The new age of record keeping.
Blockchain got a big boost on Tuesday when a Delaware law went into effect that lets corporations maintain shareholder lists, along with other corporate records, using the technology. Already, several companies, including the retailer Overstock, say they intend to use it.
Delaware’s decision to bless blockchain—which is a type of software that creates indelible records across multiple computers—is significant because the state is America’s de facto corporate law capital, and more than two-thirds of Fortune 500 companies are incorporated there.
According to lawyers and state officials, the new law ensures companies will not face legal trouble if they choose to keep a list of shareholder names, which they must do by law, on a blockchain instead of conventional methods like an Excel spreadsheet or a SQL database.
“The Delaware statute is enabling—it doesn’t require any particular type of blockchain ledger,” said Marco Santori, a partner with the law firm Cooley, who advised the state on the plan.
Santori said it will take some time for companies to get up to speed on the technology, and for vendors to build tools to begin recording their shareholder lists and other documents onto blockchains. He added that a number of big companies have been speaking with Delaware officials about using the technology, but was not at liberty to say which ones.
In the case of Overstock, Fortune asked the retailer—which recently began trading Series A Preferred shares on a blockchain platform—about the Delaware law, and a company official confirmed its subsidiary, Medici Ventures, will take advantage of the new listing option.
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“[We’re] very excited about the possibilities this forward-thinking legislation from Delaware affords corporations, and plans to offer its shares and begin managing its shareholder records on the blockchain as soon as possible,” said Jonathan Johnson, president of Medici Ventures and an Overstock.com board member.
For now, though, many other companies may regard a blockchain-based shareholder ledger as a novelty. But that will likely change as blockchain’s implications for corporate record-keeping become more pronounced.
“Every corporate document..could be recorded”
Blockchain technology, along with the cryptocurrencies like bitcoin that are created by it, is the midst of a hype cycle. Buoyed by investors who liken the current state of blockchain to the early days of the Internet, firms of all sorts are rushing to get a piece of it.
This hype is no doubt overblown but, as with other revolutionary technologies, people are likely overstating its short term impact while underestimating its long term effects. The Delaware law could be a case in point. By this time next year, it’s unlikely corporate record keeping will be much different than it is now. But in two to five years, the change could be profound.
One reason is that governments, including the state of Delaware, are also adopting blockchain technology. According to state official Andrea Tinianow—dubbed “the blockchain czarina” by the lawyer Santori—the state is working with a company called Symbiont to integrate its own records onto blockchain ledgers.
Tinianow, who predicts widespread of the technology is “around the corner,” added that registered agents and law firms are also working to add their own nodes to blockchains. All of this, together, will serve to replace our current system of corporate record-keeping—in which documents are stored in disparate places online and off—with a unified and secure ledger.
“When an incorporation happens, the info will flow directly onto a stock ledger,” said Tinianow, whose formal title is Director of Global Delaware.
John Mark Zeberkiewicz, a partner at the law firm Richards, Layton & Finger, likewise predicted the Delaware initiative is just the beginning of a transformation in how companies document their existence.
“Think about what a corporation is—on some level, a corporation is its records. Ultimately, just about every corporate document and transaction could be recorded on the blockchain, creating an immutable record of all corporate acts,” said Zeberkiewicz.