The author recently read the book "The History of the World's First Exchange" by Lodwijk Petra, and discovered the similarities between the commercially developed Dutch securities market 400 years ago and the current blockchain project. This article will introduce some of the author's findings.

①Public Offering

On August 31, 1602, the "Public Offering" activity of a joint-stock company in Amsterdam, the Netherlands ended in the early morning of that day. At that time, a total of 1,143 people became the first shareholders of the company through the public offering, raising 3,674,945 Dutch guilders (367 Dutch guilders, the currency unit of the Netherlands at the time, were equivalent to 130 billion won today). This is the earliest financing activity for an unspecified majority in history, implemented by the Dutch East India Company.

In September 2014, the heat of the World Cup final between Germany and Argentina two months earlier was still lingering. As of the early morning of September 2, 2014 in Zug, Switzerland, the 42-day public financing (ICO) of Ethereum attracted more than 6,670 people (the actual number of account holders) to invest and raised about 30,000 bitcoins. According to the bitcoin market at that time, the financing scale reached about 20 billion won, ranking second in the history of cloud fund financing through the Internet. At that time, the public offering price of 1 ether was $0.31.

②Public offering method

The public offering process of the East India Company is roughly as follows: investors go directly to the home of one of the founders of the East India Company, the Dutch businessman Ben Ness, to express their investment intentions, and make a request to the clerk under the witness of witnesses. Write down your name and the amount you plan to subscribe on the account book (book), such as "Hong Giltong, 50 dong". At that time, there was no concept of stocks or securities in the form of certificates, and shares could only be allocated according to the investment amount of investors through book books.

The public offering process of Ethereum is also very similar. Investors must use bitcoins to subscribe, and need to transfer bitcoins to the account with the address "36PrZ1KHYMpqSyAQXSG8VwbUiq2EogxLo2" before the specified date. Investors can participate in the public offering through Coinbase exchange accounts or projects designed by Vitalik Buterin (the founder of Ethereum). After the Ethereum blockchain is launched, the accounts participating in the investment will be recorded in the blockchain in the form of "account name, amount of ether".

③Business model

The business model of the East India Company is simple: shipbuilding→trading→trading goods→distributing profits. At that time, the world was in the era of great voyages. After the ships from long voyages successfully completed trade activities and returned, investors could get a return of 2-3 times the investment. However, similar fundraising at that time was only carried out on a small scale for merchant alliances or relatives with blood relations, and only the East India Company raised funds for an unspecified majority. Interestingly, although the East India Company successfully raised investment at that time, its business plan was not clear at the beginning. It did not even clearly write in the plan how many ships to build and what commodities to trade. funds. Moreover, at that time, the project faced greater risks. If the ship on the voyage unfortunately died, or the transaction failed to be successfully completed, the investors would lose all their investment.

The design of Ethereum is also very simple: various applications (DApp) are developed on the Ethereum platform, people need to pay Ether to use DApp, the demand for Ether increases → the price of Ether increases. Like the East India Company, Ethereum did not design a detailed business plan at the beginning of its design. It only released two papers, the project white paper and the yellow paper, and disclosed the four-stage project research and development plan, which is equivalent to selling business ideas in exchange for capital. Of course, the project could fail as well. If the research and development fails, Ethereum may not be launched from the beginning; even if it goes online smoothly, if it fails to attract enough DApps and users, investors will lose their money.

④ Transaction start

About 6 months after the public offering of the East India Company ended, Yaan Arlez, a shareholder who participated in the subscription and held 3,000 dong shares, sold his 3,195 dong shares in the East India Company. Arlerts made a 6.5% gain within six months of holding the stake. After that, the trading price of East India Company stock tripled after about five years and further quadrupled after seven years. At this time, the company's trading ship had not yet set off.

Ethereum’s ledger (the earliest block) was launched on July 30, 2015, about one year after the end of the public sale. As of August 7, a week later, Ethereum generated a total of 46,146 empty blocks, and then on the 4th The first transaction appeared on block 6147. The account with the address "0xa1." transferred 0.000000000000031337 ETH to the account with the address "0x5d..", and paid 1.05 ETH as a service fee. As for whether this transaction is a normal user transaction or a pure transaction test, we have no way of knowing.

⑤ Sale (trading) procedure

The procedures for selling shares designed by the East India Company are roughly as follows: Those who intend to buy stocks and those who intend to sell must go to the office of the East India Company to find the person in charge of accounting for registration. The ledger records all transactions from 1628 to 1798 before the company collapsed and is preserved to this day). The person in charge of accounting books charges 60 cents for each transfer transaction, and the buyer can take away a copy of the transaction records, and needs to pay an additional stamp duty of 1.2 dong.

The procedure for changing the ownership of Ethereum is roughly as follows: Users who plan to sell Ethereum need to generate data such as account information, handling fees, transaction amount, and their own account signature. After this data is generated and entered into the Ethereum system, hundreds or thousands of coin miners (clients) will process the data according to the fees collected, and include this transaction in the next block. The job may go faster if you pay a higher fee, otherwise it may take longer. However, compared with the account books of the East India Company, since the accountant of the Ethereum system is a group of miners, there is no need for two additional monitors, and according to the design of the Proof of Work algorithm, there are no There is no possibility of erroneous data.

⑥ Account book fraud vs DAO attack

The head of the accounting books of the East India Company was Balant Lamp. On days when there are more transactions, there will be directors of the East India Company waiting to sign in Lamp's room all day long. Lamp is a meticulous person, so many directors signed the matter without looking at the contents of the account books. After a long time, the accounting books are basically only checked by Lamp.

One day, Hans Paul came to the office unexpectedly. He makes a dangerous proposal to Lamp. He asked Lamp not to record the share of stock sold in his account, and the two made a lot of money together by falsifying the books. Lamp accepted this suggestion, and they made 33,000 guilders "ghost shares" for sale in two months (at that time, a river-view house near the Amsterdam canal was only sold for 2,000 guilders). And so there were victims, leading to three trials of the company in nine years. Both the courts of first instance and second instance ruled that the director of the East India Company should compensate the client for losses, but the court of third instance supported the director's position.

Ethereum has also developed smoothly for a year after its release. But at the end of April 2016, the crowdfunding of "The Dao" project using ether made Ethereum experience a major turning point. The project uses Ethereum for crowdfunding, and plans to use the funds raised to invest in other Ethereum ecological projects, similar to a blockchain version of venture capital funds. At that time, The Dao Fund had raised funds equivalent to 200 billion won, and people were full of expectations for the future of the fund and the Ethereum ecosystem. However, there is a bug in the code (smart contract) of the project that manages this fund. On June 17, 2016, hackers exploited this loophole to attack the fund, and 75 billion won was stolen, equivalent to 1/3 of the total amount of the fund; on July 20, 2016, the Ethereum community forcibly divided Fork, canceling the hacker's transaction. However, the upgrade (hard fork) caused a lot of controversy, and eventually Ethereum’s ledger system was split into two, Ethereum and Ethereum Classic.

Of course, the East India Company’s book fraud and the Ethereum DAO attack are different in nature. For the East India Company, the company did not directly falsify the books, but the company's shares were severely defrauded. The hard fork of Ethereum is similar to the operation of the directors of the East India Company to cancel the relevant transaction records and re-revise the ledger. Splitting Ethereum in two is like canceling the East India Company ledger transaction records and setting up a new "East India Company 2.0" after copying the original ledger.

⑦ New Era, New Technology, New Technique

The Netherlands introduced the concept of joint-stock companies ten years ahead of the British East India Company. In addition, in order to overcome the inconvenience of book transactions, the Dutch also introduced advanced financial transaction technologies such as futures contracts. At that time, except for the merchants involved in the transaction, it was difficult for others to understand this transaction method. However, this approach has since evolved into the core of the modern capitalist system and has led to developments in the 21st century.

Bitcoin has been born for 10 years. In the past decade, the cryptocurrency community has also developed cutting-edge encryption technology and financial transaction techniques. Of course, many incidents and accidents occurred during this period. But this system is still evolving and creating greater added value. So, whether blockchains such as Ethereum can continue to make history like the East India Company is worth waiting and seeing.

Chung Soon-hyung Representative of Onther