The Value of Asset/Equity Tokens
2018-03-14

Real-world asset tokenization through blockchain technology.

With technology and the Internet of Things already having a ubiquitous influence on our daily lives, how can we make it seep in just a little deeper?

Let us say you wanted to sell your house tomorrow, you would likely have to go through a series of agents, bank reps, prospective buyers, etc. This tedious process could take weeks, months, or even years. Well, what if you could speed up that process by uploading your house to the Internet? You obviously won’t be plugging it in through a USB port anytime soon; rather, you could upload the deed as a digital asset powered by a smart contract. In principle, then, you can make your house available to investors around the world. This, and so much more, is the value of Asset Tokens.

An Asset Token represents ownership of any asset, or part of an asset, that has undergone Tokenization. Tokenization refers to the process of legally transferring assets from the real world into the virtual world. The function of these tokens is similar to that of a stock, or share, for a company in the real world. With the example of a company, the shares are legally digitized with the help of legal service providers and engineers who work together to transcribe the assets into smart contracts once the asset is legalized in its jurisdiction. The contracts of the equity tokens automatically transform to investment agreements that conform to the laws of the country where they are issued, to ensure the legitimacy of all investments.

Currently, the most attractive prospect of creating Asset Tokens is for companies looking for seed investment. Entrepreneurs wishing to finance their projects can create their own token using their assets in the real world and a legal team to legitimize the insertion of these tokens into a digital platform; like a blockchain. Having done this, the entrepreneurs can choose to value their asset and set a price and name for the tokens they issue.

Investors have access to these tokens and can choose whether or not to acquire them to form part of their portfolios. Consequently, by acquiring these assets from the blockchain, investors raise the market value of the tokens and yield higher profits simply by contributing to an increase in trading frequency, efficiency in trading, and lowering of legal costs. This is an aspect that heavily influences investors to take early participation in these projects.

Entrepreneurs take advantage of this aspect by launching campaigns to market their newly issued tokens. They can raise market awareness of their tokens and fund their projects faster by launching an Initial Coin Offering (ICO). In the same way an Initial Public Offer (IPO) and an Initial Token Offering (ITO) works, an ICO is a way for companies to entice larger early contributions from interested investors.

As with the purchasing of stocks, through an Asset Token the company grants partial ownership of the company over to investors (with respect to the details in the company’s whitepaper), as well as some additional benefits. These benefits may vary from company to company, however these may include: receiving dividends from the company, access to financial statements and information of the company, and the option to stop their own investment or repurchase tokens.

Nevertheless, the value of this technology goes far beyond the sole capacity to raise funds. Blockchain technology roots from the need to fix problems. It was initially developed to be a trustless system, where no one need trust anyone else. This isn’t to say everyone on the network is to be trusted, but instead that there is a greater degree of the security of information for investors. It makes this possible by handling the variability of questionable middlemen and leaving that to a computer program with no biases, just a code to run. Regardless of the ethics of any middleman, the blockchain simply reduces the room for any possibility of human error. Thus, creating a more sustainable system where there needn’t be any central server but rather a spread, or decentralized, network that maintains the core information safe from hacking or tampering.

Having these companies online fully utilizes these advantages. It doesn’t stop there though, it also allows for greater transparency. The information of each company can be verified by legal representatives and uploaded to public domain for any and all investors to see. The information can be uploaded onto one platform and from there be spread across all platforms for the convenience of investors. This breaks the barriers of geography, allowing a global availability of information resources. Additionally, through the use of a rating system they can even receive a score similar to peer reviews that can serve as vouches or warnings for the community. This allows investors to make quicker and more confident decisions about which is the smartest investment. Tokenizing assets can help in legitimizing the process in which we invest and reducing the risk of scams or frauds.

Moreover, uploading assets also reduces the amount of time investors need to spend signing up to different platforms. They will no longer need to sign up to each platform individually but can rather sign up to one that is connected to the rest. In essence, by being registered on one database, that same information could potentially be carried to and accepted by all other platforms, similar to the way Google and Facebook accounts can currently be used to sign onto numerous other websites. SharesChain, in its initial stage will be able to provide all this information, and its token, the SCTK, can be used to purchase the services that make all this possible; at its later stage, we will hold the potential to directly connecting all of these processes together.

Greater speed, greater security, and greater reach are all benefits to be had from Asset Tokens and wider adoption of decentralized systems. The potential for this technology is barely at its primary stages. By supporting these networks and secondary markets we can advance the development of these and quicken the adaptation of their conveniences. Support can be something as simple as informing others of the different groups working on developing these very technologies.

One such platform that will aid companies in their development acquisition of legally established Equity Tokens is SharesChain. The SharesChain Community aims to create a blockchain network of registration, management, and circulation for entrepreneurs, investors, and Specialized Service Providers (SSPs). Here, they can link assets in the real world with digital assets in the virtual world. Business practices and interactions can be adapted depending on the rules and policies of different countries and regions.

Though the individual companies and entrepreneurs will create the Asset Tokens off the network, SharesChain will provide a platform on which they can share their projects with prospective investors. Additionally, the platform will also connect these new companies with SSPs that can help them with the legal documentation, smart contracts, due diligence, KYC Services, and any other services they may need during the process of legitimizing their assets on the blockchain. SharesChain aims to facilitate this process for both entrepreneurs and investors alike.

In a market that is riddled with scams and frauds due to lack of regulations, a network like SharesChain becomes a relief to investors looking for some assurances in the assets they’re purchasing.

Overall, Asset Tokens can become a relief to entrepreneurs, investors, and your average Joe with a house to sell. The process of uploading assets to the blockchain is a gradual one, with plenty of nuances and tweaks along the way. As mentioned earlier, these are the beginnings of this new technology and not all assets are “digitizable” just yet. The opportunities it poses for the future, however, are far beyond what we can imagine. The fact is, through innovations in technology our world is becoming smaller and smaller, but the opportunities however, have never been greater.