After publishing 200+ posts on Daily Fintech, I have only used the word “early-pioneer” in my titles for Lykke; Lykke: the early pioneer in the next generation of Global Digital Asset Marketplaces. Fall 2016 was early for an equity ICO with a live real app running (still is) and February 2017 was early for a 1yr forward token (still is)!
The last two months I have half a dozen of early-pioneers short-listed in blockchain space. As year-end approaches, it is customary to share predictions for next year. A few dare to check back to their list from last year and share what worked, what didn’t etc. I will be one of those few in the next few weeks in December. For now, I can confess that as I prepare my 2017 business review (strategy and P/L) it is clear that my choices of investments in the blockchain and crypto space had significantly high returns (financially and for professional development). Anyone interested in my current short list of such blockchain ventures (some pre-ICO and some post-ICO) and also in my own (heuristic) framework for picking, sizing and managing my crypto-exposure; you can book me for one hour (“gold digital pennies” rate applies; contact me efi at dailyfintech.com).
ARK Business entity – No. 833 439 300
Ark is undoubtedly an early pioneer in the area of governance for an open source blockchain venture. It is the first Cooperative society in the Blockchain space. It is the first blockchain project to incorporate in the EU and in France. Maybe we will refer to No. 833 439 300, the registration number of ARK ecosystem which incorporated in France just this past week, as a reference in history because this simply offers a legal alternative to the Swiss foundation setup that has become “the way” since the ICO boom. Starting with the Ethereum foundation setup in Cryptovalley, all the way to today most legal advisors were concluding that the Swiss foundation setup is the way to go for a token sale.
Today the French regulatory body of financial markets – AMF Autorité des Marchés Financiérs – and the National bank of France – Banque de France – have been in close collaboration with ARK ecosystem and their legal advisory firm – Fieldfisher. Fiedfischer has a global practice with a particular interest in technology not only form the point of view of their clientele but also as innovators themselves. They have their own GDPR app for clients and won the ‘New Business and Service Delivery Models’ at the FT Innovative Lawyers Europe Awards 2017 for their Condor Alternative Legal Solutions (Condor) offers clients a range of lower cost technology-efficient and process-efficient services. Condor handles large scale documentation repapering projects such as EMIR, MiFID II, GDPR and Brexit, data extraction and analytics projects, trading and commercial contract negotiation or KYC/AML processes.
The lead partner that designed the SCIC structure is Arnaud Grunthaler. He is also a member of the think tank of the French Prime Minister’s Cabinet focused on policy “France Stratégie”.
SCIC stands for “Société Coopérative d’Intérêt Collectif” which is “Cooperative Society of Collective Interest” or “General Interest Cooperatives”. This structure is more aligned with an open source venture and with a for-profit venture. It does not have the regulatory risk of the Swiss Foundation setup. The Tezos governance case will be studied soon in top business schools that have already blockchain research departments. The moment a foundation is financed from the sale of tokens, it runs the risk that cryptocurrencies are seen as financial assets and therefore the use of the foundation funds for funding for-profit development, can become a serious governance issue and a complex tax non-compliance.
So how does the SCIC work?
All the members of the cooperative – SCIC – are shareholders and each has one vote!
There are three kinds of shareholders:
- Founders; in the case of ARK they are 26 founders from more than a dozen nationalities who are decentralization enthusiasts.
“The ARK crew, being initial shareholders, will choose the Executive Board of the legal entity, which permits ARK to continue the current board structure.Additional shareholders, except Founders, can be named by members of the Board. They can be appointed to the Supervisory Board, as provided for in the charter. The charter may be amended as often as necessary. In French Law, the SCIC format also allows public institutions to become shareholders if seen fit by the board. As a common interest benefit company, an SCIC must keep at least 52.5% of the company’s profits as legal reserves. In the case of Ark, there is no plan to do any distribution of profits to shareholders so it will hold 100% of any profits for use in development, marketing, and operations.” Source: ARK Creates a Unique Business Entity: The Worlds First SCIC in the Cryptosphere
This structure is setup in a way that incentivizes all stakeholders to work for the vision of ARK. From technical staff, employees, token holders, users, institutions etc.
The SCIC structure IMHO is the first attempt to not only overcome the shortcomings of the Swiss foundation setup but also to design an incentive structure for the token that will grow the open source ecosystem. Related to this is one of my main 2018 predictions which calls for a whole new area in business that will be developing new frameworks to replace Business models with Incentive Models.
ARK business briefing
The focus today wasn’t on ARK’s vision but rather on their registration No. 833 439 300.
A briefing, however, will help further understand the significance of this move. First of all, this is a venture as I already mentioned of more than two dozens founders that live all around the world. Last November when Bitcoin was trading around $600-$780 range, they launched their token sale, ARK. They didn’t do that well since they were unable to reach their funding target which was 2000 BTC. They managed to raise a little short of 1300BTC (at the time worth around $800k). Despite this setback, they continued with their mission which is well summarized on the Smith & Crown Site.
- Smartbridge Technology.ARK will be able to communicate natively with other blockchains, allowing ARK to execute a variety of cross-network operations.
- ARK smartcard. This smartcard will be compatible with the ARK network and can be utilized to make payments.
- Changing the voting protocol of Lisk.
- Faster and more secure DPoS consensus than Lisk.
Efi Pylarinou is a Fintech thought-leader, consultant and investor.
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