The economic incentive structures of an organisation strongly influences their governance models & power distribution, sometimes to the extent that attempts at decentralising governance fail, if they are built on centralising econ...
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Descripción del proyecto
The economic incentive structures of an organisation strongly influences their governance models & power distribution, sometimes to the extent that attempts at decentralising governance fail, if they are built on centralising economic incentives.
Traditional forms of equity investing offer uncapped returns to shareholders that create strong incentives for profit maximisation and centralisation of power.
Initial Coin Offerings (ICOs) on the blockchain were designed to allow organisations to raise funding from their community and bring a greater distribution of economic gains and governance power to organisations’ stakeholders. However, since tokens issued through ICOs are also offering uncapped returns, current blockchain networks have become even more centralised.
There are investor reward models in traditional forms of investing that cap stakeholder profits and through that remove the incentives for profit maximisation, like (Platform) Cooperatives and Steward Ownership companies. They have shown to bring greater distribution of economic gains and governance power.
However those organisations struggle to raise (early stage) funding in the traditional financial market a Consumer investors conscious about the damaging effects of investing in uncapped public equity have challenges investing in such organisations. This is because capped investor profit models have only been implemented in the existing legal systems with significant bureaucratic hurdles, similar to traditional startup investing up until the advent of ICOs in the late 2010s.
This proof-of-concept helps organisations to run Initial Coin Offerings with capped investor profit models so they can raise funding from a diverse set of supporters, while avoiding mission drift and profit maximisation incentives. It enables more economic decentralisation, transparency and accountability, from which decentralised organisational governance can be developed and maintained in a more sustainable way.