Blockchain shareholder: How Blockchain Technology is Revolutionizing Shareholder Rights

1. What is blockchain and why it matters for shareholders?

blockchain technology is not only transforming the way we exchange value, but also the way we exercise our rights as shareholders. Shareholders are the owners of a company, and they have the power to influence its decisions, policies, and performance. However, the traditional system of shareholder governance is plagued by inefficiencies, asymmetries, and conflicts of interest that undermine the effectiveness and legitimacy of shareholder democracy. Blockchain technology offers a radical solution to these problems by enabling a more transparent, secure, and decentralized way of managing shareholder rights. In this article, we will explore how blockchain technology is revolutionizing shareholder rights in the following aspects:

1. Shareholder identification and verification: Blockchain technology can provide a reliable and tamper-proof record of who owns what shares in a company, and how they are transferred over time. This can eliminate the need for intermediaries such as brokers, custodians, and registrars, who often charge high fees and introduce delays and errors in the process. Moreover, blockchain technology can enable shareholders to prove their identity and ownership of shares without revealing sensitive personal information, thus enhancing their privacy and security.

2. Shareholder voting and participation: Blockchain technology can facilitate a more direct and democratic way of shareholder voting and participation, by allowing shareholders to cast their votes online, in real-time, and without intermediaries. This can increase the speed, accuracy, and transparency of the voting process, and reduce the costs and risks of fraud and manipulation. Furthermore, blockchain technology can enable shareholders to delegate their votes to other shareholders or experts, or to vote on specific issues or proposals, thus increasing their flexibility and influence.

3. Shareholder communication and collaboration: Blockchain technology can foster a more open and collaborative way of shareholder communication and collaboration, by allowing shareholders to access and share relevant information, opinions, and feedback on a distributed ledger. This can improve the quality and availability of information, and enable shareholders to monitor and evaluate the performance and behavior of the company and its management. Additionally, blockchain technology can enable shareholders to form and join networks, groups, or coalitions, and to coordinate their actions and strategies, thus enhancing their collective voice and power.

Blockchain technology is not a panacea for all the challenges and issues that shareholders face, but it is a promising and innovative tool that can empower shareholders and improve their rights. By leveraging blockchain technology, shareholders can have more control, confidence, and convenience in their role as owners of a company, and can contribute to its success and sustainability.

2. Lack of transparency, efficiency, and security

shareholder rights are the rights that shareholders have in relation to the company they own shares in. These rights include voting on major corporate decisions, receiving dividends, inspecting the company's books and records, suing the company for misconduct, and participating in the liquidation of the company's assets. However, these rights are often hampered by various challenges that affect the transparency, efficiency, and security of the shareholder system. Some of these challenges are:

- Lack of transparency: Shareholders often have limited access to information about the company's performance, governance, and financial situation. This makes it difficult for them to monitor the management, hold them accountable, and exercise their rights effectively. For example, shareholders may not be aware of the conflicts of interest, hidden fees, or fraudulent activities that the company or its intermediaries may engage in. Additionally, shareholders may face barriers to communication and coordination with other shareholders, especially in large and dispersed ownership structures.

- Lack of efficiency: Shareholders often face high costs and delays in exercising their rights, especially in cross-border transactions. This is due to the complexity and fragmentation of the shareholder system, which involves multiple intermediaries, such as brokers, custodians, registrars, transfer agents, proxy advisors, and voting platforms. Each intermediary adds its own fees, procedures, and risks to the process, creating inefficiencies and frictions. For example, shareholders may incur significant expenses in sending and receiving proxy materials, attending meetings, and casting votes. Moreover, shareholders may experience errors, disputes, or failures in the execution of their rights, such as lost or miscounted votes, or delayed or reduced dividends.

- Lack of security: Shareholders often face risks of losing or compromising their rights, either due to external threats or internal malpractices. This is due to the vulnerability and opacity of the shareholder system, which relies on centralized and outdated technologies, such as paper-based records, manual processes, and legacy databases. These technologies expose the system to hacking, fraud, manipulation, and human error. For example, shareholders may lose their shares or dividends due to theft, forgery, or misplacement. Alternatively, shareholders may have their rights diluted or overridden by the company or its intermediaries, such as through unauthorized share issuance, insider trading, or vote rigging.

3. Benefits of decentralization, immutability, and smart contracts

One of the main challenges that shareholders face is the lack of transparency and accountability in the corporate governance process. Shareholders often have limited access to information, voting rights, and influence over the decisions that affect their interests. Blockchain technology, which is a distributed ledger system that records transactions in a secure and verifiable way, can offer a solution to these problems. Blockchain can improve shareholder rights by providing the following benefits:

- Decentralization: Blockchain eliminates the need for intermediaries such as brokers, custodians, and registrars, who often charge high fees and introduce delays and errors in the process. By allowing shareholders to directly interact with the company and each other, blockchain reduces the costs and risks of intermediation and increases the efficiency and speed of transactions. For example, blockchain can enable shareholders to instantly verify their ownership of shares, receive dividends, and participate in corporate events without relying on third parties.

- Immutability: Blockchain ensures that the records of transactions are permanent and tamper-proof, which prevents fraud and manipulation. By creating a single source of truth, blockchain enhances the reliability and accuracy of information and reduces the possibility of disputes and litigation. For example, blockchain can prevent the issuance of fake or duplicate shares, the alteration of voting results, and the misappropriation of funds by malicious actors.

- Smart contracts: Blockchain enables the use of smart contracts, which are self-executing agreements that are triggered by predefined conditions. smart contracts can automate and enforce the rules and obligations of the parties involved, which reduces the need for human intervention and oversight. For example, smart contracts can automatically distribute dividends, execute share transfers, and implement corporate policies and resolutions without any delay or error.

By leveraging these benefits, blockchain can empower shareholders to exercise their rights and protect their interests in a more effective and convenient way. Blockchain can also foster a more democratic and participatory corporate culture, where shareholders can have a greater voice and influence over the company's direction and performance. Blockchain can thus revolutionize shareholder rights and create a more transparent, accountable, and fair corporate governance system.

4. Examples and features of existing and emerging solutions

Here is a possible segment that meets your requirements:

One of the most promising applications of blockchain technology is to enhance the rights and participation of shareholders in corporate governance. Blockchain shareholder platforms are digital platforms that use blockchain to facilitate the issuance, management, and trading of shares, as well as the communication and voting of shareholders. These platforms aim to increase the transparency, security, efficiency, and inclusiveness of shareholder processes, while reducing the costs and intermediaries involved. Some of the examples and features of existing and emerging blockchain shareholder platforms are:

- Horizon Fintex: This is a platform that enables companies to issue and trade digital securities on a blockchain-based exchange. The platform allows shareholders to access real-time information, communicate with the company, and vote on corporate matters. The platform also provides regulatory compliance and investor verification services. Horizon Fintex claims to offer a faster, cheaper, and more accessible way for companies to raise capital and for investors to participate in the ownership of assets.

- DAO Maker: This is a platform that helps create and manage decentralized autonomous organizations (DAOs), which are entities that operate on a set of rules encoded on a blockchain. DAOs can be used to govern various types of projects, such as startups, social movements, or charities. The platform allows shareholders to propose and vote on initiatives, allocate funds, and monitor the performance of the DAO. DAO Maker also provides tools for fundraising, marketing, and community building.

- Polymath: This is a platform that simplifies the creation and management of security tokens, which are digital representations of regulated assets, such as stocks, bonds, or real estate. The platform provides a standard protocol for issuing and transferring security tokens, as well as a network of service providers, such as legal, financial, and technical experts. The platform enables shareholders to benefit from the liquidity, efficiency, and security of blockchain technology, while complying with the relevant regulations and laws.

- Boardroom: This is a platform that connects shareholders with the governance processes of various blockchain protocols, such as Ethereum, Compound, or Uniswap. The platform allows shareholders to access information, discuss proposals, and vote on decisions that affect the development and direction of the protocols. The platform also enables shareholders to delegate their voting power to other users or experts, and to earn rewards for their participation. Boardroom aims to foster a more informed, engaged, and democratic governance of the blockchain ecosystem.

5. How blockchain can enable more democratic and verifiable voting processes?

One of the most promising applications of blockchain technology is to enhance the voting process for shareholders. Shareholders are the owners of a company and have the right to participate in its governance by electing directors, approving major decisions, and receiving dividends. However, the current system of shareholder voting is often inefficient, opaque, and prone to manipulation. Blockchain technology can offer a solution to these problems by enabling more democratic and verifiable voting processes. Here are some of the benefits of blockchain shareholder voting:

- Transparency and auditability: blockchain is a distributed ledger that records every transaction in a secure and immutable way. This means that every vote cast by a shareholder can be traced back to its origin and verified by anyone. This reduces the risk of fraud, errors, or tampering by intermediaries or malicious actors. Moreover, blockchain can provide real-time visibility into the voting results and the status of each proposal, allowing shareholders to monitor the progress and outcome of the voting process.

- Accessibility and convenience: Blockchain can also make shareholder voting more accessible and convenient for shareholders. Instead of relying on physical or postal ballots, shareholders can use their smartphones or computers to cast their votes online, anytime and anywhere. This can increase the participation rate and the representation of shareholders, especially those who are geographically dispersed or have small stakes in the company. Additionally, blockchain can enable proxy voting, where shareholders can delegate their votes to other shareholders or third parties, such as proxy advisors or activists, who can vote on their behalf.

- cost-effectiveness and efficiency: Blockchain can also reduce the costs and inefficiencies associated with shareholder voting. By eliminating the need for intermediaries, such as custodians, brokers, or registrars, blockchain can streamline the voting process and reduce the administrative and operational expenses. Furthermore, blockchain can speed up the voting process and the settlement of the results, as the votes are recorded and validated instantly on the ledger, without the need for manual verification or reconciliation.

An example of blockchain shareholder voting in action is the case of Horizon State, a startup that developed a blockchain-based platform for digital voting and decision making. The platform was used by MiVote, a non-profit organization that aims to empower citizens to participate in the democratic process, to conduct a shareholder vote in 2018. The vote involved more than 400 shareholders from 24 countries, who were able to cast their votes online using a mobile app. The platform ensured that the votes were secure, transparent, and verifiable, and the results were announced within minutes after the voting period ended. The vote was hailed as a success and a milestone for blockchain-based voting.

6. How blockchain can facilitate faster and cheaper dividend distribution?

One of the benefits of blockchain technology for shareholders is the possibility of streamlining the dividend distribution process. Dividends are payments made by a company to its shareholders, usually as a way of sharing its profits or rewarding its loyal investors. However, the traditional way of distributing dividends is often slow, costly, and prone to errors. Blockchain technology can offer a better alternative by enabling faster and cheaper dividend distribution, as well as more transparency and security. Here are some of the ways how blockchain can facilitate this process:

- 1. Automating dividend distribution with smart contracts. A smart contract is a self-executing agreement that is stored and executed on a blockchain. It can be programmed to automatically distribute dividends to shareholders based on predefined rules and conditions, such as the amount, frequency, and eligibility of the payments. For example, a company can use a smart contract to automatically send dividends to its shareholders in proportion to their shareholding, without the need for intermediaries or manual verification. This can reduce the administrative costs and delays associated with dividend distribution, as well as the risk of human error or fraud.

- 2. reducing transaction fees and currency conversion costs. Blockchain technology can also reduce the transaction fees and currency conversion costs involved in dividend distribution, especially for cross-border payments. By using a blockchain-based platform, a company can send dividends directly to its shareholders' wallets, without the need for intermediaries such as banks or brokers. This can lower the transaction fees and commissions that are usually charged by these intermediaries, as well as the currency conversion costs that may apply when sending dividends in different currencies. For example, a company can use a stablecoin, which is a cryptocurrency that is pegged to a fiat currency, to send dividends to its shareholders in their local currency, without the need for currency conversion or exchange rate fluctuations.

- 3. enhancing transparency and security of dividend distribution. Blockchain technology can also enhance the transparency and security of dividend distribution, by providing a tamper-proof and immutable record of all the transactions and events related to the dividends. By using a blockchain-based platform, a company can provide its shareholders with real-time and accurate information about the dividend distribution, such as the amount, date, and status of the payments. This can increase the trust and confidence of the shareholders, as well as the accountability and compliance of the company. Moreover, blockchain technology can also protect the dividends from cyberattacks, theft, or loss, by using encryption and cryptography to secure the transactions and the wallets of the shareholders.

7. How blockchain can empower shareholders to hold corporations accountable?

One of the most promising applications of blockchain technology is to enhance the rights and powers of shareholders in corporate governance. blockchain shareholder activism is the idea that shareholders can use blockchain platforms to organize, communicate, vote, and monitor the actions of the corporations they own. This can potentially increase the transparency, accountability, and efficiency of corporate decision-making, as well as reduce the costs and barriers for shareholder participation. Here are some of the ways that blockchain can empower shareholders to hold corporations accountable:

- Blockchain can enable direct and secure voting by shareholders. Traditionally, shareholders have to rely on intermediaries such as brokers, custodians, or proxy agents to cast their votes in corporate meetings. This can introduce errors, delays, conflicts of interest, and fraud. Blockchain can allow shareholders to vote directly on a distributed ledger that records and verifies each vote in real time. This can eliminate the need for intermediaries, reduce the risk of manipulation, and increase the accuracy and legitimacy of voting outcomes. For example, Medici Ventures, a subsidiary of Overstock.com, has used blockchain to conduct its annual shareholder meeting and allow shareholders to vote online using a digital proxy card.

- Blockchain can facilitate shareholder communication and coordination. Shareholders often face difficulties in communicating with each other and forming coalitions to influence corporate policies. Blockchain can provide a platform for shareholders to exchange information, opinions, and proposals in a decentralized and encrypted way. This can enable shareholders to form networks, share resources, and coordinate actions across borders and jurisdictions. For example, DAOstack, a project that aims to create decentralized autonomous organizations (DAOs), has developed a platform for shareholders to propose and vote on collective decisions using blockchain-based tokens and smart contracts.

- Blockchain can improve shareholder monitoring and enforcement. Shareholders have the right to monitor the performance and behavior of the corporations they own, and to hold them accountable for any misconduct or breach of fiduciary duty. Blockchain can provide shareholders with access to real-time and verifiable data on the financial and operational activities of the corporations, as well as the environmental, social, and governance (ESG) impacts of their actions. This can enable shareholders to detect and expose any problems, and to enforce their rights and interests through legal or contractual means. For example, OpenOwnership, a global initiative that promotes corporate transparency, has created a blockchain-based registry of beneficial ownership information that can help shareholders identify and track the ultimate owners and controllers of the corporations.

8. How blockchain can increase shareholder awareness and engagement?

One of the main benefits of blockchain technology is that it can empower shareholders by giving them more control, transparency, and participation in the governance of their companies. Blockchain can enable shareholders to exercise their rights in a more efficient and secure way, as well as to access more information and insights about the performance and decisions of their companies. Here are some of the ways that blockchain can increase shareholder awareness and engagement:

- 1. Blockchain can facilitate proxy voting and shareholder resolutions. proxy voting is the process of delegating one's voting rights to another person or entity, usually through an intermediary such as a broker or a custodian. Shareholder resolutions are proposals submitted by shareholders for a vote at a company's annual meeting. Both processes are often cumbersome, costly, and prone to errors and manipulation. Blockchain can streamline and automate these processes by creating a digital record of the voting rights and preferences of each shareholder, and by allowing them to cast their votes directly and securely on a distributed ledger. This can reduce the need for intermediaries, lower the administrative costs, and increase the accuracy and transparency of the voting outcomes. For example, Broadridge Financial Solutions, a global fintech company, has developed a blockchain-based proxy voting platform that has been used by several companies and investors around the world.

- 2. Blockchain can enable real-time shareholder communication and feedback. Shareholder communication is the process of informing and educating shareholders about the company's strategy, performance, and outlook. Shareholder feedback is the process of soliciting and analyzing the opinions and suggestions of shareholders on various aspects of the company's governance and operations. Both processes are essential for building trust and loyalty among shareholders, as well as for improving the quality and effectiveness of the company's decision-making. Blockchain can enhance these processes by creating a secure and decentralized channel for shareholders to communicate and interact with the company and with each other, and by providing them with real-time data and analytics on the company's activities and results. For example, Nasdaq, a global stock exchange operator, has launched a blockchain-based platform called Nasdaq Linq that allows shareholders to access and share information about their holdings and transactions, and to provide feedback to the company through surveys and polls.

- 3. Blockchain can foster shareholder collaboration and activism. Shareholder collaboration is the process of forming alliances and coalitions among shareholders who share common interests and goals, and who want to influence the company's policies and practices. Shareholder activism is the process of using one's ownership stake and voting power to pressure the company to adopt certain changes or reforms that are deemed beneficial for the shareholders and the society. Both processes are important for promoting corporate accountability and responsibility, as well as for creating value and impact for the shareholders and the stakeholders. Blockchain can support these processes by enabling shareholders to identify and connect with like-minded peers, and by providing them with tools and platforms to coordinate and execute their collective actions. For example, DAOstack, a blockchain-based platform for decentralized organizations, allows shareholders to create and join self-governing communities that can propose and vote on various initiatives and projects related to their companies.

9. The future of blockchain shareholder rights and the challenges ahead

blockchain technology has the potential to transform the way shareholders exercise their rights and participate in corporate governance. By enabling faster, cheaper, and more transparent transactions, blockchain can reduce the frictions and inefficiencies that plague the current system of intermediaries, registries, and proxies. However, this vision is not without its challenges and risks. In this section, we will discuss some of the main issues that need to be addressed before blockchain shareholder rights can become a reality.

Some of the challenges that blockchain shareholder rights face are:

1. Regulatory uncertainty and compliance. Blockchain technology is still relatively new and unregulated in many jurisdictions, which creates legal ambiguity and complexity for its adoption and implementation. Different countries may have different rules and standards for shareholder rights, corporate governance, and data protection, which may conflict or contradict with the decentralized and distributed nature of blockchain. For example, some jurisdictions may require shareholders to disclose their identity and holdings, while others may allow anonymous or pseudonymous participation. Some jurisdictions may impose strict requirements for auditing and reporting, while others may rely on the self-regulation of the blockchain network. Therefore, blockchain shareholder rights need to comply with the relevant laws and regulations of each jurisdiction, and also ensure interoperability and compatibility among different blockchain platforms and systems.

2. Technical challenges and limitations. Blockchain technology is not a panacea that can solve all the problems of shareholder rights. It also has its own technical challenges and limitations that need to be overcome or mitigated. For example, blockchain networks may face scalability issues, as the number of transactions and participants increases, which may affect the speed, cost, and security of the system. Blockchain networks may also face governance issues, as the rules and protocols of the system need to be agreed upon and updated by the consensus of the network participants, which may be difficult or contentious in some cases. Blockchain networks may also face security risks, such as hacking, fraud, or malicious attacks, which may compromise the integrity and reliability of the system. Therefore, blockchain shareholder rights need to adopt appropriate technical solutions and safeguards to ensure the functionality and robustness of the system.

3. Behavioral and cultural changes. Blockchain technology may also require significant behavioral and cultural changes from both shareholders and corporations. Shareholders may need to acquire new skills and knowledge to use blockchain platforms and tools, and also to understand the implications and consequences of their actions and decisions. Shareholders may also need to adapt to new ways of communication and collaboration with other shareholders and stakeholders, and also to new forms of participation and influence in corporate governance. Corporations may need to embrace more transparency and accountability, and also to engage more actively and constructively with their shareholders and stakeholders. Corporations may also need to rethink their strategies and policies, and also to innovate and experiment with new business models and opportunities. Therefore, blockchain shareholder rights need to foster a culture of learning, trust, and cooperation among all the parties involved.

Blockchain shareholder rights are not a distant or utopian dream. They are already being explored and experimented by various actors and initiatives around the world. For example, the ethereum Enterprise alliance is a consortium of over 200 organizations that aims to develop and promote blockchain solutions for various industries and sectors, including finance, law, and governance. The Medici Ventures is a subsidiary of Overstock.com that invests in and supports blockchain startups that focus on social impact, such as voting, identity, and property rights. The DAO was a decentralized autonomous organization that raised over $150 million in 2016 to fund and manage projects on the Ethereum blockchain, but was later hacked and dissolved. These examples show the potential and the challenges of blockchain shareholder rights, and also the need for further research and development in this field.

Blockchain technology is not a magic bullet that can solve all the problems of shareholder rights. It is a tool that can enable new possibilities and opportunities, but also pose new challenges and risks. Blockchain shareholder rights need to be carefully designed and implemented, with the consideration of the legal, technical, and social aspects of the system. Blockchain shareholder rights also need to be constantly monitored and evaluated, with the feedback and input of the users and stakeholders of the system. Blockchain shareholder rights are not a static or fixed concept, but a dynamic and evolving one, that can adapt and improve over time. Blockchain shareholder rights are not an end in themselves, but a means to an end, that is, to create a more fair, efficient, and democratic system of corporate governance.