Introducing myStake

Delivering transparency, liquidity, and confidence to stakeholders in companies

The status quo of company corporate governance and compliance is slow, mostly people driven, and expensive. Both accountants and lawyers are required at every step of any given process due to a need to provide a layer of independence and trust. Adding to this, in Australia, the Australian Securities and Investments Commission (ASIC) requires Company Secretaries and Directors to fulfil a number of responsibilities. Failure to do so incurs significant penalties — in 2016 ASIC collected A$24 million in late fees alone and $118.5 million in penalties and fines. This staggering statistic reflects that the current world of governance and corporate compliance is murky, opaque, and driven by advisors, not by company owners.

myStake is a new platform aimed at changing this status quo and bringing corporate compliance and governance into the twenty-first century. Our belief is that too many companies, in particular private companies, hold their key shareholder information in binders hidden away in the offices of their accountants and/or lawyers. This is information that should be not only visible, but directly accessible by shareholders who ultimately own the company. myStake aims to achieve this by giving unprecedented transparency to shareholders in their companies using the Ethereum blockchain, mobile app, and web app.

myStake aggregates all the key information a shareholder might expect to see into the one location. This might include existing shareholdings in companies on the myStake platform, announcements made by the company, and key performance metrics such as historical share price, net investments, and distribution history. myStake also provides the directors of companies the means of making key decisions such as the authorisation and signing of share certificates, organise both general and board meetings, and store and manage key documents. Driving all of this is the Company Secretary, whom we want to empower in ensuring their company’s records are correct and up-to-date. Corporate governance is a complex and multi-faceted process but one that is made more structured and easier through myStake.

Core to myStake is the delivery of greater transparency to stakeholders in companies. Transparency allows for stakeholders, in particular the board and the shareholders it represents, to make informed decisions. It also allows shareholders to ask more questions of their management and board, preventing the kind of agency issues that could potentially arise as a result of lack of information or communication. The key difference myStake provides is that users can independently verify the information the company provides, and identify for themselves any mismatches or gaps in that information.

The transparency myStake delivers to companies on its platform creates confidence. Investors are more confident that the information they have access to is correct so that they can make their own informed decisions. Directors are more confident that their responsibilities and liabilities are looked after. Company Secretaries are more confident in ensuring all company records are correct and up-to-date, and that their obligations to ASIC are met. The end result is that all stakeholders in a company have greater confidence due to having access to a defensible audit trail of all company history.

With greater confidence comes a greater propensity to invest, and hence greater liquidity. Investors, for the first time, can see all the information they might need to make their investing decision in the same way they might have with a public company. Further, myStake will allow the instant transfer of value between parties, meaning both primary issuance and secondary trading of unlisted securities will become significantly more efficient, cheaper, and more simple for all parties.

myStake is a groundbreaking application in delivering the first commercial, hybrid web 2.0/3.0 web application in Australia. Building such an application involved looking at the application holistically, and deciding what compromises would be required in balancing the requirements of both web 2.0 and web 3.0 applications. The key to doing this is combining a Meteor based web application, with a React front-end to the Ethereum blockchain using the web3.js API. The ultimate aim is to deliver a real-time application that abstracts away all of the technical difficulties that blockchain applications often face in reaching mainstream usage. A lot of this thinking was described in a previous article written — accessible here

Ultimately, the core innovation is the tokenisation of shares using the Ethereum blockchain. By turning each company into a smart contract, that manages and issues shares as ERC20 tokens, immediately every action performed by that company is recorded and made immutable by the Ethereum blockchain. The upshot is that the share tokens are usable like any other cryptocurrency — you can send and receive instantly, log data against the tokens and wallets that the tokens are stored in, and independently verify the existence of those tokens, separate to what information is delivered by either the company or the web application.

As an additional layer, deep integration with ASIC enables a new level of compliance. This is the three points of truth system — what does the app say, what does the blockchain say, and what does the ASIC register say? In following these three points of truth, if at any given point of time one is out of sync, stakeholders are immediately alerted and can set about rectifying the issue immediately.

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