Ethereum as universal stock – from wall street to blockchain

I am mining on an EVGA RTX 3070 FTW obtained at MSRP via their step-up program. To date, I’ve averaged about 50 MH/sec on nanopool with essentially no overclocking of any kind.

My intention is to just accumulate ETH as a learning process. I am toying with launching a couple of coins myself to see how the process works and to better understand the ecosystem. I’ve gotten a good idea of how Uniswap works but am still struggling with Pancake.

The analogy to the stock market is the default when most people talk about crypto, and especially in the analyses of the price behavior. Some of this stuff comes from the forex world, like fibonacci retracements. There’s also a cultural influence and cross-pollination from the Reddit crowd at /r/wallstreetbets – where the rallying cry of HODL reigns. There’s an entirely new culture springing up around crypto and it has inherited toolchains from the stock market disruptor scene.

I find myself considering how far the analogy could go. Blockchain is already a public record of transactions – an early proposed use case was as a replacement for the county recorder’s office, as a way to track real estate ownership. Ethereum took that a step further with Decentralized Finance (DeFi) where “smart contracts” are executed directly on the blockchain. In essence, Ethereum added programming to the blockchain concept, creating a computational infrastructure. In all of these evolutionary steps, the stock market analogy reigns supreme, as a benchmark for competition against and innovation beyond. What if the entire idea of stocks itself could be disrupted by a smart blockchain? What if Wall Street could be entirely replaced by the Crypto Grid?

What if the entire idea of stocks itself could be disrupted by a smart blockchain? What if Wall Street could be entirely replaced by the Crypto Grid?

Consider the way a private startup works. The founder solciits money from a bunch of inventors. Those investors each receive a proportional ownership share (equity) of the company, to the amount of money they provide relative to the total investment received by the founder. The founder eventually goes public or sells the company, and in either case each investor receives a payout that is proprtional to their equity stake.

The analogy to Ethereum 2.0 staking is immediately apparent. If you hold a lot of ETH, and you stake some of it, you will receive “interest” payments as income based on that stake.

If the founder instead put out a callf or investors to donate crypto instead of fiat money, then the entire process would work identically. The only difference would be that the donated crypto could be sold to fund the startup (an extra step). However the equity stake of the investors is permanently recorded in the blockchain.

Suppose further that the founder issued their own Ethereum token at a 1:1 ratio to the donated ETH. That token could be capped so that each token represents an actual proportional share, and ownership of the company would then follow those tokens. It would be completely public.

If the founder solicited 100 ETH as investment, and issued 100 tokens to his investors, then those investors could then resell the tokens or fractions thereof as “stock”. The only thing that is unclear is how, legally, those tokens translated legally to ownership. The gap here is between the legal world where business is actually conducted and the crypto world where these constructs reside. Ultimately you need a legal entity to function as a DBA and to open a bank account, take on payroll, pay vendors, etc. However, if the nature of the business is entirely digital – for example, the gig economy on UpWork – then all of these transactions could be purely crypto. The dream of moving away from fiat is possible, and creates a way for people to pay for services and conduct transactions without any footprint in realspace. At least, until the people involved cash out.

What do you think?