The rise of the firm in the 20th century paved the way for the industrial and digital revolution. Based on a legal structure that provided for limited liability as well as legally enforceable ownership structures, companies flourished. It allowed risk-taking and rewarded founders, investors, and others with their fair share in the endeavor. Enormous wealth, products, and services were created that would not have been dreamed of only a few decades earlier.
Beginnings
The firm was held together by contracts that were written on paper, notarized, wet-signed, and stored in the company’s safe. The company’s shares became tradeable on stock exchanges, together with banks that acted as custodians for the paper shares.
Not much has fundamentally changed in this structure since then.
Web3 emerges
At the beginning of the 21st century, we witnessed the development and rise of blockchain technology. Using cryptographic signatures, hashes, and Merkle trees, a tamper-proof source of truth was created that enabled true digital ownership and directly executable financial contracts.
Nowadays, technically, there is no need for third parties and custodians. Shared distribution and changes in ownership can be directly managed within a smart contract on a blockchain. Payments and other terms can be encoded and executed in smart contracts.