"Buy local, buy local, buy local." No! *Invest* local
Widespread tokenization of small businesses on the blockchain will revolutionize community scale economics.
Big businesses can go public and access funding through buying & selling ownership (securities) with millions of investors.
Small businesses can plead their case to big banks and pray for loans that arenât too predatory.
Or they can take the SBAâs recommendation to beg friends and family for cash in exchange for âgiftsâ from the business. Because ownership brings up securities laws.
While there are some exceptions for sophisticated investors working with small businesses in exchange for ownership/securities- itâs not a simple process.
Tokenization on the blockchain will enable transparent, auditable, and algorithmically enforced securities for small businesses and that will be a massive disruptor to how small businesses both raise funds and interact with their communities.
Storytime.
I have fallen in love with pupusas. I moved to the suburbs of DC into a historically El Salvadorian neighborhood. Every street corner has 2-3 pupuserias.
One specific restaurant Casa Dora is walking distance from me. More specifically Casa Dora II. This local restaurant has 4 locations after taking over similar restaurants and rebranding them.
I eat there so much, I wish I could own a slice of the business and get a rebate!
With over 7,000 followers on their Facebook page (their unofficial website, they donât host their own*) I doubt Iâm the only one.
Hereâs the current business model for small business owners.
Customers spend their money (cash, credit, debit, Big-Tech Pay app, etc.) and the processor gets their cut. Employees work their shifts and get their cut. Suppliers bring supplies and get their cut. The banks or investors get their cut. The owner gets a few drops at the end if theyâre lucky.
For a highly mature business, those drops might be massive. But that takes time! While all thatâs happening the business is bringing in revenue. But the owner canât realize the value of their business to better balance their overall investment portfolio.
This is a problem blockchain can fix.
Tokenization:
Customers spend their money with a blockchain enabled currency, imagine a US Central Bank Digital Currency (CBDC). The appropriate miners get their processing cut of course!
The business uses that currency to pay employees and suppliers.
The profit & loss of the business is fully automated via smart contracts and on-chain analytics.
Lastly, a % of profit is automatically given to a treasury smart contract.
Now this is where it gets interesting.
Casa Dora ownership can tokenize this treasury into $CASA Dora tokens.
Then, a free market of individuals including: customers, employees, suppliers, local government(s), casual investors, and other people in the Casa Dora community can buy and sell these tokens based on their valuation and expectations for the treasuries growth (and presumably dividend payments) over time. Because itâs blockchain enabled, the financial data wonât require any trusted parties. The rules will all be enforced algorithmically by the smart contracts (did someone say automatic accountants?)
Community ownership provides an off-ramp for business owners that want to diversify their portfolios while still controlling their business.
Ownership of tokens can directly incentivize higher quality employees, managers, suppliers, and customers by rewarding better service that leads to higher profits.
*Imagine if a web developer customer and an owner made an arrangement for $CASA tokens in exchange for a website.
If youâre especially interested in the supplier angle of this, consider reading this article on ending bureaucracy within business & blurring the lines between customer and employee.
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