FairCoop, Swarm, and “Cryptoequity” Funding

Coopshares cryptoequity crowdfundingThis blog has been following the adventures of the FairCoop project since it began and we are now seeing another development.

Coopshares is an emerging example of a ‘cryptoequity’ platform, launching during the Ouishare Fest (where FairCoop was nominated for the Collaborative Finance award).

I have been in touch with Enric Duran, the founder of FairCoop, and he has explained to me the intention behind the project: basically the idea is that each investment (which can be made in a combination of Faircoins (the FairCoop’s own cryptocurrency) and Euros, or Faircoins alone), will be rewarded with P2P Equity Tokens, designed to pay a dividend based on both the predicted rise in the Faircoin value, and any profits made by the Fairstarts cooperative projects. If a project is for the commons and will not produce any financial profit, reputation points will be awarded instead.

The overall plan is to attract investment to secure both the long-term future of FairCoop, add liquidity to the financial ecosystem within the FairCoop, and help kickstart individual cooperative projects which will be launched under its FairStarts incubator programme.

From the Coopshares website:

Coopshares will be a P2P equity crowdfunding platform focused on cooperatives, social enterprises, and P2P production projects. It will be endorsed by FairCoop and based on Faircoin.

Coopshares will facilitate investments in cooperative projects without the gambling component of asset trading that usually exists in the wider cryptocurrency environment and in the equities markets

The stakes in CoopShares are tied to the Faircoin price, which allows investors to obtain profits with the growth both of Faircoin, and of the entire ecosystem of cooperatives linked to FairCoop, without compromising cooperative values and principles.

Also, Coopshares will use blockchain technology to provide tools to cooperatives for decentralized organizing so that they can encourage the participation of all stakeholders, from workers to investors.

Swarm Logo There is some overlap between this Coopshares initiative and another ‘cryptoequity’ platform, Swarm, launched by Joel Dietz and friends recently, and in fact Coopshares is also one of the projects features on the Swarm website.

After the Occulus Rift affair (let’s call it), where the crowdfunders who literally kickstarted the virtual reality project failed to see any sort of return (other than their reward from the original crowdfunding campaign) after the company was sold to Facebook for two billion dollars, there has been an awareness that while ‘traditional’ crowdfunding is fine in the case of a one-off project like a book or music album, where the project is an enterprise which is likely to generate ongoing profits, ‘crowdinvesting’ would be preferable, rather than leaving the venture capitalists to clean up on the back of the community’s well-intentioned original investment. And also, with cooperative projects, very often it is simply not acceptable to receive VC funding and submit oneself to the accompanying difficult moment when large returns on investments are demanded, often at the cost of warping the principles which inspired the cooperative in the first place.

Both Swarm and Coopshares are hoping to avoid this situation by allowing smaller investors to get involved and by putting cooperative principles before pure profit. Thus it becomes a combination of a crowdfund where the investors merely wish to support worthwhile projects, and a traditional equity investment which pays a dividend.

The proposed addition of voting rights and reputation systems, both based on blockchain technology, within what are called DCOs or ‘Distributed Collaborative Organizations’ could turn this sort of cryptoequity system into something genuinely innovative, potentially allowing a cooperative to give many many stakeholders a voice in its running, and possibly outperforming traditional hierarchical companies in the process.

Right now both Coopshares and Swarm are in the early stages and need investment and participation to get started. If they are successful, it could be an exciting new development in the way in which cooperative projects are initiated and funded.

(Disclaimer: I am an unpaid volunteer member of the Ecosystem Council of FairCoop – addition to the disclaimer: it’s open to everyone so come and get involved!).

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