Blockchains Reinvent the Cap Table

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Illustration by Jack Butcher

The most valuable dataset in Silicon Valley is the capital allocation table, the register of who owns part of a company, and how much they’ve got. The cap table might also be one of the most underutilized assets. 

We built Freehold to leverage the blockchain like a cap table—instead of a collection of stakeholders in your company, blockchains can build a community of believers in your idea.

Cap tables organize labor

Cap tables keep businesses running by organizing labor and incentives. 

For example, look at air travel. It takes thousands of people to design, build, and maintain planes, to pilot them and serve the passengers, not to mention all the infrastructure needed to make air travel possible. 

Each employee needs a salary, but where are those salaries coming from? They’re drawn from a treasury associated with the business, run according to an org chart and members that have a vested stake in the success of that business—a cap table. 

This system gives people a stake in the airline’s success. It incentivizes them to keep things running and provides the organizing structure to get people to do the work.

Blockchains make cap tables more efficient

Blockchains make cap tables easier to join and grow by making them more liquid. 

Cap tables organize people around a mission by letting them claim ownership, and subsequent upside, from contributing to that mission. The problem with a traditional cap table is that it's highly inefficient. 

Most cap tables in tech are private and exclusive; first you need to win over a few big investors that can raise millions of dollars to get your idea off the ground. Then, you spend months hiring a small team with fiat, working for years before you see potential upside. 

Blockchains, however, are liquid and tradable from the start. The public offering (even if that’s as simple as mining a token into existence) comes first. With instant open access to all potential stakeholders—anyone, anywhere—the capacity of a cap table as scaled by blockchain is virtually unlimited. Rather than a few big fish, you can create a vast school of small ones.

The best part, though, isn’t the capital that your stakeholders contribute—it’s what it incentivizes and indicates.

Ownership is more than a token belief

When people buy into a cap table as scaled by blockchains, they’re not just looking to turn a profit—they’re expressing belief in your idea.

What if the first members of Facebook got a bunch of company shares in return for being an early mover and helping the platform succeed? In reality, a few dozen people got wildly rich off the platform’s success. But for everyone else that uses Facebook, even the first people to adopt it, there’s little upside. Doesn't seem very fair, does it?

What if you could flip that model? Optimize for putting as many cap table members to work as possible?

Blockchain-scaled cap tables do that. Instead of just a stake of ownership, the tokens represent equity in an idea. Every person who owns a token has the same motivation as a founder. These new blockchain cap tables can incentivize long-term value creation over short-term gains.

Freehold unlocks the true potential of cap tables

With Freehold, stakeholders with large treasuries can reward new or smaller stakeholders who want to grow their share in the idea by doing useful work. 

For Freeholds with limited funds, this is another way to grow their share and benefit the protocol at the same time. Founders can leverage their community like underutilized investors and employees.

Blockchains keeps ideas alive

In the traditional world, a business can go bankrupt. The company dies, the cap table is liquidated, end of story. 

But how does a blockchain go out of business? Good luck killing Doge or Bitcoin. They are ideas. The more people that own a blockchain’s token, the more resilient the idea becomes, because so many people have a vested interest in that idea existing. As long as one or more person believes in it, there's a good chance that idea will live on. 

Blockchain-scaled cap tables have levelled the playing field, unlocking doors and giving every idea the opportunity to thrive.

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