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For a long time, the financing of new companies has been one of the most lucrative industries anywhere. Especially with the rise of the tech industry, the potential for staggering gains on the back of relatively small investments is quite amazing and attracts huge attention as a career path. But the investment industry is still old-fashioned in many ways, leading to a lot of inefficiencies for both investors and the receiving companies.
So despite the fact that we have a very stable few years of economic growth behind us since the previous recession, there is still a gap between the desired amounts of funding and the available amounts. As such, less companies are achieving Initial Public Offerings (IPOs), even while consumer interest in personal investing is at an all-time high and the global equity market is valued at $74 trillion.
This is not because of bankers and VCs preventing competition, it is simply because of the requirements for new companies when seeking investment. The whole process is understandably laden with legal requirements, costs of entry, and manual processing needed.
A new blockchain startup, Chainium, is hoping that their answer to this lies with blockchain technology. Instead of relying on central actors to guarantee trust and comprehensiveness of deal processing, they are going to rely on the trustless nature of blockchains to provide oversight and allow investors to view a marketplace of available companies to invest in.
An oldschool marketplace
While there is no doubt that firms like private equity managers, VCs, and banks contain a lot of knowledge of how to manage investments and where returns lie, it is also true that a lot of what they make their money from is either mundane work (like providing legal oversight) or purely a consequence of scale (there are huge barriers to entry of millions of dollars to be able to operate in this space). What Chainium wants to do is to automate as much of the paperwork as possible while also providing a level of decentralized security through the nature of transparent and smart-contract enabled blockchains, while speeding up the process from days to mere minutes.
The company described their platform thus:
“Chainium is the platform to buy and sell shares – business owners can sell equity in their businesses to raise capital and investors can buy and sell shares from businesses. You can see our prototype on our website. Like all good ideas, at its core our platform is really simple. Chainium allows business owners to sell equity in their business in return for capital from investors. We can offer this service free of charge to both business owners and investors because we keep our processes simple and use blockchain technology.”
While it is at the cutting edge of cryptography, blockchain technology is quite reliable and transparent, as evidenced by the fact that many securities exchanges and banks are queueing up to implement their own blockchain solutions. This bodes well for Chainium’s integration with auditing and securities regulatory bodies.
Their CHX tokens are the underlying element of the ecosystem, which will be sold from early 2018 in their platform ICO.
By providing a platform where companies can communicate with investors, publish earnings, release tokens, and issue shares, the Chainium platform has all the features that a regular VC or bank would perform.
In many ways the idea is simple, but until the trustless features of blockchain were made available it was not feasible at scale. In this respect Chainium functions as an automated bank, disintermediating a large amount of manual labour.
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