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Tokens organize networks like C-corps
Organizing capital
Before C-corps came unlimited-liability partnerships, then limited-liability partnerships, and each brought a different kind of economy. A token is a similarly different way to create organizational activity: a principle for getting people to come in and work together on an economic and social basis.
The token bubble
Much of the token world may be Pets.com and Webvan, and plenty of it will go to zero. It still has to be simplified, and some of it is nutty. In a networked economy running on the internet, though, an organizational mechanism is needed.
A token in practice
Picture the first user on Twitter getting a token for putting content there. Other people join and use it, the token gains value, and the person who helped Twitter succeed shares in that value. Twitter monetized that user, who received only utility in return.
Why did railroads need new corporate structures?
Building a railroad took more money than a few partners could supply, and under unlimited-liability partnership each owner risked personal ruin if the venture failed. Limited liability capped an investor's loss at the amount invested, which let thousands of strangers buy shares. Britain passed the Limited Liability Act in 1855 and the Joint Stock Companies Act in 1856. By then, railway companies had already absorbed enormous sums of share capital.
How did the Dutch East India Company raise capital?
The Dutch East India Company, chartered in 1602, issued shares to the public in Amsterdam and is often called the first publicly traded company. Investors could not withdraw their capital directly, so they traded shares among themselves, which created a secondary market. The charter gave the company a monopoly on Dutch trade in Asia. It operated for almost two centuries until it was dissolved in 1799.
Why did Pets.com and Webvan fail?
Pets.com went public in February 2000 and liquidated that November, after spending heavily on advertising, including a Super Bowl spot, while selling products like pet supplies at thin margins. Webvan raised hundreds of millions of dollars in its 1999 IPO to build automated grocery warehouses and filed for bankruptcy in July 2001. Both were casualties of a bubble that peaked in March 2000, when the Nasdaq Composite reached about 5,048.
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