Security Token Issuers
Digital Assets, Real World Assets, Security Tokens - August 25, 2020
In this video, we continue discussing real-world blockchain assets. But, before that, why do we think a real-world security token is a good idea, and why is it going to revolutionize finance?
Real-world assets are quite complex and hard to manage because so many people own them. A company’s ownership is complicated. It is divided between the founders and the ones who fund it. In order to track this every company has a table – also called a capitalization table. This table is constantly updated to check who owns how much.
For a company to constantly check and update this ‘cap table’ is a tedious job, and owners would rather want the company to focus its time and energy on running the company in a more efficient manner, wouldn’t they?
Here’s where blockchain technology comes in. Blockchain technology companies are allowing real-world assets to be represented digitally on the blockchain, essentially moving the cap table into a distributed ledger. This is forming a use-case for a security token and tokenizing beyond just financial assets.
Each asset is represented as a digital token on chain (on the blockchain) and in it, the information of the owner, identity details, previous transaction history, price data, and more are locked in.
Since all this information is stuffed into the token, and it’s verified by legal and regulatory authorities, it can be put on a secondary market for exchange. This is where things get really exciting!
Without blockchain technology and tokenization, these real-world assets would be very illiquid. This means that it would be very difficult to easily transfer, buy, or sell these assets for currency. However, once they are put on the blockchain, it becomes very simple to buy them, sell them, or transfer them between parties. What’s more is whenever the ownership changes through these transactions, a note is made within the digital structure of the token. Pretty neat, right?
Tokenization of real-world assets creates a whole bunch of benefits for both the issuers of the tokens and the buyers of the tokens:
- Issuers: A lot more specific data and be put into the token, with respect to the company’s data, the identity information of the buyers, and the transaction details.
- Buyers: A secondary market is available to transact with these assets for liquid currency, these assets can also be used as collateral by the holders just like any other asset would
Real-world assets, especially those that are rigid and illiquid could never before be expressed digitally and used for more than just their block deals. Now, with blockchain technology and decentralized finance, new opportunities are being developed to change the way we look at these assets.
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