Modern technology enables stock markets to be faster and more complex than ever.
But while the speed of order executions are infinitely more impressive across the board, the conceptual backbone behind the stock market itself hasn’t changed much. In fact, the model we use today for settling trades and ensuring proper share ownership is still based on the one initially created in the 17th Century.
A Decentralization of Equities?
Today’s infographic comes to us from Equibit, and it envisions what a decentralized securities platform could look like.
In such a paradigm, the settlement of trades would not occur through centralized transfer agents, but instead through a blockchain with this feature “built in”.
The application of blockchain technology could take the modernization of the stock market one step further. Instead of technology being used simply to speed up more complex transactions, the blockchain could change how the plumbing behind the system works to mitigate current risks and problems.
But to understand how transformative this idea is, we need to look at the history behind the current model first.
The Roots of the Modern Market
The roots of the modern stock market can be traced back to Amsterdam in the year 1602, when the Dutch East India Company became the world’s first “publicly traded” company.
Trade missions to the West Indies were risky and expensive – so shares and bonds in the company were initially sold to a large pool of interested investors to spread the risk. In turn, backers of the company received a guarantee of some future share of profits.
As investors began speculating about the prospects of the Dutch East India Company, a secondary market quickly developed for these securities. People bought and sold stock in high volumes, and a central registrar tracked the transfer of shares between parties.
The Backbone of Today’s Market
Over 400 years later, the stock market is not that much different from the earliest exchange found in Amsterdam.
Modern computing and the internet have sped up transactions so they can be executed in milliseconds, but the conceptual backbone of the market hasn’t changed at all.
Stock Transfer Agents are the centralized registrars in the background that track share ownership for issuers and the stock market. They are a third party that will cancel the share certificate for the investor that sold the shares, and substitute the new owner’s name on the official master shareholder listing.
There are over 130 stock transfer agents in the USA and Canada, maintaining the records of more than 100 million shareholders on behalf of over 15,000 issuers.
New Technology, Old Model
While modern stock transfer agents use today’s technology, the same old model persists – and it creates multiple industry problems:
Centralized and expensive
- Depositories and transfer agents are a single point of failure
- Registration, transfer, distribution, scrutineering, courier fees
- The more widely held, the higher the administration costs
- Information asymmetry leads to market advantages
- Forged securities still a concern
- Counterparty risk is systemic
Furthermore, legal ownership rests with transfer agents in most jurisdictions. Investors actually do not have title.
At the same time, the industry is huge – just one company, The Depository Trust & Clearing Corporation (DTCC) is the highest financial value processor in the world with $1.6 quadrillion in transactions in 2016.
The Problem With Centralization
During the Financial Crisis, the problems of increased centralization and limited transparency reared their ugly head.
Companies like Lehman Brothers and MF Global self-destructed – and nobody knew what kind of assets they had off their balance sheets.
If an accurate [blockchain] record of all of Lehman’s transactions had been available in 2008, then Lehman’s prudential regulators could have used data mining tools, smart contracts and other analytical applications to recognize anomalies. Regulators could have reacted sooner to Lehman’s deteriorating creditworthiness.
– J. Christopher Giancarlo, Commodity Futures Trading Commission
This lack of clarity and risk helped drive hysteria, ultimately exacerbating the extent of the crisis. Because no one could quantify the risks, investors liquidated their assets. More selling meant even less liquidity.
Enter the Blockchain
Instead of putting all stock transactions through a centralized hub, the blockchain can be used to directly transfer share ownership between investors.
Here’s how a decentralized securities platform could work:
- Somebody decides to transfer a security.
- The transaction is broadcast to a P2P network consisting of computers known as nodes.
- The network of nodes validates the transaction and user’s status using known algorithms. A valid transaction will transfer the title of the security.
- Once verified, the transaction is combined with other transactions to create a new block of data for the ledger and thus completing the transaction.
In other words, stock exchanges could run using a blockchain under the hood, with no longer any need for a centralized settlement or transfer of share certificates.
This is cheaper, faster, reduces risks, and more secure. It also would be fully transparent.
Even better, such a platform could also serve as the base for other value adds – and fully transform the way we think about equity markets.
Companies Gone Public in 2021: Visualizing IPO Valuations
Tracking the companies that have gone public in 2021, their valuation, and how they did it.
Companies Gone Public in 2021: Visualizing Valuations
Despite its many tumultuous turns, last year was a productive year for global markets, and companies going public in 2021 benefited.
From much-hyped tech initial public offerings (IPOs) to food and healthcare services, many companies with already large followings have gone public this year. Some were supposed to go public in 2020 but got delayed due to the pandemic, and others saw the opportunity to take advantage of a strong current market.
This graphic measures 68 companies that have gone public in 2021 — including IPOs, SPACs, and Direct Listings—as well as their subsequent valuations after listing.
Who’s Gone Public in 2021?
Historically, companies that wanted to go public employed one main method above others: the initial public offering (IPO).
But companies going public today readily choose from one of three different options, depending on market situations, associated costs, and shareholder preference:
- Initial Public Offering (IPO): A private company creates new shares which are underwritten by a financial organization and sold to the public.
- Special Purpose Acquisition Company (SPAC): A separate company with no operations is created strictly to raise capital to acquire the company going public. SPACs are the fastest method of going public, and have become popular in recent years.
- Direct Listing: A private company enters a market with only existing, outstanding shares being traded and no new shares created. The cost is lower than that of an IPO, since no fees need to be paid for underwriting.
The majority of companies going public in 2021 chose the IPO route, but some of the biggest valuations resulted from direct listings.
|Listing Date||Company||Valuation ($B)||Listing Type|
|21-Jan-21||Hims and Hers Health||$1.6||SPAC|
|05-May-21||The Honest Company||$1.4||IPO|
|07-May-21||Blade Air Mobility||$0.83||SPAC|
|29-Sep-21||Warby Parker||$6.0||Direct Listing|
|27-Oct-21||Rent the Runway||$1.7||IPO|
Though there are many well-known names in the list, one of the biggest through lines continues to be the importance of tech.
A majority of 2021’s newly public companies have been in tech, including multiple mobile apps, websites, and online services. The two biggest IPOs so far were South Korea’s Coupang, an online marketplace valued at $60 billion after going public, and China’s ride-hailing app Didi Chuxing, the year’s largest post-IPO valuation at $73 billion.
And there were many apps and services going public through other means as well. Gaming company Roblox went public through a direct listing, earning a valuation of $30 billion, and cryptocurrency platform Coinbase has earned the year’s largest valuation so far, with an $86 billion valuation following its direct listing.
Big Companies Going Public in 2022
As with every year, some of the biggest companies going public were lined up for the later half.
Tech will continue to be the talk of the markets. Payment processing firm Stripe was setting up to be the year’s biggest IPO with an estimated valuation of $95 billion, but got delayed. Likewise, online grocery delivery platform InstaCart, which saw a big upswing in traction due to the pandemic, has been looking to go public at a valuation of at least $39 billion.
Of course, it’s common that potential public listings and offerings fall through. Whether they get delayed due to weak market conditions or cancelled at the last minute, anything can happen when it comes to public markets.
This post has been updated as of January 1, 2022.
A Visual Guide to Profile Picture NFTs
Feeling bored on social media? Consider investing in profile picture NFTs, one of the most popular digital assets being traded today.
A Visual Guide to Profile Picture NFTs
How do you represent yourself on social media? For most people it’s a selfie, a photo with their friends, or a picture of their pet—but what about a digitally-created character?
Profile picture NFTs are pieces of digital artwork that people use to express themselves online. Each item is a depiction of a character’s face, and has a unique mix of attributes that gives it a sense of collectability.
Like other NFTs, they’re secured on a blockchain and can be bought and sold for cryptocurrency. And while there’s nothing to stop you from screenshotting an NFT and using it for your own profile, the market for these items continues to grow.
To learn more, this infographic explains how three well-known profile picture NFT collections were created.
CryptoPunks are commonly regarded as one of the first examples of NFTs. The collection consists of 10,000 unique “punks” and was released in 2017 by Larva Labs.
One interesting fact is that these NFTs were originally given out for free—today, they are worth thousands or millions of dollars each. According to OpenSea, one of the largest NFT marketplaces, CryptoPunk #3100 was sold for 4,200 Ethereum (roughly $7.6 million) in March 2021.
A large component of #3100’s perceived value is its blue alien skin, which only eight other punks have. In other words, it’s incredibly rare. The following table shows the species distribution of the CryptoPunks collection.
Bored Ape Yacht Club
Next is the Bored Ape Yacht Club (BAYC), another collection of 10,000 unique profile picture NFTs. Unlike CryptoPunks, BAYC NFTs show both the head and torso of a character (in this case, an ape).
This opens up many combinations of clothing items, facial features, and accessories. Altogether, there are seven categories of attributes: Background color, Clothes, Earring, Eyes, Fur, Hat, and Mouth.
The following table lists some examples of BAYC attributes, and their % rarity. To explore further, visit the BAYC gallery.
|Attribute Category||Attribute Name||% Rarity|
BAYC NFTs also grant access to members-only benefits. This includes access to a collaborative graffiti board, as well as other NFTs from spin-off collections like the Bored Ape Kennel Club (BAKC). As its name suggests, the BAKC is a collection of dogs, rather than apes.
Cool Cats NFT
The last collection is Cool Cats NFT, which again amounts to 10,000 images. Cool Cats were minted at a cost of 0.06 Ethereum each, or roughly $200. The act of “minting” an NFT is similar to when metal coins are entered into circulation.
Each Cool Cat NFT is a depiction of a cartoon cat with a varying number of facial features, hats, and shirts. Altogether, there are over 300,000 possible options that could be included.
Building Your Identity in the Metaverse
A criticism of today’s social media is that there’s little room to express yourself.
Think back, for a moment, to the days of MySpace. Users could spend hours customizing their profile page, adding music, art, and whatever else they felt was an expression of themselves. As the platform’s name implied, it was a space that belonged to you.
The metaverse offers something similar. To take part in a virtual universe, you need an avatar—a digital manifestation of yourself. Avatars will be highly customizable and far less constrained by the limitations of the real world.
If you’re having trouble imagining this, check out VR Chat, a virtual reality game where players socialize as aliens, monsters, and other “interesting” beings.
This may help to explain the recent craze around profile picture NFTs. When the metaverse arrives, these NFTs could become a user’s avatar. After all, who wouldn’t want to have blue alien skin?
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