P2P Bitcoin Stocks Available at Btcpop
At Btcpop.co you can launch a global initial public offering or IPO for a simple fee ranging from 1%-5% of funds raised depending on size. Take a moment to let that sink in, what was once a tool only for elite successful companies, can be used by pretty much anyone at very low cost. Btcpop is a young growing P2P Bitcoin bank, in a young growing cryptocurrency industry. You’re not yet likely going to raise millions of dollars like the traditional IPO’s we think of, but the fundamentals and functions of shares at Btcpop are the same if not better then typical shares we think of.
“Shares traded on a P2P lending platform nullify the idea that you can invest in a “business” or “product”. In Business there only ever has been, and only will ever be, people”- Anonymous user
What is a share
Google defines a Share as: “one of the equal parts into which a company's capital is divided, entitling the holder to a proportion of the profits”. So for example, 8 year old Tommy’s Lemonade stand could be broken up into shares, with every share representing a specified fraction of Tommy’s lemonade stand. Tommy could have even launched and IPO to get started. Lets just say that Tommy took out his crayon and made 100 notes of paper, of which he sold 20 to Mom and Dad for start up funding to buy his lemonade supplies. Now for every dollar Tommy's lemonade stand brings in each share would essentially be entitled to $.01 of that dollar. Of course every dollar that comes in doesn’t go right to the shareholders. Tommy needs some operating cash for expenses, capital expenditures, and possibly wages to his sister.
I could go on with the analogy including trading shares at exchanges, dividends, liquidation, buy-outs and more, but I think you get the idea. Shares are simply just a way of dividing equity and it really isn’t any more complicated than that. And at the end of the day shares always come back to people. Shares in Apple Inc the highest market cap publicly traded company in the world, are fundamentally no different then Tommy’s. Apple shares are of course magnitudes of scale more complicated and involve many more people than Tommy’s shares, but the shares and their integrity are still 100% dependent on people.
P2P Money, P2P Shares
Bitcoin, an open source, trust-less, decentralized, secure, pseudonymous, and low cost digital currency has enough benefits in itself to change the ways shares are done. Simply paying a dividend to shareholders, becomes as easy as sending and email. And (pending the scaling debate) shares can be broken up into very small efficient units, as micro payments are now possible with Bitcoin.
As with P2P Bitcoin banking, the current fiat method for issuing and managing shares quickly becomes obsolete. With 3rd parties and regulation cut out, users can act as their own direct brokers and buy and sell shares directly. The friction of 3rd parties and regulation vanishes, and both parties benefit. However, with that benefit also comes some of the responsibility and due diligence 3rd parties and regulation used to handle.
Current Process for a business raising capital
The current model for entrepreneurs is in my opinion more "who you know, rather than what you know". That's not so say the process is flawed, it works and it serves the entrepreneurial community pretty well. But, like anything, there is always room for improvement. The general steps to the current process are:
- Bootstrapping: Money is invested by founding members using their own resources or personal/family loans.
- FFF funding: Friends, Family, and Fools. The company has proven itself to a small extent, but it is still a very high risk investment
- Angel investors: The company is getting traction and through networking and reaching out entrepreneurs can get in front of Angel Investors for. These investors need to be accredited to make these investments.
- Venture capital: Similar to Angel investors, but higher up the food chain venture capital investors are also accredited and usually have higher expectations than Angel investors. They also have a lot more money.
- Initial Public Offering: The company is established and big enough to list publicly on an exchange and be available for global investment. Requirements vary by exchange, but your company needs to be worth millions of dollars to list here. You will also need a large amount of resources to list with the SEC and comply with all the regulations to get listed and stay listed on this exchange.
So as you can tell the process towards listing globally traded shares has a lot of friction and cost. Also it must be remembered that throughout the whole process lawyers are needed to make enforceable contracts between shareholders and share issuers. Tax compliance throughout this process is also comes at a very high cost. The tax code contains thousands of rules and regulations regarding raising capital and issuing shares.
Lawyers, Contracts, and Laws for not
I believe the justification for all of this friction and waste is to keep everything legally enforceable and protect the investor. But, I would argue it is more of a tool for legislators and lawyers to make obscene amounts of money, rather than a tool to protect the investor. In the end the friction hurts both the share issuer and the shareholder. The parties they are suppose to protect. Funds spent trying to protect the investor, would be much better re-investing back into the company. In my opinion, you can make as many contracts and rules as you want, but it always comes back to the integrity of people. Laws and contracts just give investors the illusion that they are investing in something safer than the promises and intentions of people running the company.
I’m not saying that all of the laws and contracts protecting shareholders are useless or unnecessary. But, they come at a very high cost and don't provide that much benefit. And while it is less likely to happen with lawyers and regulation, the shares can still go to $0. Take Enron for example, a huge company with thousands of contracts and laws protecting the shareholder. But, in the end, a couple malicious people brought the whole thing tumbling down and the share price eventually hit $0 even with all of their laws and contracts.
Listing Shares at Btcpop: Simple, Safe, Affordable, and Globally Accessible
If you want to be an innovator and bypass this cumbersome process, you can today at Btcpop. All you have to do is sign up, pay the IPO fee, and you're able to list globally tradable shares and easily pay dividends/communicate with shareholders through a secure platform with Bitcoin. It isn't going to be like listing an IPO on the NYSE, but the fundamentals of what you are doing are absolutely the same. But, when you list at Btcpop, your listing on a 100% free market and the friction costs are very low.
P2P money, such as Bitcoin, is a very young developing innovation itself, so naturally P2P shares using P2P money are an even newer innovation. Being so young, there really isn’t any standard on how to do things, and innovators have to work through the kinks of this new technology. Much like innovators had to work through the kinks in Bitcoin back in the early days. There also isn’t going to immediately be a large pool of investors or investor funds to draw from right away, but if your proposal is good enough, fiat investors can easily head over to Btcpop to participate. Btcpop also has 50,000+ users and growing with plenty of Bitcoin if you and your proposal are good enough. Over time I believe the superior solution of P2P shares will grow to compete with (and beat) traditional shares.
Btcpop a P2P platform and natural fit for P2P Shares
Btcpop is the perfect platform to launch something like P2P Shares. Btcpop's primary function is to act as a free market platform for Bitcoin banking. So the necessary tools and systems to raise funds were already in place. Btcpop.co started 3 years ago as a strictly P2P banking company, much like early Btcjam and Bitcoin Lending Club. But, Btcpop’s goal was always to do P2P better and through trial, error, and a dedication to free market principles they succeeded. The whole industry struggled through raising Bitcoin prices and huge default rates, but Btcpop came out of the “learning phase” of P2P lending with a viable platform that worked. Borrowers can get reasonable loans, and, more importantly, investors get their funds back with interest.
Adding P2P Reputation to the mix
In transparent P2P lending online with Bitcoin, reputation quickly becomes one of if not the leading factor in determining the creditworthiness of borrowers. Investors are much more likely to invest in a user that has paid back 10Btc and been around 2 years, compared to a new user that has paid back less than 1Btc regardless of how much less the interest rate is.
Online reputation as a tool works really well in many different scenario’s. Ebay, localbitcoins.com, and even the silk road are great examples of online reputation success. In the free market, there are natural incentives for participants to cooperate and practice commerce fairly, because if they screw someone over, their reputation is ruined and they can no longer participate in the community. This incentive gets even stronger the longer they have been doing business successfully.
Improving online reputation and identity
So while in theory online reputation works really well and self regulates. Ask any early P2P lender, and they will tell you the system is far from perfect so far. Rating systems fail, reputations fail, great borrowers fail, and the whole industry is flooded with scams. The quality of digital identity needed for banking online just doesn’t exist yet, and then there is just the high-risk nature of banking denominated in a volatile currency with 20% price swings that has gone up 500%+ in the last 3 years.
Through innovation and learning the hard way, Btcpop in my opinion has cracked the P2P banking nut and made the whole industry viable. Not only have they greatly improved the online identity issue, but most importantly they have added the tool of online collateral to the mix. With Btcpop, users have cost effective means to gain the reputation necessary to function in the P2P space. Because in the P2P industry you will quickly learn that without reputation, you're not likely to raise more than $50.
P2P reputation the only one that matters
Reputation in a P2P environment is the basis of all your creditworthiness. Just like in a small town where everyone knows everyone, and your reputation is well known. If you go to a bank for a loan in a small town, your banker might not even pull your credit if you have a good enough reputation. This is because personal P2P reputation in that community is a better tool than your credit score. While its a subjective measure, small town reputation is what I would consider the pinnacle of subjective P2P reputation. Unknown to the decision maker thousands of data points help him or her subjectively determine creditworthiness. This is compared to the relatively small number of data points that go into a credit score.
The challenge of getting a small town reputation online isn’t an easy task and cannot really scale past a couple thousand people. That is why we have objective tools like credit scores to determine creditworthiness. However, after you have been at Btcpop for awhile, you will realize that users get funded more on a subjective “small town” based reputation, rather than just their credit score. Btcpop has successfully brought some of that "small town reputation" online.
“The longer you are in the community, the more you get to know people, and the better you can subjectively determine good and bad lenders”- Btcpop user.
Raising capital via shares is much like taking out a loan except with some additional risk. Founders normally limit their liability to the project. So capital raised via shares is more of a loan on a project then a person. But its important to remember, you can never remove people from the equation. If you ask good Angel investors I can almost guarantee that they will put the most weight on the quality and reputation of the founding team. This is why I am excited about the idea of P2P shares. Once users realize their share is only backed by people anyway, why not trade them on a much freer and cheaper platform such as Btcpop.co.
Listing your shares or transferring to Btcpop.co
So if you are past the FFF stage and looking to raise outside capital for your venture I encourage you to take a look at a free market low friction solution like Btcpop to raise capital. 40+ people have launched IPO’s including Btcpop.co the platform itself. Dividends are paid, reports are sent to investors, and shares are traded every day without legal contracts or laws. You can even transfer your current share system into Btcpop. Btcpop provides founders with tools to easily manage investor relations, pay dividends, and communicate with investors using Btcpop's platform. And investors can freely trade shares, and if they desire use the shares as collateral for Bitcoin loans.
Only time will tell if P2P shares will overtake our current share system. But, if you believe in the superiority of P2P money, why would P2P shares be any different?