Blockchain the next revolution
A blockchain is a very large ledger or database which exists on a decentralized network of computers. So instead of having information in a hard drive somewhere or on a server in the cloud, the information exists on thousands of private computers around the world. The only way to add information to the ledger such as a transaction, is through a complex validation method that uses cryptography.
Cryptography transforms information into a form that is impossible to change, duplicate or erase without a secret digital key that has numbers and letters.
This technology makes a series of blocks containing data/information that are chained and stacked on top of each other in a manner that allows for the tracking of any sort of transaction in a sequential way. It provides a secure, tamper proof transparent, cost-effective way to record transactions. It is like a digital accounting system/book that is automated.
This system needs thousands of computers that agree on every single new ledger update. It uses algorithms and cryptography to perform these validations that have a consensus of agreement. It maintains a secure list of transactions that are copied repeatedly across computers within a worldwide network which cannot be changed. It records data and hash functions with timestamps.
The term “hashing” is fixed string of numbers. It is like a type of file that has encryption (thus crypto). In encryption, data is transformed into a secure format that is unreadable unless the recipient has a digital key that has letters and numbers. It is similar to a fingerprint where the Hash that is made is unique. The blockchain technology can securely identify all participants, confirm data, and generate consensus.
What are Smart Contracts?
A smart contract is a self-executing contract with the terms of the agreement between buyer and seller being directly written into lines of software code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions are trackable and irreversible. By using smart contracts, and cryptography blockchain eliminates the middlemen and automates transactions and tasks.
A smart contract agreement programmed with a computer protocol that executes
if conditions of the agreement are met. For a simple example, let’s use a vending machine. You decide to buy a bottle of water which costs $2.00. You pay $2.00 press a button and the machine releases your bottle of water and can give back change if needed.
What Are Security Tokens Offerings (AKA STO)?
Security Tokens are the result of connecting the regulation and compliance of traditional securities with blockchain technology. Like traditional securities, they represent ownership interests in assets; the main difference, however, is they’ve been created digitally (tokenized) to unlock the power of the blockchain. Security Tokens can represent the ownership of traditional assets like publicly traded equity and bonds, or traditionally illiquid assets like private placements, real estate, songs, movies, Intellectual Property, or artwork. Security Tokens can be issued at any stage (startup to IPO) and used to raise funds through a Security Token Offering (STO). They can be transferred between two parties with out the need for an intermediary.
The asset value can be broken down in smaller units/shares this is called this I called “tokenization.” These tokens can then be traded peer to peer or on a “regulated platform.” By doing so real estate now has liquidity.
So how it works with real estate is that the property is put in a LLC. That LLC owns/manages that property. That LLC has tokens/shares which investors buy/sell/trade/hold.
So think of it like you have a company. That company grows and will be listed on the stock market. The STO will have a ticker symbol that can be catalogued and searched. For example Nike, is “NKE” on the New York Stock Exchange. Now investors can find and purchase shares of your company for an investment. There could be individuals properties with unique ticker symbols or a ticker symbol for a fund (basically a portfolio of many properties under one ticker symbol).
What Are Security Token Benefits.
- Efficiency: Blockchain removes the middlemen, resulting in cost savings and reduced settlement time. Removes human error. No way to lose documents because they are all encrypted on an immutable shared ledger.
- 24/7 Market Access: No weekends, holidays or bank closures, investors decide when to trade. Now there are some rules were they have to wait 1 year before selling.
- Liquidity: Hyper–fractional asset ownership, tokenization of traditionally illiquid assets, and access to global investor pools. Imaging owning real estate and having 40% locked in equity you can’t access. The only way is if you sell or refi. Now even if you are holding the property and you sell, finding a 1031 replacement can be a challenge.
- Democratization: Diversify your portfolio with access to previously unavailable or traditionally illiquid assets.
- Speed: Once you have been cleared and compliant with initial rules set by the government you can invest right away (Securities laws must be followed). Software automates steps.
- Dividend sharing: Revenue sharing is sent directly to your crypto wallet. Reduces the complex and costly operation process with traditional securities. Only about 3k stocks traded on the stock market provide dividends.
- Access additional capital – Real estate owners and developers can offer smaller investment denominations by fractionalizing a property through a blockchain-based system, expanding distribution to a broader and more diverse investor group.
What is a Stablecoin?
It is a type of cryptocurrency that always holds a stable price. These types of cryptocurrencies are created to take on the unstable crypto market scenario and ensure a stable ground for all. Thus, stablecoins are crucial for crypto investors, exchanges and the overall crypto market.
The most popular stablecoin is: USDC (United States Dollar Coin)
USD Coin is a digital stablecoin that is pegged to the United States dollar. USD Coin is managed by a consortium of companies.
Types of Stablecoins:
- Fiat Backed are backed by fiat money like the American dollar. Could be somewhat a digital form of money.
- Commodity Backed by commodities like gas, gold, metals etc.
- Cryptocurrency-backed stablecoins are those backed by other cryptocurrencies.
- Seigniorage-style (not backed) No collateral is needed to mint coins. Value is controlled by supply and demand through algorithms, stabilizing price.
Blockchain Real Estate Investment
With blockchain real estate investment, you can invest in apartments in the United States of America at a fraction of the typical cost from anywhere in the world. Here is how the model look for structure:
What is the Eco-System of Security Tokens?
Security token issuance requires a network of custody agents, broker-dealers, legal firms, cap table management providers, KYC (Know Your Customer)/AML (Anti Money Laundering) providers, and others. Custody Custodians are charged primarily with safekeeping funds and security tokens. They can also assist with things like portfolio segregation and ownership rights management.
Token Sale Platform Token sale platforms give issuers a simplified way to manage the onboarding of investors and the sale of their tokens to the general public or to a list of approved investors. They typically include an investor portal, onboarding services, and may also provide fund collection and token distribution services.
KYC/AML Provider Securities regulation requires issuers to verify the identity of their token holders through a KYC process. When done through traditional manual methods, this can be quite slow. With technology investors can get verified in a few clicks and get added to the token’s whitelist of approved investors in real-time. Companies that issue tokens have the ability to use the platform to manage their company equity, view holdings, and manage investors.
Digital Security Offering Process:
- Select apartment property/properties to digitize (takes less than a week)
- Legal structure of the digital security offering; common stock, preferred stock, minimum dividend etc. Location of the property, the size of the capital raise and location of investors. Operating Agreement and Private Placement Memorandum.
- Shareholder rights: offer multiple tokens that represent different investment classes. For example, you can create a token that represents preferred equity in a property with a liquidation preference, and another token that represents common equity.
- There are options we will focus on are Single asset
- Special Purpose Vehicle (SPV) – title and deed of the physical property are assigned to an SPV structure. Tokens represent shares of the SPV. This type of structure is typically limited to accredited investors or qualified institutional buyers.
- Blockchain / Token – choose the blockchain on which to create the token, and decide which data and transfer restrictions to include in the token.
- Custody – determine a physical custody solution that can suitably store real estate tokens. Investors may also need a custody solution.
- KYC / AML Vendor – determine a Know Your Customer / Anti Money Laundering vendor that can integrate with the primary issuance platform and the digitized security infrastructure.
- Primary / Secondary Marketplace – where do you want these digitized securities to be offered to investors for the primary issuance? And on which exchanges do you want them to trade? These decisions will ultimately determine the success of the capital raise and the ability for investors to access liquidity. An alternative option is to create your own marketplace.
- Raise Capital. Leverage exemption (Reg D. Reg S, Reg A etc) (takes 2-3 months). Have the option to accept different types of payment methods easily. Can stick to traditional fiat currencies, or enable investors to purchase the digitized real estate using cryptocurrencies or stablecoins.
- Distribute Digital Securities to investors. Place in broker accounts (immediately post capital raise, Technical Platform distributes digital securities to investor wallets and brokerage account).
- Investors can keep/buy/sell digital token securities. (Depends on security lock up, can be immediate or after 12 months). Dividends can be issued via cryptocurrency, stable coin, additional tokens, or fiat payment. Payments is logged on the blockchain through a user facing web application where they can track.
What is a wallet
A ‘wallet’ is a core component of a blockchain/cryptocurrency system.
A ‘Public Key’ or ‘Public Address’ are also terms that are used to describe a ‘wallet’.
A wallet is composed of two parts: a ‘public address’ and a ‘private key’. A good metaphor for this is ‘a mailbox’ and ‘a mailbox key’. Anyone can drop anything in the mailbox, but only the owner of the private key can open it up and access it. The link between a ‘public’ and ‘private’ key is rooted in public-private key cryptography, and is what puts the ‘crypto’ in ‘cryptocurrency’.
There are many different wallets available, and each one manages your private key in different ways.
A private key is very important! Any owner of the private key can access any of the funds that are stored it is associated wallet.
Creating a wallet is very easy. You just need to install the application of your choice and then create an account. When creating an account, the application will give you a “recovery phrase” to carefully note, to keep access to your wallet. You don’t have to enter any personal information like your email address or your name.
Once your account is created, you will be able to find your public Chain address (this address always starts with “0x”). This is the address that we will use to send you your DAI Tokens.
How do I receive my security tokens?
You have two options: the first one and simpler one is to let your tokens sit in our integrated keyless wallet. This means you store your security tokens on our platform and you can log in anytime to see your tokens and the amount of dividends you are entitled to.
The second option is to migrate your tokens directly to your e-wallet like Coinbase wallet or Metamask. This is the safest way to store your tokens and you can then have complete control and versatility of your tokens.
How to transfer USDC into fiat currencies?
Sample of real estate that is currently a STO
- This shows you the trading activity for the property/STO https://stomarket.com/sto/aspencoin-st-regis-aspd
Securities are being eaten by software.
Many middlemen will disappear. Issuance, transfer, trading, are becoming much less expensive and much faster.
At its very essence, a security token is an investment contract that represents legal ownership of a physical or digital asset like real estate, or a piece of artwork. Tokenization is the process of converting an asset with a ‘digital wrapper’ so it can be accessed via the blockchain.
A ‘token’ is a digital symbol of ownership. In blockchain, you own a token in the same way you own the deed (or title) to a house or car. With the deed, the piece of paper has no value; it represents the value. It is symbolizing ownership of the house or car. Extending the analogy further, the deed to the house is registered with a government or private authority to show chain of title and confirm ownership. Once the asset is entered into the digital “ledger” of the blockchain, both the asset and ownership are permanently and immutably recorded. It is like the title records at your local county recorder, but instead of musty, handwritten books in the basement of a courthouse, it is open and available to be accessed worldwide.
The potential to digitize (tokenize) ownership of almost any asset will create new ways to invest in institutional quality investments previously unavailable to the average person. Real estate is poised to be the biggest asset class ready to be tokenized on the blockchain.
Security Tokens will forever change access to previously hard-to-acquire (and sell) assets. Security Tokens will create several new ways to sell or exchange real estate, including Peer-to- Peer trading and trading on secondary markets.
All this is accomplished with faster settlement times, 24 hours per day, 7
days per week every day of the year (24/7/365). Peer-to-Peer is the ability to directly sell or trade both person to person, person to business, or business to business, all without an intermediary such as a stockbroker, bank, or payment processor. Say, for example, you have 10,000 tokens, and you want to sell 5,000 to your friend. It is as easy as sending an email with a link in it for the tokens. If your friend has the correct amount of money and agrees to buy, the trade will go through automatically.
Furthermore, the trade between you and your friend happens almost instantaneously because blockchain trading allows for Faster Settlement Time. You gain access to your money within minutes instead of up to three trading days for trading a stock or other current financial instrument.
If all of this sounds interesting and you want to be involved as we purchase small apartments through the Blockchain, contact us ASAP!