BRØK, a Norwegian government project to track ownership of unlisted shares, moved into a sandbox phase earlier this month. A bit different than other solutions is that we plan to use a public blockchain. Specifically, we use Arbitrum, a layer 2 scaling solution for Ethereum with low transaction costs.
Many countries around the world have business registries where you can search for information on companies of all sizes, including private companies. These often contain shareholder data, usually up to a year old. You should contact the company for the latest details. The Norwegian Business Registry, which holds records for 380,000 companies, is no exception.
Hence the concept of creating a blockchain system to track private equity ownership changes and get a current view of the “cap table” – who owns the shares and how much they own. , when did you buy it?
Another advantage of using blockchain is immutability. It’s not a particularly common scam, as companies only occasionally share snapshots of their stockholders, but it does give them room to manipulate cap tables. In fact, if there is a stock transfer tax and you want to stagger the timing, it is the government that is most likely to be sacrificed. Not surprisingly, tax authorities are participants in the ecosystem.
Companies also benefit. The most obvious is that you only need to log stock trades instead of managing cap tables. This makes the sale of shares easier with less due diligence on the cap table itself. This is because the buyer and seller must agree to the blockchain transaction and provide some degree of third-party validation. Additionally, stocks can be used as collateral for loans, and claims on stocks are also recorded on the blockchain.
The solution provides a good foundation for the upcoming wave of tokenization as shares are stored using the ERC1400 Ethereum security token standard.
The project has been in the works for some time, with developer Blockchangers posting the code for the solution three years ago. A software development kit (SDK) is now available.
BRØK is a combination of blockchain, open database and custom software. This solution is GDPR compliant, so no personal information is stored directly on the blockchain. However, we use the Ceramic Protocol for personal information. It’s an open, distributed database where data can be deleted and modified as required by the GDPR.
While this may be one of the first cases of governments using blockchain for cap tables, it is by no means the first cap table solution. One of the first companies in private securities was the Swiss company daura, a joint venture of BDO, BEKB, SIX, Swisscom and Sygnum. Another Swiss example is Aequitec. In the US, Figure Technologies has developed a cap table solution using the Provenance public blockchain.