Wrapping your mind around Bitshares is like taking the Electric Kool-Aid Acid Test. Even after an hour of dedicated reading, Bitshares felt nebulous. So, I went straight to the source and phoned Brian Page, BitShares Director of Marketing.
“We’re all about Decentralized Autonomous Companies,” he says.
They’re called DACs for short, and you can think of them as companies that run on autopilot. They’re companies without a board of directors, without employees or liabilities. They’re just software that runs on the internet. Most importantly, though, it’s automated software that makes money. Making money is the first rule of a BitShares DAC.
“In the dotcom era, there were all these ideas, all these companies, but none of them made any money,” Mr. Page says. “At BitShares, we truly believe that you have to follow the first rule of economics: you have to make a profit. You have to create value. What would you rather own: stock in a company that’s profitable, or a company that’s losing half a billion dollars a year?”
Bitcoin itself, he argues, can be viewed as a company. It’s a company that earns transaction fees. The employees are the miners, and the coins are shares. Unfortunately, Page says, it’s a company that’s burning through cash.
“There’s more money flowing into it than there is flowing out of it,” he says. “There’s no money flowing out. Bitcoin bleeds half a billion dollars a year in expenses (via electricity, hardware, developers, etc). You own apple stock because the underlying asset is the company that’s generating profits.”
Enter the concept of DACs: autopilot companies that make money.
Give me an example of a profitable DAC
Page’s primary example of a DAC is a lottery company. There’s software with a blockchain and an automated way of selling tickets.
“The algorithm says 50 percent of ticket sales go to one winner,” he says. “The other 50 percent goes as profit to shareholders. Immediately, that DAC would be profitable.”
Decentralized Autonomous Company DACs
Those profits would then be dispersed to shareholders in that DAC.
Now, we’re getting closer to the core of what BitShares is doing: the company is creating a platform to sell shares in hundreds, thousands, maybe millions of DACs. They envision a platform like the New York Stock Exchange. Instead of swapping stock in human-run companies, though, BitShares will let us swap stock in automated companies.
DAC creators could write the code for an autopilot company, and then release it on the BitShares platform. Anyone could then buy shares in that company, and those shares would entitle the holder to a portion of the company’s automatic profits.
This raises an interesting question. Why would a developer want to release his DAC on the BitShares platform? Why wouldn’t he create it on his own, release it on his own, and reap all of the rewards himself?
Mr. Page and the BitShares crew believe the platform brings not only a way to trade shares, but also a huge community that will help drive the success of certain DACs.
“We’re creating the App Store for entrepreneurs,” he says. “It’s like launching a company where you have a ton of different owners. They’re going to take ownership because they know that if you make money, they’re going to make money, too.”
A developer could always choose to release an app outside of the App Store, but then they wouldn’t have that built-in community that comes with the App Store. They’d hobble themselves.
If BitShares truly becomes a deep, liquid exchange for shares in automated companies, holders of BitShares-PTS stand to reap in enormous rewards. Each PTS holder, after all, will receive 10 percent of any future DAC shares released on the platform.
BitShares has also created an angel investment fund (AngelShares) that gives investors the ability to donate to BitShares in exchange for 10 percent of the shares of all future DACs. Already, BitShares has raised nearly $5 million off its AngelShares.
“As far as I know, it’s the largest angel investing in crypto ever,” Mr. Page says. “That’s how we pay for salaries, marketing, development.”
The idea has a lot of people excited. The community at the BitShares forum is over 10,000 strong. And there’s a host of DACs that are under development. There are ideas for stock exchange DACs, domain name companies, banks, insurers, money transmitters, smart contract companies, etc. There’s even a music DAC in the works where artists could release shares in specific songs. Once the BitShares platform gets deployed, we’ll see how much money DACs can generate. If money’s involved, interest and investors will follow.
“The fundamentals are what make us really different,” Mr. Page says. “There are a lot of smart people out there in the cryptocurrency space, computer nerds, I guess you could say, but very few of them are economists. For anyone in the space, I ask, ‘Where’s the value? Where are you creating value?’ It has to be something, a service or a product that has worth – something that causes the value of the shares or coins to go up. We’re helping businesses do what they do in a decentralized way.”
When I ask Mr. Page what he thinks BitShares-PTS might be worth in the future, he admits he has no idea. Something could come along that eclipses the BitShares platform. Then, again, it could one day rival the NYSE.
“Look at Berkshire Hathaway and Warren Buffet,” he says. “Berkshire became a company that collects other companies, and now one share of Berkshire is worth $160,000.”
The Kool-Aid tastes good, I think.