Introducing the Open Cap Table Protocol

Transcript

Hey everyone. Well, thank you for attending this uh this presentation. I know I'm between I'm between you and lunch. So, thank you for being here. Um yeah, so today I wanted to introduce you to the open captive protocol. So, I'm Tibo. I'm the CTO at at Fairment. First always useful to go through some definitions because uh it's a it's a domain that is brand new to to crypto. So what is a security? A security is a financial instrument. Okay, that is defined by a legal contract. And there's like two types of securities and it's important to make the difference between the two. Um the first one is like debt securities, right? which represent a

loan to somebody or a company and the one that interest us today is equity security. Equity security represent ownership in a company, right? And so it comes with additional rights like financial rights, legal rights, voting rights. And this ownership is tracked in something that we call a cap table, right? So cap table is a capitalization table. It tracks who owns what in a company. And then two other definitions like transfer agent transfer agent in the US market because all this talk is mostly going to be US market oriented because this is this is my bread and butter and what I operate on. Um transfer agent is a regulated entity

that is in charge of handling the transfer of securities meaning like the recording when securities have been transferred and the regulated entity that actually executes the transactions of equity is a broker dealer. That being said let's move on. So it doesn't u you haven't missed it. The SEC in the US has made a complete shift over the past six months, right? Like before crypto was personal grata, now like uh they are open arms with crypto. And this is like Chair Atkins one of these latest twist tweet tweets.

So saying that yeah everything is going to be tokenized and so this is how Wall Street heard it. Okay. So basically it's game on, right? and and we see that like people who would not return our calls like a year ago now they're all like banging at the door. So, so there's a huge difference um if you're in the US. Um so the question is how do you put equity on chain right? Is it as simple as just like creating a token that represent the share of a company? I wish it was. Uh it is not. It is more complicated than this because yeah this is basically uh so fermit has been around since 2019 and so we had our our fair share of trial and errors and so

this is probably like the first version of ferment right. Hey, it's easy. Let's create a token that represents equity and uh issue it to investors. The problem is you realize soon enough that okay, it's very easy to issue a token on on chain. It's very hard to move it. And why is it hard to move it? It's because all the intermediaries that you need from a regulation standpoint to interact with when you want to transfer equity, they're all offchain. The capable uh vendor is offchain. Transfer agent is offchain. The broker dealer is offchain.

So that means that by creating your token, you actually added complexity instead of removing complexity. And so so that was this is why like we were like okay there must be a better way. But first little help for you guys because like the the space is now very hot. Uh a lot of people is talking about like onchain stocks onchain equity but there's a lot of fluff but a lot and I mean it. And so here's a little bingo card. If you ever hear these type of claims regarding onchain equity or onchain stocks, your matter should like stop being triggered. Okay.

So, oh solution doesn't need KYC. Yeah, right. Impossible. Uh you can trade it on unis swap. No sir, you cannot like same with like a cannot use your shares as collateral on a not yet. You cannot do that today. Um we remove all intermediaries. No. Like when it comes to securities, you will have at least one intermediary. You cannot have zero intermediaries. Well, at least at scale like it's a simplification. Um you don't need a broker dealer stuff like this. So this is like keep that in mind. If you hear that you should have little alarms ringing in your in your head. So the solution that we are implementing and which occurred to us is like you need to break free from the off-chain infrastructure and the only

way to do that is to actually record the source of truth of who owns what meaning your cap table onchain. If you do that then now you can have really end to end onchain equity transactions because the source of truth of who owns what is now actually onchain. It's not in a spreadsheet in a private database somewhere. So that's what fair is all about. So fair we've uh we're an SEC regulated transfer agent since 2023 and we created the open capable protocol to turn cap tableables into onchain smart contracts.

So in a glance the open captable protocol so obviously it's fully open source MIT license compatible with any EVM blockchain. Um it's an implementation of the open capable format. Why is it important? because um there's a lot of knowledge in captables and and today it's mostly lawyers who deal with capables and so you cannot just invent a new format how to store and record a capable. Good news is we as well as like all these lawyers that you see here in the US, we created the open coalition, the open capital coalition which basically says, hey, let's create the first open-source format for capitaliz capitalization data. And so

what the open protocol, open capital protocol is is we took this format and we implemented it onchain. It's privacy preserving and it's token agnostic meaning it doesn't come by default with any sort of token. It records the ledger. It puts on on the ledger the story of your capable and all your transactions but without necessarily having a token. And this delivers on the promise promise of onchain equity meaning like you can now self-custody like what are the benefits of onchain equity? Don't do that for just the the the sake of doing it. Self-custody. So you have like direct asset ownership on your wallet.

You see your position on like the companies you invested in. You have programmability. So instance settlement like uh atomic swaps, automated compliance, borderless markets of course like by definition you're global from day one. Full traceability and last but not least composibility. This is very important because this is I think the most exciting part about onchain equity is that it opens up a brand new design space on what you can do with your equity from the issuer side, the company side and from the investor side. So from the investor side for example you can collateralize your equity to take out cash. Uh from the investor side you can you can unlock liquidity much more

progressively than you can do today. Imagine for example if you were to say hey you know what we want to open up um some liquidity on our um on our stocks but we want the price to be X and that's the only price because the board decided that the price was X and we'll only allow like uh 100 more investors at this price. This is very hard to do like and very lawyer consuming stuff in the real world today like the goal with onchain equity is like just in a few clicks you set this up and then if you want to say hey you know what there's actually a lot of buy pressure let's do some price discovery let's increase like we said price was x what about we say price is now between x and z like uh and so these are all the things that are technically

possible in the paper world but practically impossible to do if you want to learn more about the open capture protocol, you can go like we published a full white paper. Um, so I encourage you to to read it. Um, it really details the entirety of the of the protocol and it's live today. Like we've been using it, we've we've built it, we've been using it oursel at Fairint and so we already on boarded more than a billion dollar of equity using the open capable protocol and the ambition is is huge. What we want to do is basically replace the DTCC. So what is the DTCC? It's very it's very big but it's very unknown. The

DTCC is like the depository and trust clearing corporation. That's this big monster thing in the middle of the US public markets because what it does is basically it's the is the centralizing entity who holds all the shares of all the public companies and it's the the entity that says okay like uh Robin Hood you have a million Apple shares like a Shal Fab you have 2 million Apple shares and so this is basically the database where all equity is recorded today and As long as you depend on the DTCC, you have a problem. You cannot really do onchain equity properly. And and this is by the way, this is the public market,

meaning like one transaction on the public market, like there's nine intermediaries. Like uh when you click on that little button, there's nine intermediaries. And what is very important to understand is that the private market there's none of this. Meaning at least the public market, we can say it's efficient, right? It works well. in the private market all of this is replaced by lawyers. So it's very slow it's very costly. Um and so that's this is why we think that the the most um the most value that the open capable can uh protocol can bring first is on the private market like basically we the open capable protocol you can think about it as like a DTCC for the private market. It brings an infrastructure that

is much needed on the private market. And yeah, so if with the open captive protocol basically if you want the if you want a an idea is that right now like you cannot trade equity on capables because captables are in a private database. They are disconnected. This is why at some point when you want to go public you need to take your shares, you need to list on a national exchange. You need to bring your shares to the DTCC. There's a whole process. It's very complicated. Uh now if your capable is a smart contract well everybody every market participant can now trade directly equity from your smart contract. It is extremely powerful and this is how you

break free with the current infrastructure of like um of equity transactions. And that's it. There's four a few minutes I think. So thank you very much if you want to drop me a note. So I'm Tibo. Um if you want to talk business, talk to my co-founder like so that's I don't have to do the the introduction myself. So Jice is the CEO of the of Perment. Um and that's it. And if you're a founder um and you want to future proof your company and save a lot of money, stop paying for carta, stop paying for all these capable solutions, just um on board on firming today.

Thank you very much. Thank you. Insightful question. Do we have any question? Yeah. Um, so I'm not familiar what with the term regulated DeFi. So can I use this on unis swap for example? So good question. So regulated DeFi, what we mean by regulated DeFi is that today you cannot use unis swap for example because in the US I'm talking US right in the US to make an equity transaction a broker dealer needs to be involved. So regulated DeFi is basically the same type of contracts like lending contracts

or like uh market maker contracts but that have been deployed and managed by a broker dealer. Right? So, so today if you ask me where is regulated D5, where do I use it? It's not yet there. We are building actually like this is why we're building the entire stack from scratch uh to make that happen. But that's the that's the only way you can do that. And this is why by the way I I I had a little yeah like supplement like to compare like Robin Hood like everything what that has been announced lately and they all have like tweaks right like it's not really stocks or if it's really stocks then they exclude all the principal jurisdictions. Um and and this is why like the there's a there's a race

today to bring equity onchain and so people are being very tactical in in finding workarounds on how to make it look like uh onchain stocks but in most cases it's not and uh and so this is why like we really thought this from first principle and we say okay if we are to bring equity on chain we need to bring capables and the source of truth of equity on chain. Um I have a another question is that possible? Yeah. Um, so you said it's private. So do you mean so is it confidential or private? And I mean does the the system know who I am or not? So yeah, the the way the open cattle works is there's like a there's an offchain component and an onchain component. Obviously we don't put PIIs

on chain or stuff like this. So there's like a a database that basically stores the sensitive information and then pushes on chain all the transactions and all but in a in a completely anonymized way. Okay, thank you. So, uh it definitely works for the US. Does it just work for Delaware companies or how about EU entities like the coming EU Inc. maybe or I mean in Germany and Austria we still need notaries which is a very Yeah. So unfortunately we're laser focused on the US right now. Um because our our thinking is like if we can make it work in the US, it's going to work everywhere else because the US

is the most complex and difficult jurisdiction to to go heads on. Um and also everything moves a lot right now, right? And so in Europe, we we looked at in the past a little bit like uh but there's no real um united European friend. Maybe there's the EU ink soon. So So exactly like I fingers crossed you can hear I'm French even though I live in the US. So, so I'm always rooting for Europe in the part of me and uh and I hope Europe does it well this time. But yeah, like the more you can be integrated uh the better. And in the US, is it just for like a Delaware company or also other type? Oh, it's also all sort of corporation as long as you have. So you like for LLC is a bit different, but usually LLC's you don't need to manage shareholders as much. Uh

it's it's simpler. Um most of the companies who grow and and in the end have the ambition to IPO or get acquired and stuff like this are all um C corps. They don't need to be from Delaware though like it can be any any C corp. Okay. Thank you. One last question. All good. Okay. Thank you Tibbo. Thank you very much. [Music]