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Comment by redpiller | Hacker News Reader

There is innovation in the crypto space but it's not being talked about or covered in mainstream media. Not yet at least.

Just because the author has fallen victim to the media oligopoly and is thus unable to see any innovation past all the flashy CNN, Facebook and Cointelegraph interfaces, doesn't mean there is no innovation occuring.

I'm involved in an innovative project right now which is creating real world economic value. It's small but we've already proved the concept and are profitable. The blockchain adds undeniable value to our use case.

When people finally find out about all the innovation that has been going on outside of their awarenesses, it's going to be a shock and they will regret it.

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I've been involved in "Crypto" since before Bitcoin (yup), and I never cease to be surprised at the innovation-blindness here on HN!

Even clearly obvious disruptions that are already affecting the financial industry (such as DeFi exchanges, etc.), and which signal even greater disruptions to come, are blithely discarded as irrelevant.

The abusive treatment of free citizens by the banking system is going to end. "The banks" haven't yet really declared war on Crypto, perhaps because they still feel unassailable in their super-national castles, well beyond the reach of any national law or moral principle.

This naiveté will be their downfall, I hope.

Are you sure about that?

How did you arrive at the conclusion that it is undeniably a value-add?

We came up with a way to allow investors to independently verify how much profit a business makes with certainty without having to trust company directors or accountants.

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.

Can you elaborate? I doubt your claim because "how much profit" a business makes is tied to the legal/financial system(s) the business operates in. To me it looks like we have the "object level vs. meta level" fallacy that is so typical for crypto enthusiasts: in the end, what governs our society is not crypto tech (object level), but meta level institutions. And even if these institutions were to agree that, for example, a smart contract is a legal contract, they could still reverse this decisions and hence move the agreement back to the meta level.

Here is an article about our use case:

https://jonathangrosdubois.medium.com/how-leasehold-achieves...

Maybe I get this wrong, but doesn't this rely very classically on aligned interests and various parts keeping the other parts in check? No blockchain or tokens required...

I did not see anything how profit is verified. Could always use expenses to funnel money out, opex and capex are mixed creatively etc.

It costs real money to buy back tokens from the market and to burn them on the blockchain because they are provably scarce. Because new tokens cannot be created, burning them on the blockchain permanently reduces the remaining circulating supply of tokens so the value of remaining tokens goes up (supply versus demand).

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.

Fair enough. For me this is a much better "pitch" than the "absolute certainty" above.

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.

> but anyone could independently check expected earnings

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?

Thank you. I took a quick look, and the article at least mentions something along the lines of my "object level vs. meta level" concerns :-)

> We use the token as the primary store of value for the profits of the underlying economic activity.

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

There is no single operator. The company is decentralised with each director having the same vote. Even if an insider started embezzling funds, we would be able to see it based on the absense of proof of profit on the blockchain.

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.

I understand how you think the world works. I’m saying that it doesn’t work that way.

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.

The buybacks can only be done with real money. This is not an opinion, it's a hard fact since buybacks are done on the open market. Sure, the directors who handle finance could fake profit by taking on debt and using it to buyback the token to drive up the price artificially... But there is no incentive for someone to commit such crime since the buybacks benefit the whole community and not specifically the attacker. Also, the community can see if a director is selling their tokens (since it's all on the blockchain and the director's wallet is known).

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.

Nothing of what you say suggests that you have "come up with a way to allow investors to independently verify how much profit a business makes with absolute certainty without having to trust company directors or accountants".

Imagine if there was a tamper-proof ledger of who owns what shares of what companies in such a way that no new shares could be issued and existing shareholders could not be diluted in any way. Tamper-proof in this case means that even the company directors themselves could not modify it, even if all of them wanted to.

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.

This only keeps track of the shares that that the company has issued, it doesn't tell us anything about the profit that the company is making.

> When people finally find out about all the innovation that has been going on outside of their awarenesses

Do you have some examples of what you mean? Maybe it would be interesting to get into that

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