Regenerative ICOs: Tokenizing Debt and Dividends

Introduction

The economic incentive structures of an organisation strongly influence their governance models and power distribution. Sometimes, attempts at decentralising governance fail if they are built on centralising economic incentives.

Traditional Equity Investing

Traditional forms of equity investing offer uncapped returns to shareholders, creating strong incentives for profit maximisation and centralisation of power.

Initial Coin Offerings (ICOs)

Initial Coin Offerings (ICOs) on the blockchain were designed to allow organisations to raise funding from their community. This approach aimed to bring a greater distribution of economic gains and governance power to organisations’ stakeholders. However, since tokens issued through ICOs also offer uncapped returns, current blockchain networks have become even more centralised.

Alternative Investor Reward Models

There are investor reward models in traditional forms of investing that cap stakeholder profits, which removes the incentives for profit maximisation. Examples include:

1. Platform Cooperatives
2. Steward Ownership companies

These models have shown to bring greater distribution of economic gains and governance power.

Challenges in Traditional Financial Markets

However, these organisations struggle to raise early-stage funding in the traditional financial market. Consumer investors, conscious of the damaging effects of investing in uncapped public equity, face challenges when investing in such organisations. This is because capped investor profit models have only been implemented in existing legal systems with significant bureaucratic hurdles, similar to traditional startup investing up until the advent of ICOs in the late 2010s.

Proof-of-Concept

This proof-of-concept helps organisations to run Initial Coin Offerings with capped investor profit models. This enables them to raise funding from a diverse set of supporters while avoiding mission drift and profit maximisation incentives.

Conclusion

It enables more economic decentralisation, transparency, and accountability, from which decentralised organisational governance can be developed and maintained in a more sustainable way.