Distributed ledger technology and SSI should be seen as a broader context, and the digital company founding process is only one of the numerous possible applications for SSI and DLT. By bringing together the two key innovations; decentralized transaction management, and decentralized identity data management, it is possible to digitalize contracts and signatures and by that way create new business models as was shown in Project Mercury.
The digital identity and verifiable claims could be extended beyond the founding process and in premise, could always be applied when verifiable proofs need to be presented. This could mean digitalizing all credentials from driving licenses, identification cards, passwords, usernames, powers of attorney to academic diplomas and so on. Anytime when a credential needs to be used it could be digitalized in the same way as was shown in Project Mercury.
The signing of founding documents is also only one example of a contract that could be digitalized and signed in a decentralized way. Again, there are numerous contracts that could be signed digitally by using the same principles applied in Project Mercury. Therefore, the implications of Project Mercury go way beyond the company's founding process. With this in mind, there are numerous different applications, and instead of thinking only one application this should be seen as a broader context; decentralized data ecosystem.
Therefore, the broader impact could probably come from future applications after the LLC is founded digitally and has a digital identity. Due to the digitalization of the company identity and its shareholder register, the company’s shares could be digitalized and tokenized. This could enable a globally digitally verifiable and traceable ownership structure without the need for centralized parties.
Project Jupiter is a continuum from Project Mercury. The aim of Project Jupiter is to create a fully decentralized trade network for non-listed company shares. Project Mercury acted as a foundation for Project Jupiter, which could be built-on. Project Jupiter demonstrates how issuance and trading on non-listed company shares can be fully digitalized. Digital identity with digitally verifiable and traceable ownership structure enables the trading of unlisted company shares in the Corda-network. Project Jupiter demonstrates three core functionalities of the network: Founding share issuance, founding round, and trading of shares.
This network enables companies, shareholders, and investors to trade and manage non-listed company shares. Project Jupiter includes private and public entities, creating a market-driven, legally compliant network of services. This creates a market opportunity for both primary and secondary services related to non-listed shares. As a second proof of concept, this also strengthens the feasibility of the Corda and Indy-based digital company network.
Currently, the shares of unlisted companies are illiquid, and this kind of service could increase the liquidity of unlisted shares, thus introducing a new asset class to asset management services. This could be a significant disruption in corporate equity finance. The value of this market is enormous in the Finnish scale. The estimated value of unquoted shares held by Finnish households is 61 billion euros, and enterprises and non-profits are estimated to own approximately shares worth of 130 billion euros. Together accounting almost 200 billion worth of value which can be seen from Table 16 below. (Project Jupiter 2019)
Value of unlisted shares Entity
61 Billion Euros Finnish households
130 Billion Euros Enterprises and nonprofits
348 Million Euros Investments into Finnish startups and early-stage growth companies
Table 16. The value of unlisted shared held by different entities in Finland The buying and selling of unlisted shares are manual activity and there are only a couple of secondary marketplaces for unlisted shares which only account for a fraction of the total amount of unlisted shares. As a result, this asset class lacks liquidity which affects the value of unlisted shares. For highly illiquid assets, the value is lower since the security cannot be easily traded into cash by using its fair market value. Therefore, increased liquidity often increases the value of an asset. This is known as the liquidity premium phenomenon. The liquidity premium is high for most of the unlisted shares thus decreasing the market value of the shares. Due to the increased liquidity, financing for unlisted companies becomes easier and the shares could be used as a collateral asset.
Project Jupiter offers a new opportunity to develop and maintain the primary and secondary marketplace for non-listed shares for service providers. A better understanding of the value of unlisted shares and up to date information related to the ownership structure of unlisted companies makes it possible to form a better picture of both shareholders as well as the company’s wealth. This means that FIs that are part of the network could offer better wealth management and advisory services for clients with unlisted shares and even new products for investors which would prefer to invest in them.
Public authorities benefit from Project Jupiter as well since they get higher quality and up-to-date information related to the ownership structure of companies and to conducted trades.
Markets become more transparent, and real-time information enables real-time taxation and register updates. According to Project Jupiter this “can be seen as a good example of public-private co-operation where administrative burden can be reduced”.
8 CONCLUSION AND DISCUSSION
In this chapter, the conclusion of the thesis is discussed, and the research questions that were presented in the introduction chapter are answered. Critique and limitations of this thesis are outlined and at the end of this chapter, possible future research objectives are presented.