This is a story about modern blockchain and old-fashioned business ledgers.
You might associate blockchain with crypto bros, NFT monkeys and get-rich schemes that seem too good to be true. That’s not this story, because it wasn’t always that way. Yes, blockchain and cryptocurrency have been tied together since most people have heard of them. But half a decade ago, blockchain was seen as something that would slide seamlessly into our lives like Twitter or high-definition television, only its purpose would be more impactful.
Bitcoin would likely implode like a 16th-century tulip bubble, they said, but the tech behind it, the blockchain, would be forever.
An asset in the blockchain can, in theory, never be touched or altered by unverified entities, whether it be a virtual coin, digital artwork, a deed or a vote. At its most basic, it’s a list of records linked together, with all changes, transactions and timestamps viewable to anyone who accesses them. This makes it especially secure — which is why it’s often used for currency that isn’t controlled by a government.
Delaware, with its more than 1.6 million incorporated entities — about a corporation and a half for each resident of the state — including 68% of all Forbes 500 companies, sees a lot of corporate paperwork. Which is why, in 2016, then-Gov. Jack Markell decided to try and blaze the blockchain trail on the state level by launching the Delaware Blockchain Initiative, including the appointment of a state blockchain ombudsman, Andrea Tinianow.
The Delaware Blockchain Initiative's goal was to create a new method of maintaining corporations' lists of stockholders — on a state-run blockchain, not a psychical ledger.
The initiative as it was introduced was wider reaching, but its specific goal was to create a new method of maintaining a corporation’s list of stockholders, which Delaware corporations (including all of those Fortune 500s) are required to do. Ordinarily, this has been done with a physical stock ledger. The goal was for companies to maintain those lists on a state-run blockchain.
The change to blockchain is, at least in theory, time saving, more secure, and will reduce errors that lead to litigation. Having the state run the blockchain was a big deal, even for something as seemingly mundane as stock ledgers. And it would need a lot of resources — for something as mundane as ledgers.
Delaware launched of a proof-of-concept with blockchain technology provider Symbiont. Then, 2017 brought change to state leadership, as Markell finished his two terms and Gov. John Carney took over. That same year, Carney signed the passage of an amendment to Delaware General Corporation Law (DGCL) that allowed for the use of blockchain in corporate record keeping.
At the time, it was often said that the amendment would authorize the tokenization of shares of stock in Delaware corporations. That, as Tiananow explained in a Forbes post, was not true.
Still, the amendment caused a buzz. The podcast Analysis in Chains devoted a 2018 episode to “The Delaware Decision,” where hosts Neal Kierans and Nathan Williams debated the potential impact of the amendment and when the technology would become common enough that most corporations would use blockchain for its stock record keeping.
It's unknown how many Delaware corporations are using blockchain for stock ledgers.
“Blockchain could be used different type of ways. It’s really exciting,” Kierans said on the podcast. “But I still think we could be maybe five or 10 years away until we start seeing corporations take on blockchain as a form of recording of information.”
It’s been four years since that episode, and while corporations have the state’s authorization to use blockchain for record keeping, it’s unknown how many Delaware corporations are using it for stock ledgers. However, blockchain is increasingly used in other areas. Companies like Walmart and UPS use it for logistics tracking, and it’s becoming a common technology in industries such as finance, healthcare and energy.
The reason little is known as far as how many Delaware corporations use blockchain for stock ledgers is that, while the 2017 amendment to the DGCL was a direct result of the Delaware Blockchain Initiative, it doesn’t include any state infrastructure. It simply allows Delaware corporations to use blockchain on their own if they choose.
Technical.ly has reached out to the governor’s office and several individuals directly involved with the evolution of the initiative and has not yet received a response. It’s also unclear what came of the Symbiont proof-of-concept.
John Williams, founder of Wilmington incorporation services company Inc. Now, has been watching things play out. Using unregulated blockchain for sensitive business records is is not attractive to a lot of companies, he says.
"I think there's a value in having a government actor behind it because it essentially increases the trust factor."
“With the government, there’s a little extra confidence in the system,” Williams told Technical.ly. “And I think there’s a lot of value in that. Like, you’ve heard all about NFTs. What if an NFT was actually on a state ledger instead of some sort of private ledger? Would that give you a little more confidence in it? I think there’s a value in having a government actor behind it because it essentially increases the trust factor.”
A lot of companies in the incorporation industry (which, in Delaware, largely involves pairing companies with registered agents in the state) are less open to change, a likely factor in why the Delaware Blockchain Initiative seems to have evolved into simply giving permission to use the technology as a private ledger if you want. It is, despite the fact that in Delaware it represents behemoth companies such as Coca-Cola and Meta, an old-fashioned industry.
“The registered agent business started when there used to be snake oil salesman that would go around, and people would get poisoned, and they didn’t know who to sue,” Williams said. “And they say, ‘Well, if you’re a new business with our state, you have to have an office where we can drop off a lawsuit physically within the borders of the state.’ We still have that concept over 50, maybe 200 years later. Do we need to have an old-fashioned sort of office with paper delivery concepts still? I think to some extent, there’s a lot of people in our industry who are very comfortable where they are, and they’re worried that electronic is going to upset the entire industry.”
What the industry should really be looking at as a disruptor, he said, is a recently filed Corporate Transparency Act, part of the Defense Authorization Act. But that’s another story.
Do you run or work for a Delaware corporation that uses blockchain for its stock ledger? Does the company use blockchain for other purposes, such as logistics? Should blockchain stay private or should Delaware revisit the idea of a public framework, as Wyoming is doing? We welcome your feedback: Drop us a line at firstname.lastname@example.org.
- Delaware Blockchain Initiative: Transforming the Foundational Infrastructure of Corporate Finance (Harvard Law)
- A Split Emerges In Blockchain Law: Wyoming’s Approach Versus The Supplemental Act (Andrea Tinianow)
- Implications of the Delaware Blockchain Amendment (LinkedIn)
- Delaware Paves the Way for the Use of Blockchain Technology (Morrison Foerester)