The Crypto-economy that will change the bags forever
History has shown that, with each technological advance achieved, the human being has been able to create new solutions or improve old processes. One of the most recent and essential developments is in the chain of blocks or Blockchain. It is an open global digital system, where you can register and maintain permanent records, as well as process transactions in a secure environment. This allows any asset backed by a real asset to have its corresponding digital asset that is registered publicly and represented by a token. Also, this can be exchanged and transmitted worldwide. This means that you can “tokenize” a home, a car, a picture or an action, and establish open financial relationships around any physical property.
If we focus on stock exchanges, the natural process will go through the exchange of stocks, bonds, debt, funds, etc., as we know them today, by tokens that represent one or another right to be specified. From those who transfer property, to others that only give the right to receive a dividend, coupon or income. Blockchain has allowed the creation of these tokens or crypto actives that, however, can have very different functions.
Before moving forward on the subject, it is convenient to analyze what happened in 2017 and how we have evolved to date. The ICOs (public offers of currencies or tokens) became famous for the excesses and the ability to raise funds for the use of new technology. Against these collected dollars, tokens were offered that could then be negotiated in different Exchanges (brokerage houses). They were something magical at the beginning for real developers, frauds, and crooks. Projects of companies without any legal entity, address or management team identified were able to raise millions of dollars for these experiments. Under the illusion-many did not even have a “White Paper” (pamphlet) in condition to develop a disruptive infrastructure capable of overcoming classic players such as banks and other intermediaries, sold a crypto-utopia in which many investors fell, and they ended up losing a lot of money. In that period we witnessed a right price bubble, never seen in the past.
Concerned about this strong development of the ecosystem and the abuses committed, the regulator ended up taking action on the matter and establishing limits to redirect the situation. It is in this moment in which conditioning the generalized treatment of tokens as “utility” (use) in the developed project, which had been the excuse to avoid going through the regulator and the normal processes of issuing all “security.”
All this noise and excesses end, however, showing a new reality to which, legally adopted, the new economy-credit is directed. In this future ecosystem, digital assets will be crossed in the form of tokens, with traditional financial products under the umbrella of Blockchain technology. While, on the one hand, we will have the “programmable money” in the form of bitcoin, on the other hand, we will have the “security tokens” as a form of “programmable property.” Which means that any real asset that involves property may, as I said before, be tokenized.
Once the form that these tokens must take, both for the defense of the investor and legal reasons, and differentiated the “utility” of the “security” (which can be in turn compatible), will be apparent the obligations of the issuer and the investor rights. Opening, in this way, the path to non-revolutionary tokenization, but evolutionary of the entire financial system.
Advantages of “security tokens.”
The first big advantage will come from the decrease in costs. Having no operative intermediaries nor (in many cases) legal will mean a generalized reduction in commissions. We are replacing the classic entry into account with a record in a Blockchain. Smart contracts will reduce the complexity, costs and the entire documentary process are so far necessary (collection of signatures, transfers, etc.). The lawyers do not disappear, but instead, play a role based more on counseling.
Secondly, the immediate execution of the operations and negotiation of 24 hours 7 days a week will be achieved. By removing intermediaries in the performance, higher speed is obtained in both the primary and secondary markets. And by quoting the 365 days of the year, greater volume increased liquidity and an unlimited global market will be achieved. This will allow Spanish investors to more easily access real estate projects (for example) made in Australia, Chile or South Africa. And this will contribute to even having a better valuation of the assets offered.
Third, it allows adding incentives and specific properties to the token. In contrast to the classic shareholder who receives voting rights, ownership and participation in results, now the token holder may win a series of different incentives depending on whether he holds a certain number of tokens, shows an absolute commitment to the company or that do for a particular time. This means that, for example, you can offer a discount on the telephone bill if you have kept the time, provide a discount for lunch or any other type of incentive. If we added geolocation and allowed the use of data, the possibilities are immense.
Fourth, tokenization allows fractional ownership. The case of Metrovacesa is now the case since it will enable access to tokens that represent an underlying real estate asset. The same with art and collecting, which would give its owner the option of obtaining liquidity and profitability of a specific work of art or collection.
Among the disadvantages of “security tokens”It should be noted that the elimination of intermediaries implies a series of additional problems and risks. On the one hand, responsibilities are transmitted on the buyers and sellers of the operation. This means that, for example, the issuer of new tokens must perform all the actions that intermediaries used to do before. From preparing marketing documents to raising investor interest, going through functions such as signing the operation, certifying the legality of the operation and executing it correctly. All this means that, on the other hand, in any process of “issuance of securities” (STO) offers, the issuer itself is capable of carrying out the aforementioned transactions. And here are many of the critics on the matter because, in no small extent, doubt that the latter is possible.
In this way, and given how the token offers are evolving, there is a very high probability that the “tokenization of everything” is a more or less immediate reality. It is not about eliminating and liquidating classic players, but joining them to achieve a real optimization of costs, time and resources beneficial for all. With a simple Internet connection, many will be able to access a global market of all kinds of assets and, that is unstoppable.