• Xan Ditkoff

Digital Incorporation: Closer than You Think


The Blockstack team circa 2017

The below from Balaji reminded me of both my excitement for digital incorporation and how much closer we are to realizing that vision than is generally recognized.


One of the first apps created after I joined the Blockstack team was Misthos. Released by an independent team out of Berlin, the landing page describes as “the most advanced multisig bitcoin wallet for businesses, emphasizing frictionless setup, low risk and streamlined collaboration.” This isn’t wrong, but it misses the bigger picture.


Only the call to action on the landing page hints at the possibilities: “Use it for projects. Use it for payments.”


Apps like Misthos are the existing kernel of digital incorporation. They make it possible for any group to define a vehicle and create the main functions of incorporation: (1) define members, (2) define rules for collective decision making among those members, (3) receive payments and funding, (4) compensate members and nonmembers for contributions, (5) liquidate the vehicle when it no longer serves the intended purpose.


They’ve solved the thornier problems of decentralized digital structure. Complete with collective value, decision making, and compensation. What remains to be done can be roughly divided into two categories: incentive structures for contributors, and bridges to the real world with the same status as currently recognized corporations.


Incentive Structures

Incentive structures for members take the form of ownership right. Balaji points to issuing equity, but this can take the form of more novel instruments and structures. This could include tokens that vest over time, or smart contracts. Imagine rewarding a creator a percentage of revenue as long as their code is being used. 


What about those who are not members, but create value nonetheless? Aligning users and paying referral bonuses are two ways corporations compensate non-employee contributors today. What could be novel about digital incorporation is the ability to create a more fluid state between who is a member or “employee” and who is not. Individuals can become members with full rights, but based purely on value contribution. 


The future of a sizable amount of work is increasingly becoming both remote and gig based. Current corporate structures do a poor job of catering to this new reality, and do not equitably reward contributors over time. The fluidity enabled by digital incorporation and the incentives at disposal hold an opportunity to improve the situation. This one area where I expect to see a high degree of experimentation and innovation.


Bridges to the Real World

If digital incorporation doesn’t come with legally enforceable status, the above doesn’t matter. Let’s consider what could be added to Misthos. Spinning up a Misthos wallet could generate the necessary filings, legal framework, and associated protections in the real world that are most appropriate to the needs of the project. These frameworks and protections will need to be tested, established, and well understood in order for both founders and investors to gain the confidence to begin adopting this vision. 


Luckily, we can start small and simple. As Balaji offers, this may prove a potential competitive advantage of digital corporations: vehicles currently considered too small to incorporate could be perfect for this new model.


Incorporation to Fit the New Reality

To close, digital incorporation can not only lower the barriers to what can and should be incorporated, but also expands the idea of what it means to be an “employee” and be equitably compensated for work. As the nature of work continues to shift drastically over the next 20 years, digital incorporation could be the structural innovation on the other side of the coin that allows that new nature to flourish.


There is still a long way to go, but we are closer than may appear.


Thanks to the friends and colleagues who took the time to provide feedback on this piece.

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