusing the credit... But then why would they use our blockchain and jeopardize the value of their own large director's stake (from their main wallet) with such scheme? Why not use a random token not affiliated with them and which has lower volume where this scheme would have more effect on price and where the attacker has nothing at stake?
No matter which way you look at it, this is a huge transparency improvement over shares.
https://jonathangrosdubois.medium.com/how-leasehold-achieves...
I did not see anything how profit is verified. Could always use expenses to funnel money out, opex and capex are mixed creatively etc.
Someone could potentially funnel money out from the stream of profits but anyone could independently check expected earnings (looking at the assets in the portfolio) against the on-chain buyback amount. At least, it significantly limits how much money can be funnelled out.
On the other hand, with a regular company, the directors can make up any numbers on the books and funnel out all of the profits and could keep this going for years undetected. That is far worse.
Altogether, it's not 100% trustless but it's orders of magnitude more transparent than a share-based system. As a small business with directors located in different parts of the world (some of which only met over video chat), this model was essential for us to get over the trust hurdle. Now that we can see tokens being bought and burned, it is building trust within the community. Many community members have already sold some tokens back and seen them burned. Some small investors already made a profit over their initial investment and still have half of their tokens left.
That said, it's not going to be ideal until we we multiple real estate companies (run by different people) hooked into the LSH blockchain. The more companies there are, the less trust there is.
How? In order to know the earnings of the company I basically need to audit everything. I need to know all the lease agreements, I need to know all the costs etc.
How do I know that the company has made less money this year because we just got unlucky with low occupancy or expensive repair bills, or if one of the people running the company is funneling money via some subcontractor?
The way I understand it, you help align incentives better and improve financial oversight while your tool of choice is some blockchain structure (others might work, too). And it seems to me that is mainly directed at smaller businesses with limited auditing requirements and in distributed settings.
Now imagine if all share buybacks (which were purchased by the company on the open market in exchange for real money and then permanently taken out of circulation) where recorded on this ledger in such a way that it could not possibly have been faked (can be independently verified using cryptography).
If you see the value in this hypothetical scenario above, then you see the value of our use case.
How did you arrive at the conclusion that it is undeniably a value-add?