Will investments on the blockchain democratise capitalism?

By Sascha Ragtschaa | 25 January 2018

After the financial crash and events such as the Brexit vote, it’s no surprise that new generations are losing their faith in the promise of capitalism. Sascha Ragtschaa, CEO and Co-founder at Chainium, argues that investing on the blockchain could be the answer.

In the past ten years the global status quo has been turned on its head, and nowhere more so than in politics. It seems only yesterday that the political landscape was dominated by figures such as Bush and Blair, but now formally fringe figures such as Farage and Trump have entered the mainstream. This, combined with huge events like Brexit, shows that much has changed in the last decade.

This raises the question: "How has this happened so quickly?"

A sceptial new generation

As some millennials are reaching middle-age, it’s now the turn of the centennials to join the electorate, and they have a very different set of priorities.

Given the fact that this group has been raised in an era of austerity following the financial crisis, their attitudes seem to be significantly different. Evidence so far paints a picture of a sober and serious generation that wants to change the world.

As they begin to vote, we’re seeing the rise of politicians that reject the economic status quo; that argue that capitalism has failed to live up to its promise, with a small class of ever fatter cats creaming off the top of a system that locks most people out.

However, even though this new generation is anti-capitalism in its current form, they are far from anti-money. Young people today want access to investment – but on their own terms. They want control not only over rates and returns but over precisely who and what they invest in.

The problem is that the current equity market doesn’t support such ambitions.

Time for an update?

In 1800 the London and New York stock exchanges were created. While it made sense to have a country-by-country model back then, in today’s global equity market with global businesses and investors, it is becoming outdated.

Since the financial crash, economies around the world need businessses to support growth more than ever. But current financing models don’t do enough to support either ambitious firms or investors.

On the one hand, global businesses who want to raise capital often find their options restricted to getting a loan, selling equity to venture capitalists, asking friends and family, crowd-funding or lanching an IPO.

These complicated options waste time and money and are often limited to just one country. Firms are required to jump through pointless hoops and to pay pointless middle-men. And even with all this they can still miss that one crucial investor who shares their vision.

For investors, it’s not much better. Their opportunities to buy shares are limited to public companies on the stock exchanges or crowd-funding platforms – they’re charged high fees and they aren’t easily able to invest in private businesses or businesses in other countries.

This can mean investors missing out on the best opportunities or even opting not to invest at all.

Of course centennials want something better. Imagine a system in which investors and businesses of any size could make deals that suit them, anywhere in the world. Imagine they could get together directly, without the need for a middleman. Imagine that the process was quick, easy and free.

A innovative digital share certificate

This is all possible and attainable. With a digital share certificate, built on the blockchain, business owners and investors can connect directly to buy and sell equities – all without the middle layers, administration and reconciliation steps required in today’s global equity market solutions.

And by holding all information on-chain, through a model of private and public data – a hybrid blockchain, transparent enough to ensure democracy and visibility and private enough to protect individuals and businesses – there would be no need for regulatory approval.  

Capitalism is about to be democratised for the first time ever. Put in the hands of the people, to do with it what they want. To allow centennial’s to invest in and grow businesses, without middle-men slowing things down while getting rich on the inefficiencies.

This is going to happen, because it has to. It’s how we equip a new generation with the tools to build a better world.  

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