Asset Tokenization Part 2 - Asset-backed Coin Offerings
Asset-backed Coin Offerings allow would-be entrepreneurs and investors to bypass the expensive, exclusive and locally regulated capital-raising process required by venture capitalists or banks by issuing a percentage of coins or tokens in exchange for cryptocurrencies on permissionless global blockchain networks like Ethereum. Initial Coin Offerings (ICOs) are not regulated formally by any financial authority and exist in an ecosystem with few checks and balances. While in their early days, there were several Ponzi schemes and scams as regulators struggled to respond, the market is stabilizing in 2019 with maturing investor sophistication, less hype, and more clarity around the application of Securities Laws. Initial Coin Offerings (ICOs) volumes exceeded 45% of the size of IPOs in 2018 - this is a market not to be ignored. Further, the exponential growth of the cryptocurrencies that underpin these transactions has made exposure to the crypto asset class essential for a diversified portfolio. Alternative assets have doubled in the last 8yrs to 24% of pension holdings due to their inefficiently priced and thus alpha generating nature, as passive investing takes hold of stocks and bonds. The permissionless and decentralized nature of public Blockchains creates an opportunity for Initial Coin Offerings (ICOs) to improve investment outcomes and democratize finance for issuers and investors. Evolution in Initial Coin Offerings (ICOs) requires the combination of blockchain technical maturity, cryptocurrency stabilization, and the growth of financial ecosystems around decentralization.
Synechron’s modular Asset-backed Coin Offerings platform allows for public token issuances utilizing more traditional fundraising components that are not yet available in Asset-backed Coin Offerings. We combine multiple industry standards rather than build bespoke components due to the large security risks of smart contract writing in Ethereum. These include:
The issuer establishes the parameters for a fully-configurable token issuance within the widely-used ERC20 token standard.
The issuer can whitelist addresses of participants that can participate in the initial issuance, as well as future secondary trades using the Harbor whitelisting protocol. This is critical for compliance with local Securities Laws on a global platform.
The investor bids with variable prices and sizes in multiple currencies to fill an order book for the issuance which can exceed the total book using 0x relayers. These also drastically reduce transaction fees.
At trade execution time, a Dutch auction is performed, and the transfers of cryptocurrencies and the coin offering are settled to the respective winning parties via the 0x decentralized exchange. This avoids having to issue via centralized exchanges that charge large issuance fees like an IPO.
HOW WE HELP
A futuristic, distributed application to manage Asset-backed Coin Offerings.
Synechron’s Wealth Tech Accelerator for Asset-backed Coin Offerings has the following benefits:
New Business Models - Supports new ways of capital raising while maintaining compliance with securities regulation.
Key Coin Properties - The ERC20 standard interface is implemented guaranteeing full compatibility with Ethereum.
Global platform, locally compliant Whitelist public key addresses on-chain to ensure the token does not get sold to investors based in countries that deem the issuance illegal per their local Securities Law.
Decentralized Exchanges (DEX) for Issuance - a peer-to-peer marketplace directly on the blockchain using the 0x public protocol.
IT Security - Leveraging existing, production-ready and audited public protocols like Harbor and 0x protocol.
Improved issuance - Lower cost issuance and corporate actions across asset allocation, portfolio construction, investments, and risk management with trustless technology and tokenization collapsing a multi-staged investment process into single click as well as better fundraising outcomes.
/ /THE WORK WE DO
To learn more about Synechron’s Wealth Tech Accelerator for Asset Tokenization and the work we’re doing email us at email@example.com