Quote from: PawShaker on October 15, 2012, 01:52:49 PM

Typical conditions for any security is that the management must inform investors honestly. Now, how on earth, we can get a distributed tribunal to judge that? What kind of sanction can be applied in a quasi anonymous habitat where nicks are dime per dozen?

I think it is important to decouple trading platform from other stuff like verification/rating/audit. Trading platform must be completely open for everybody: nobody can prevent you from trading, nobody can seize your assets etc.

On the other hand, verification/rating/audit is completely different business. When platform is open and is thus open to all kinds of scammers, legit companies will HAVE to use verification/rating/audit services, otherwise they will get drowned in a crowd of scammers.

Existing centralized exchanges kinda sidestepped this issue: they filtered out obvious scam, so users thought that some level of verification is there, so there was NO urgent need for indepth verification and there was no competition for this service because some service is already bundled with trading platform.

So it is similar to how Microsoft was bundling IE6 with Windows XP and this "feature" poisoned web development for like a decade. Although at the time it was introduced IE6 was actually a good thing..

Anyway... Real demand for verification will create a competition in this area. If some company wants to raise money they have go to some verification/investment banking company and work with them. Perhaps this verification company will demand some accounting to be done in their format, perform audit, check IDs, ask to sign some contracts and so on. For this they can charge some fee, e.g. 5% of IPO.

Verification companies will compete among themselves: if they have a good track record, it's easier to raise money from IPO (since users trust them) so they can get higher commission. OTOH some smaller companies might try to find luck in less demanding verification companies.

Also there is market for insurance: perhaps a trusted insurer will take like 5% out of IPO and will buy back asset in case of default. Of course, they will insure only legit-looking companies.

So there is strong economic incentive to create a working verification system, and I believe that will launch evolutionary. process. Perhaps process will be painful and we'll go through many scams and defaults, but in the end only fittest will survive, and that would be great.

So back to the question:

1. We do not need distributed verification, we need decentralized verification: it will be done not by one, but by several companies, potentially barrier for entry is rather low...

2. In many countries electronic signature is recognized and is binding. So I believe it is possible to make a contract which will recognize blockchain-based asset owner identification and it will be enforceable. I.e. shareholders can sue issuer. I'm not a lawyer, though. But there is a lot of flexibility in this.

Some people say that it is illegal to issue securities... OK. Make contract such that it is structured like IOU, IOUs are likely not illegal. But this contract won't be publically announced, instead it will be submitted to a trusted 3rd party arbitrator. On the other hand public contract will state that it is just play money. If shit hits fan, arbitrator will make IOU contract public. Then each shareholder can legally demand money from issuer personally, via existing law enforcement system.

This structure is a bit similar to bitcoin contracts: https://en.bitcoin.it/wiki/Contracts