Good old Mr. Marx complained that workers could not benefit from the fruits of their labour. Customers are even more disadvantaged. Customer purchases fund companies that keep the revenue for themselves.
Since the invention of the stock market, smart customers hold stock in the companies they buy from. Their purchases fund the company. They subsequently profit from the value of the stock increasing, from stock buy-backs, or dividends. Sometimes all three. They turn their expenses into revenue.
Mr. Buffet is the most famous example of such a customer, investing mostly in products he understands and uses. He's done pretty well using this strategy.
There are a couple of types of stocks, but they generally give the owner a couple of benefits:
- The right to vote on some company decisions;
- The right to get your money back if the company fails;
- The right to a share in the company's profits (e.g. dividends, buy-backs).
Depending on how company owners configure the stock, the stockholder might get one, two or all three of these benefits.
The downside to the stock process is that investments usually have to be very large. Outside of pools, penny stocks, or mutual funds, investing is a rich person's game. For example, as I write this, purchasing a single stock for Mr. Buffet's company, Berkshire Hathaway Inc. (ordinary class A), costs $420,791.40 (USD). And most brokers don't want to sell 1 share! It's too much paperwork for too little reward. Buying blocks of 100 is common.
Cryptocurrencies put this model into overdrive. Instead of a few companies offering shares through a stock market, any company can issue tokens. Tokens are bought and sold through markets or directly from buyers to sellers.
There is currently a massive amount of experimentation with tokens and how they work. Some experiments are very similar to how stocks work. Some are wildly different.
Even when the form is the same, the function is often very different. For example, while stockholders might vote on a major company initiative, most tokenholders can propose new ideas and vote on all proposals.
When tokens become very expensive, they continue to be in reach of the customer. Most tokens can be divided to 8, or even 12, decimal places.
This week the SEC is saying that all tokens are securities. I think they will probably regret that decision. What is correct about that statement, though, is that tokens will turn consumers into capitalists on an unprecedented scale. When expenses become revenue, the economic model of the world requires a re-think.
Photo by Josh Appel on Unsplash