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Just so you know, your entire description of how ownership of stocks is tracked is completely incorrect. I would think one has to first properly understand the

Just so you know, your entire description of how ownership of stocks is tracked is completely incorrect. I would think one has to first properly understand the existing financial system before proposing an overhaul that is supposedly an improvement.

derefr 8y ago
To be clear, first, I should mention that the "security tokens" that everyone cares about, are meant to be a ledger for tracking the cap-table equity issuances and modifications for private companies; they aren't the equivalent of common-class stock of publicly-held companies. The key advantage of them over the current model is that they make it much easier for an accredited investor (probably a partner at a PE or VC firm) to invest in a private company. But, let's ignore that distinction and talk about "security tokens" generally, because they theoretically can be used as an equivalent of public-issue stock certificates (even if nobody really cares or is excited about using them this way, right now.) I compared security tokens to "equities", and that word has a set meaning in finance: the equity class of investments—i.e. shares of companies. But really, there is no precise concept that is a 1:1 mapping for the thing that a security token translates to, which is probably why you're upset about my description of "how equities work." You can loosely compare a security token ledger-entry account balance to a physical stock certificate held by a person. But when you want to be precise, you have to get into the fact that security tokens are multi-jurisdictional—since they represent the cap table of a company or SPV directly, and because regulators of security tokens require full KYC to apply, both domestic and foreign investors must appear directly on the table, without proxy representation. Which is to say, if you want to sell your security token in the foreign market (i.e. on a securities exchange that operates under foreign regulation), then you must list the very same security token, rather than creating a jurisdictional proxy token, as one would if they wanted to list e.g. a public American company on the Canadian TSX. From this perspective, the concept of "how is equity ownership currently tracked" looks a lot less like a centralized regulatory scheme per equity, and a lot more like a distributed system where {exchange, regulator} pairs reach eventual consensus over ownership. (And this distributed paradigm has real consequences, both today and historically, despite law using the simpler single-regulatory-regime-per-equity model. For example, multinational corporations have shareholder meetings where they vote on things. How are these votes counted? Well, mostly, you have to let the state of the trades keep on marching on a bit after the vote, and then look at the historical ownership according to each exchange at the moment of the vote, and use that to weight each vote. The "preliminary" results of a shareholder vote can—and sometimes have been!—"rolled back" because the eventual consensus of the exchanges as to the ownership-at-point-of-vote was different than what the company thought it was when running the vote.)

derefr 8y ago

To be clear, first, I should mention that the "security tokens" that everyone cares about, are meant to be a ledger for tracking the cap-table equity issuances and modifications for private companies; they aren't the equivalent of common-class stock of publicly-held companies. The key advantage of them over the current model is that they make it much easier for an accredited investor (probably a partner at a PE or VC firm) to invest in a private company. But, let's ignore that distinction and talk about "security tokens" generally, because they theoretically can be used as an equivalent of public-issue stock certificates (even if nobody really cares or is excited about using them this way, right now.) I compared security tokens to "equities", and that word has a set meaning in finance: the equity class of investments—i.e. shares of companies. But really, there is no precise concept that is a 1:1 mapping for the thing that a security token translates to, which is probably why you're upset about my description of "how equities work." You can loosely compare a security token ledger-entry account balance to a physical stock certificate held by a person. But when you want to be precise, you have to get into the fact that security tokens are multi-jurisdictional—since they represent the cap table of a company or SPV directly, and because regulators of security tokens require full KYC to apply, both domestic and foreign investors must appear directly on the table, without proxy representation. Which is to say, if you want to sell your security token in the foreign market (i.e. on a securities exchange that operates under foreign regulation), then you must list the very same security token, rather than creating a jurisdictional proxy token, as one would if they wanted to list e.g. a public American company on the Canadian TSX. From this perspective, the concept of "how is equity ownership currently tracked" looks a lot less like a centralized regulatory scheme per equity, and a lot more like a distributed system where {exchange, regulator} pairs reach eventual consensus over ownership. (And this distributed paradigm has real consequences, both today and historically, despite law using the simpler single-regulatory-regime-per-equity model. For example, multinational corporations have shareholder meetings where they vote on things. How are these votes counted? Well, mostly, you have to let the state of the trades keep on marching on a bit after the vote, and then look at the historical ownership according to each exchange at the moment of the vote, and use that to weight each vote. The "preliminary" results of a shareholder vote can—and sometimes have been!—"rolled back" because the eventual consensus of the exchanges as to the ownership-at-point-of-vote was different than what the company thought it was when running the vote.)