How One Very Boring Sentence is Going to Change The Way We Work Mike Mills Follow Oct 15, 2018 · Unlisted

This past week, I wrote:

All shares shall be issued, recorded, and transferred exclusively in a distributed network or database in accordance with the Delaware General Corporation Law.

This sentence is going to change everything about how we view work and ownership. To explain, let’s talk about my desk.

A few years ago, I was delivered a package to my desk via DHL. Busy, and without a better place to put it, I left that package in a drawer in my desk, under paperclips and an old notebook. A few weeks later, I moved it to a box in the basement for safekeeping. Inside was a stack of papers worth $2 billion.

Of course, it wasn’t $2 billion in cash. It was $2 billion in shares of a company. And this wasn’t unusual as I was a corporate lawyer regularly managing large M&A deals. This particular transaction ended in my employer owning a large piece of another company. So, for a few weeks, in my desk, sat this small stack of certificates issued by that other company to my employer stating we owned a certain number of shares, worth in total a few (okay, more than a few) times more than what I made in a year. This company had a spreadsheet somewhere where they tracked that these certificates had been issued and shipped to me, and in turn we had a spreadsheet somewhere that said the certificates were ours. When we eventually sold these shares, we shipped the certificates back to the company to be shredded.

Paper certificates for shares make sense in an analog world. Certificates have benefits: Sometimes certificates look pretty — Disney famously used to issue share certificates with Disney characters on them as souvenirs, and these are now collectors items; sometimes certificates help prove ownership — securing loans is easier if a person can show they own assets, such as a certificate issued by a corporation proving they own shares in it; and when you trade shares face to face, it’s easier to simply hand over stacks of certificates.

But in a digital world, where transactions occur across distances and in increasing frequencies, certificates are no longer as practical. In the 1970s, laws started changing to allow corporations to skip certificates entirely and to instead use spreadsheets to track ownership. We call these uncertificated shares. In the State of Delaware in the US, the law allowed for corporations to have a ledger “maintained by the corporation” to keep track of uncertificated shares. This means corporations can have a mix of certificated and uncertificated shares, as necessary.

Most corporations have transitioned to uncertificated shares. Spreadsheets of uncertificated shares have advantages: There’s no need to ship paper around, and transactions can be resolved by updating the spreadsheets. But sometimes this creates a complex mess of files, as corporations, brokers, and shareholders all maintain their own separate records of who owns what and where. Such spreadsheets can get confusing, as all the owners struggle to keep track of every transaction, share increase, and conversion.

Accordingly, the ideal solution is one that combines the benefits of certificates and the benefits of digital records. We could get the best of both worlds with a ledger maintained to allow a corporation to keep track of who owns what at any given moment, and that any owner could use to verify their ownership stake for themselves or for others. Employees, freelancers, and investors can all know exactly what they own and make use of this ownership stake.

Such a feature is a small part of what we’re building at Quidli.

Last year, similar to my one sentence, Delaware also made a small change to their law permitting companies to maintain uncertificated shares. Now, such a ledger can be “administered on or on behalf of the corporation” in the form of “distributed electronic networks or databases”, i.e., a blockchain. Forward-thinking legislators in Delaware, aware of the relevant applications that distributed-ledger technology brings, set down rules that in turn are the foundation for how Quidli can be applied by corporations in the US.

Should a corporation opt to take advantage of a distributed ledger to maintain its shares, it can fully embrace the power of Quidli to:

Provide transparency to owners and stakeholders;

Provide clear incentives to freelancers and employees;

Set up dynamic and flexible compensation structures;

Structure complex agreements in a way that is clear, understandable, and reliable; and

Reach out to all its owners without any intermediaries.

With all this, a corporation can begin to create flexible and simple compensation structures and to plan for the future in a way it couldn’t before. But this is just the beginning. As the Quidli platform grows, companies will find new ways to make powerful new use-cases from maintaining their equity in a distributed ledger built on Quidli.

This week, I wrote into the bylaws and the capital structure of Quidli that we’d take advantage of the law to permanently use a blockchain. We’re the first users of our own platform, and we certainly won’t be the last — as we grow, other companies will join us. This week, when we set up the capital structure of Quidli, we made it clear that we’ll never touch a certificate, that:

All shares shall be issued, recorded, and transferred exclusively in a distributed network or database in accordance with the Delaware General Corporation Law.

One sentence to kick it all off. There it is. The future of work.

Let’s rework work together! Follow us to learn more about the future of work, equity-for-labor, blockchain protocols, and to stay updated on Quidli’s progress.

Feel free to directly connect with the team as well via the Quidli Telegram group!