Cryptos Power the Rise of Digital Corporations
If you watched the Super Bowl Sunday night, you might have noticed one crypto ad after another.
There was a Coinbase ad that featured a floating QR code for 30 seconds.
Comedian Larry David starred in an ad for FTX.
There were also spots for exchanges Crypto.com and eToro.
But with all the buzz surrounding crypto, it’s estimated that only 8.3% of Americans actually own this new asset class.
Most skeptics are wondering: What’s it good for, anyways?
Let me explain a use case that’s set to pick up traction this year.
You’ll want to hear about this before the masses arrive.
The Most Important Part of Capitalism
Two centuries ago, if you had looked around your log cabin or wooden house, the things you owned would have been made by yourself or a local artisan.
The food in your pantry was straight from your farm. The local tailor stitched your jacket together. And the horse’s stirrups were made by a nearby blacksmith.
Look around your house today. There probably isn’t much that was made locally. How much of this stuff is attributed to a corporation, either foreign or domestic?
The advent of the corporation in the late 18th century led to enormous leaps in human productivity since then.
This is for two simple reasons.
- Corporations have “limited liability.” An individual can’t lose more than they own in the corporation. Their personal assets aren’t at risk. This allows entrepreneurs to take more risk than they would otherwise.
- Corporations can pool resources to achieve objectives not possible by an individual.
Because of this, we now have trillion-dollar companies like Apple, Microsoft and Tesla that push human productivity forward.
I would argue that the corporation is the most important part of capitalism.
But there’s a big disruption to the idea of a corporation headed our way.
Crypto allows for the creation of a new type of corporation — a digital one.
Like an LLC for the Internet Age
A DAO (pronounced “dow”) is short for decentralized autonomous organization.
It allows for the formation of an online community that can raise capital among its members.
Ownership in the DAO can be tracked through a native token. And those funds can be governed by computer code.
Think of DAOs like an LLC for the internet age.
There are DAOs dedicated to purchasing rare NFTs, such as CryptoPunks or Bored Apes.
Members can have a stake in these rare digital items for a small investment.
There are DAOs that invest in decentralized finance to earn higher yields.
There are also DAOs that purchase real-world items like real estate or aircrafts.
PleasrDAO even bought a rare Wu-Tang Clan album for $4 million.
A New Form of Online Governance
Sometimes, DAOs require ownership of a specific NFT.
This is possible with new apps that use your digital wallet to verify access to a website or Discord server.
And some of these NFTs are more expensive than the ritziest golf club in Palm Beach, Florida.
There’s a lot of excitement around DAOs right now.
One of them recently raised $40 million and nearly purchased a copy of the U.S. Constitution!
Even though it failed, a new form of online governance was born.
And I predict that DAOs are a better, more efficient way to raise capital and keep track of ownership stakes over time and space.
But you won’t hear that on a 30-second commercial.
Editor, Strategic Fortunes
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My career on Wall Street started while I was in college. I spent a summer interning for Merrill Lynch in the middle of the ‘90s bull market. I was fascinated with trading, and as a result, after college, I joined Salomon Brothers in the famed mortgage bond trading department. Later, I spent time at Citigroup working with credit derivatives. Eventually, I needed to walk away from the excess of Wall Street. That’s when I joined Banyan Hill in 2017. Now I help readers get ahead of the market and build their retirements.