Impacts of the Tokenizing Process with SharesChain
2018-03-15

Modern Technology and the Blockchain

Technology has spoiled us. We’ve become dependent on the conveniences that modern technology has, quite literally, placed at our fingertips.

Tokenizing refers to the digitizing of an asset by issuing a digital representation of said asset and placing that on an immutable ledger, the blockchain. Essentially, it is the allowing assets to be transferred into a blockchain and facilitated as a record of their ownership. Aside from some immediate advantages, like eliminating the need for personally storing and trading physical assets, this presents a variety of new possibilities.

Currently, the transference of ownership or purchasing of new assets can be a tedious task. Assets such as corporate bonds, corporate stocks, land, machinery, vehicles, buildings, artwork, jewelry, and a myriad of others could potentially be transferred onto the blockchain to facilitate their sale and purchase. This traditionally lengthy process may include finding potential customers, negotiating prices, hiring legal advisors, writing up contracts, and all these are limited to a local operation. It’s definitely time-consuming and has been the common process throughout most of our recent asset-acquiring history.

Consequently, it does pose the question, “Why do we continue doing things the old-fashioned way?” With technologies taking massive leaps that have given us self-driving cars, smartphones, artificial intelligence and devices that allow us to communicate globally with such ease, we all probably cannot imagine going back to a world without them. Why are we still dragging on such an inefficient process? If history has taught us anything it’s that the only limitation we have is time. The wonders of modern technology show us that most of what we didn’t think was possible now very well can be, given we have the time to carry out the project.

Tokenization Drives Efficiency and Can Lead to Legality

Tokenizing assets eliminates the need for middlemen and enables the buyer and the seller full control over the transaction. Adding only, the help of a Smart Contract to ensure all the requirements are met. Tokenizing is the process in which equity tokens are issued. In the case of companies, for example, it relies on the shares of each company. Combining the legal agreement in the real world and the online smart contract in the virtual world, we can, thus, transmute the asset into a form that can more easily transfer its value without the need for any physical moving of it. One may ask, “So what will the currency of the transaction be?” The answer lies within the SharesChain Token (SCTK), which is a token that can be used for the acquisition of the frameworks for these smart contracts, payment for the legal service providers who substantiate the real asset, and the currency by which exchanges can take place.

Companies looking to raise investment capital can use this system to legally sell their shares quicker by simplifying the process of purchasing. Whomever wishes to raise capital by selling their assets can do so through Asset Tokens (or equity tokens). They would begin by publishing their information online and a third party Specialized Service Provider (SSP), which SharesChain can help provide access to, would serve as a representative to verify the legitimacy of the information, by performing the due diligence. Not only does SharesChain help provide access to them, but we also provide the currency token that can be used to pay them — this will allow people to do a lot of the heavy lifting completely on the web.

The due diligence reports shall be published and made available publicly within the network and can be acquired by using SCTK; investors are then able to invest individually if they find an interest in one or more of the projects. The network lowers barriers for potential investors, and in return it lowers barriers for the companies seeking those investors. It uses the community’s experience and knowledge to provide a “wisdom of the crowd” type of validation, which can be used for facilitating investment decisions. By having the information displayed publicly for anyone to see, the company allows for a kind of ‘review’ where investors can vouch for trusted companies. Although this is not necessarily a feature, investment networks can be created where seasoned investors can drop their two cents for newer investors to have a trusted community to guide their funding. A collaborator who adds their two cents will be returned with SCTK that have actual value, which in essence removes that figure of speech and makes it a reality. With the growing availability of reviews, comments, up-votes and their counterparts, companies could even be rated based on their potential for growth and become easier to find, to buy their tokens, and to fund their operations; more importantly, they can do all of this while remaining inside their legal scope.

Already, many companies are taking this approach through Token or Coin Offerings like ICOs. The company generates the legal investment agreement and the startup founders and legal representatives develop and sign documents which prove compliance. Afterward they may adjust their whitepaper and business model to follow suit with any and all jurisdictional requirements and then they begin figuring out a way to make a smart contract remain consistent with those factors. The document then, is stored in terms of a smart contract, which equity token holders can automatically take part in provided they meet the rules like KYC (know your customer) and live in a suitable area. Once an investor meets all the rules of compliance, they simply deposit an appropriate number of tokens into the smart contract to “activate” it for their specific wallet or key. The contract would enable token holders to access company details in the same way a shareholder would, which in the real world of assets would be like holding a paper stock from the same company. The system is made more efficient by trusting the record keeping to a program rather than to an accountant or financial adviser, not to omit its speed and accuracy.

The SharesChain Network’s Role and Impact

SharesChain is one example of a network for investors looking to assist entrepreneurs in the funding of seed capital for their new startups. SharesChain proposes using their core token, the SCTK, to transact the purchase of existing company tokens. The company would make their token available on the platform; the investors would acquire the SCTK and use it indirectly to then invest in these new companies. In the near future, the SharesChain team will be striving to allow for direct acquisition of the assets. Through this system both parties ensure a more secure transaction as SharesChain would provide an environment, community, and informational channels for trusted, legitimate information, as well as a channel for new companies and investors to interact.

Regardless if the token investors decide to purchase, any new token made available by SharesChain would contribute a percentage of their total tokens to the SharesChain Fund. This would be allocated in a portfolio administered by the Fund that makes the participant comparable to a shareholder in each of these companies. This both adds value to the SCTK by means of a portfolio that links assets from each startup, as well as representing an implied trust on behalf of the community to these entrepreneurs.

In short, a contract is written up in the real world that relinquishes the value of the asset to a legal representation of it online. This is then transcribed into a Smart Contract that executes the initial contract through the blockchain. Once this Smart Contract is executed the value of the tokens is set, at least to its initial value before the expected market fluctuations. All middlemen are rendered unnecessary from that moment on, as the contract legally administers ownership to its company’s investors and any change in ownership is recorded on the ledger in a transparent way.

Consequently, new companies would receive the funds they need in a much quicker manner. Early investors would receive a return on investment significantly quicker and new emerging technologies would continue to advance at a speedy pace. Connectivity leads to opportunity for all the parties involved and growth will progress for those outside of the direct process that reap the benefits of development.

In much the same way we benefit from the early investors in projects like Bitcoin, Ethereum, Apple, Microsoft, P&G, and countless others that have created the diverse products we’ve experienced influencing our daily lives. The tokenizing process, too, promises a new step toward more rapid growth of markets, as well as the development of individual companies. So SharesChain will allow for a day when investors and companies alike can feel comfortable in their day-to-day operations by providing a legal and trusted network, convenient smart contract frameworks, and a level of fluidity never seen before in the world of dealing with assets.