Fractionation Ownership, Tokenization and the future of Commerce

As I look into my “crystal ball” trying to get a glimpse of the future, I see Tokenization as a key to commerce on the blockchain, and I see fractional ownership as a key driver of the adoption of Tokenization to unlock equity.

Let me explain, if you can imagine that you inherited a painting by a famous painter, and such paintings are referred to by the name of the famous primarily painter, so paintings by the artist Rembrandt are referred to as “a Rembrandt” and paintings by the painter named Monet are referred to as “a Monet”. Now suppose that “a Monet” was part of your inheritance, and it was valued at $5 million dollars. But if you take it to an Art Dealer, they offer you $2.5 million, because they think it may take a year or two to sell. As you can imagine, the market or number of potential buyers in your country is probably small. The Art Dealer doesn’t want to tie up $5 million in the painting, so offers you much less. Right now the painting is worth five million on paper, but the 2.5 million dollar offer represents real money. In most cases you have few options, you could go to a few other dealers, and maybe get higher offers, but probably in the same price range and for the same reasons. And sadly if your “Monet” worth $5 million sells in a year, it could sell for $6 million or more.

But what if you could get some of that $5 million without selling the painting?
If it was a house you could takeout a mortgage to access the cash. If it was a company, you could hold an IPO and sell shares, but keep 51% of the stock to keep ownership. But a painting, even a “Monet” isn’t a company. But what if you could sell small pieces, representing partial ownership. What if you could sell pieces of ownership to people willing to wait a year or more to see the Monet appreciate in value and make money on their piece of it. What if you could sell any percentage you wanted from 1 to 49% of the painting and still control it, so you could get money out of the painting, without selling it and sell it at a later date at a better price? Well you can. It’s now an option through Tokenization and Fractional ownership.

Fraction Ownership allows people to own a piece or a fraction of a piece of art, with no guarantee of a profit. It also means you can sell a fraction of the painting also.
For example you can sell 2.4 million One dollar Tokens representing about 49% ownership of the Monet and you could keep 2.6 million tokens, representing 51% ownership, which allows you as the majority owner to controlling the piece of art known as “a Monet”. Now you have the 2.4 million dollars offered by the art dealer, but you still own a “controlling interest“ by owning the majority of the tokens, so you can wait a year or more for a buyer at full value $5 or $6 million.

This is a new concept, which is turning “value on paper” commonly called “equity” into cash. One of the keys here is Non-fungible Tokens, a special form of cryptocurrency Tokens where each is unique. Each one can represent an entire collectible like a Splinterlands card or a fraction, like 1/1,000,000 (one millionth) of a piece of art like “a Monet”. This process also allows investors to invest smaller amounts in more projects, which diversified their investment and reduces their risk.

Non-fungible Tokens can be bought on the internet from most countries on the earth where it isn’t prohibited by law. The combination of non-fungibility and smart contracts allow these Tokens to be exchanged for other cryptocurrency or fiat like dollars or euros with no middle man or intermediary. It also provides a trust less system. This is a good example of the cryptocurrency blockchain facilitating commerce. This is Tokenization.

Lastly, let’s take a break from gazing into the crystal ball at the future and look out our window at the “Present” where “real” companies are doing “real” deals using this decentralized finance vehicle.

Source

Securitize is an innovative global fintech company focused on digitizing assets on the blockchain. They claim to be the industry-leading digital securities issuance and compliance platform. They report that their clientele reflect a vast range of asset classes from uniquely impassioned companies. The company was founded in November 2017, with offices in San Francisco, New York City, Tel Aviv, and London. Source

Source

As you can see they focus on digitizing assets like real estate. They call the process “Securitization” which means to make something like a security, in the context of making it easily traceable. They have put into practice the process described above, taking assets like real estate and “Digitizing” which means wrap it in a digital wrapper, so it can represented digitally and traded. Thus they have different names but the goal is the same, bring down barriers to trade, fractionalized assets into smaller pieces and sell them. And most importantly in a “Compliant” manner, which means following US Securities laws.
They use the TEZOS blockchain.

Smartlands

Smartlands, the security token platform, successfully closed the sale of security tokens meant to represent shares of a student accommodation block in Nottingham, UK.

Smartlands Platform raised enough capital from private investors to buy 30% of Winrise One Limited – the company that owns the property, with the remaining 70% being held by the original developer Windermere Capital Investments Ltd. and Shojin Property Partners. Shojin Property Partners is the manager of the investment. Source

The investment target was reached during the private placement of security tokens as beneficial interest in shares of a student accommodation block in Nottingham, UK, valued by Knight Frank at £12.06 million in Sept, 2018.
Source

So this Token platform called Smartlands, helped the owners Windmere Investments raise 12 million pounds sterility or 25 million US dollars, by The real estate asset and selling 30% of the Tokens. This allowed the owner Windmere to access 25 million dollars in equity and maintain control over the asset. The asset is expected to appreciate at a rate of 5% per year over the three year holding period of the Tokens. At which time the investors can cash out and pay long term capitol gains.

Smartlands is a platform built on the Stellar blockchain.

Smartlands Platform is a Worldwide Security Token Issuance Platform designed for the 21st-century crowdfunding. The Platform is geared to bring together token issuers and investors by creating blockchain-based securities backed by digital ownership of shares in multiple asset classes. Smartlands Platform is built on the Stellar network and employs advanced blockchain technology with fast, cheap, secure transactions and extended capabilities.
Source

Steem-Engine

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Create a token and raise funds from the community right here on Steem Engine. Using our legally backed services, create a token offering and solicit investment from the community in a legally compliant manner.
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Thus we have a brand new platform, here on Steem-Engine, a platform built on the Steem blockchain to provide Tokenization, Securitization or Digitalization, pick the word you like the best. They are all about allowing owners to access their locked up equity and maintain control.

The future is now on the Steem blockchain in the words of @thecallmedan “we are where the ball is going”. This is the future of Commerce, and we are already there.

Stay thirsty for knowledge my friends!

✍️ written by Shortsegments

Shortsegments is a blogger or writer on the Steemit platform, where writers, photographers and video bloggers, along with other content producers get paid for posting their content.

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