💡1.2. Blockchain Solution

The emergence of blockchain and smart contract technology presents a good opportunity to solve the above mentioned problems. If using blockchain to book equity shares, and using smart contracts to define and automatically control share transactions and corporate governance activities, then, the potential human influences can be excluded to an extreme extent, so as to realize:

(1) Right holders directly exercise rights

Right holders may, by means of digital signature technology, have their identities verified so that may directly send instructions of exercising rights to specific API of smart contracts, thereafter, the relevant function or method will be triggered, and will update the states of the Register of Members, Meeting Minutes, or other Book-Entry records in accordance with the predefined rules and terms, thereby achieves the desired legal consequences accordingly. Throughout this process, there is no need for any third party, such as secretary, agent or authority, to engage in as legal representative or proxy. ComBoox can ensure that the actions for right exercising are not intervened or controlled by any third party.

(2) Obligors have no opportunities to default

The reason why defaults occurred is because the realization of contractual rights depends on obligors to make cooperation behaviors actively. When turning over the control rights of book-entry records like Register of Shares and Meeting Minutes to smart contracts for automatic operation, then, a lot of traditional “claim rights” requiring cooperation of obligors will be changed into "disposal rights" that can be unilaterally exercised by right holder, therefore, the possibility of defaults will be completely eliminated.

As for the constitutional documents like articles of association, bylaws or shareholders agreement, many defaults are actually Ultra Vires behaviors (either substantive or procedural) of the controlling shareholder or executive managers. Smart contracts have rigid and strict programming logic, and can precisely control the timeline, permissions, procedures and other conditions of business operations, which may fundamentally eliminate the said Ultra Vires challenges to corporate governance.

(3) Real-time information disclosure

Corporate governance behaviors can generally be categorized as signing documents, voting, paying consideration, nominating candidates, taking position, resigning and several other types, and the existing technologies are fully capable to implement all of these legal actions that takes "Expressing Intent" or "Updating Rights and Interests" as its core attributes on blockchain, i.e. using blockchain to book the digital tracks of these legal behaviors, and using smart contracts to automatically verify identity of the actors, determine the conditions precedent, and control the process and procedures.

Blockchain is a distributed system that synchronizes information in real-time among the nodes, therefore, legal behaviors conducted on blockchain will complete the information disclosure at the same time when updating the book-entry records or realizing the legal consequences concerned. Legal behavior and information disclosure are not separate activities any more, which will be integrated together and have no time lag or contents differences. Therefore, current disclosure issues like untimely delay, misrepresentation, or misleading statements etc. should become impossible to occur.