Equitable Continuous Organizations with Self-Assessed Valuations

TL;DR

This paper introduces a voting mechanism in continuous organizations with self-assessed valuations to balance efficiency, reduce speculative trading, and improve overall equity in blockchain-based organizational models.

Contribution

It proposes a novel voting system for continuous organizations that addresses allocative inefficiency and speculative risks, enhancing fairness and stability.

Findings

Voting mechanism balances allocative and investment efficiency.

Reduces speculative trading behaviors.

Potentially increases overall equity in continuous organizations.

Abstract

Organizations are often unable to align the interests of all stakeholders with the financial success of the organization (e.g. due to regulation). However, continuous organizations (COs) introduce a paradigm shift. COs offer immediate liquidity, are permission-less and can align incentives. CO shares are issued continuously in the form of tokens via a smart contract on a blockchain. Token prices are designed to increase as more tokens are minted. When the share supply is low, near-zero prices make it advantageous to buy and hold tokens until interest in the CO increases, enabling a profitable sale. This attribute of COs, known as investment efficiency, is desirable. Yet, it can yield allocative inefficiency via the "holdout problem," i.e. latecomers may find a CO more valuable than early tokenholders, but be unable to attain the same token holdings due to inflated prices. With the aim of increasing overall equity, we introduce a voting mechanism into COs. We show this balances allocative and investment efficiency, and may dissuade speculative trading behaviors, thereby decreasing investment risk.