CROWD FUNDING THROUGH BLOCK CHAIN

Block chain, the technology behind Bit coin, promises to be nothing less than Internet 2.0. The financial services industry, in particular, is preparing for the disruption block chain/distributed ledger technology promises to cause. In the current business environment, the majority of startups and small businesses have to look for alternative sources of funding given that ‘going public’ is increasingly expensive. The crowd funding space has seen tremendous growth as an alternative way to raise capital by businesses. However, these crowd funded shares cannot be traded for 7 - 10 years on average on any given platform in the current market scenario. To build a trading platform on the block chain which completely P2P, immutable, fully transparent and low cost is presents some key design issues. In particular, the issue of liquidity - and price discovery - on the block chain continues to be a puzzle. At the same time, the proposition of removing middlemen from equities trading is a very attractive one, streamlining the process of capital formation with higher market efficiency. The current paper addresses the following key questions: How can a DLT (Distributed Ledger Technology) trading platform ensure adequate liquidity? What would be the process of price discovery? While some recent studies hail block chain technology as a boom for market liquidity, it is not immediately clear what the impact of P2P trading would be on the prices of various stocks. There are no ‘solutions’ just yet.