• 06 April 2021
  • Announcements

8 Reasons for a Tokenization

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UnitedCrowd is your partner for digital corporate funding with tokenization

What is a tokenization anyway?

Tokenization refers to the digitized mapping of a value (asset) in the form of tokens on a blockchain. In doing so, the rights and obligations related to this value, such as the possession of the value, are always depicted in the token. Tokens are in a sense digital units on a blockchain. They are digitally transferable and thus tradable via this blockchain.

Tokenizable, that is to be mapped in tokens on a blockchain, is practically everything. Tokens can represent both tangible and intangible assets, or rather the rights and obligations to those assets. The scope of application thus ranges from company shares to real estate right through to license or usage rights.

Tokenization facilitates digital trading of values via a blockchain. And this is exactly why tokenization can be used to achieve digital corporate finance. By, for example, displaying the shares in a company in the form of tokens digitally on the blockchain, these can be sold and transferred to investors via this blockchain. This process is called tokensale, that is the sale of tokens.

UnitedCrowd has created a technical set of rules for this process, the UnitedCrowd Tokenization Framework. Thereby UnitedCrowd is able to provide companies with comprehensive processing of digital finance through regulation compliant tokensales. With our services, we give companies access to the benefits of tokenization and tokensales.

What are the advantages of tokenization with UnitedCrowd?

Tokenization has several advantages, which we will display below:

  1. 24/7 markets
  2. Fractional ownership
  3. Compliance
  4. Reduction of costs and intermediaries
  5. Peer-to-peer transmission
  6. Fast processing
  7. Programmability
  8. New financial products

1. 24/7 markets

Values represented on the blockchain in the form of tokens are tradable around the clock in all time zones on every single day of the year. Unlike traditional exchanges where trading is, for example, not possible for 65 hours at the weekend, there is no time limit for trading tokens. Token owners and companies can thus respond immediately to important information events by buying (or selling) tokens.

2. Fractional ownership

UnitedCrowd allows the fractionation of a total value into any number of individual tokens. This facilitates fractional ownership: several independent parties can participate in the ownership of an asset, such as real estates, oldtimers or art. The sale of individual tokens can then be directed to the public market.

This gives investors access to new asset classes and enables smaller investments. However, selling a value in fractional tokens also offers owners, e.g. companies, significant benefits. Owners are not dependent on finding a single buyer who can afford buying the total amount. The market-based sale of tokens that represent fractions of the total ownership makes the value potentially open to many smaller investors all over the world. The significantly larger market here can make it possible to increase the maximum achievable total.

3. Compliance

A variety of procedures, regulations, and laws are to be considered in a tokensale and with regard to tokenization. In order to protect investors trading in certain types of tokenized assets is only permitted in compliance with various regulations, such as the Securities Act. It is the duty of companies to ensure that they comply with the rules, do not participate in money laundering or provide a channel for it. When creating and selling tokens, compliance with complex, internationally valid regulations is essential in this context. By offering regulatory compliant tokenization, UnitedCrowd provides companies with the security to comply with all regulations.

Additionally, numerous features of our UnitedCrowd Tokensale Platform facilitate an automated and legally compliant solution to the previously manual and time-consuming processes of KYC and AML. This not only saves companies time, but also gives them peace of mind that the transactions they have made comply with the regulations. Human error sources are minimized and all transaction and checking operations are stored on the blockchain.

4. Cost reduction & reduction of intermediaries

Issuance of traditional securities requires numerous intermediaries and costly advisory services. After the exhibition, companies also incur considerable administrative costs.

UnitedCrowd offers companies the chance to automate parts of the issuing process with tokenization, making intermediaries redundant and reducing costs in the short and long term. Various contractual features, such as vesting, liquidation preferences, dividends or takedown rights, can be directly integrated into the tokens through programming. It is thereby possible to automate administrative processes and reduce corresponding costs. In addition, numerous features of the UnitedCrowd platform, provide companies with everything they need for an efficient and smooth digital management of their token.

5. Fast processing

By digitizing and automating, UnitedCrowd tokenization significantly increases the speed of issuing, selling, and trading value. At the same time, this reduces the corresponding workload for our clients.

6. Peer-to-peer transmission

Tokens can be transferred on the blockchain without intermediate instances and almost in real time. Buyers and sellers can quickly and directly trade together without intermediaries, such as brokers, publishers, notaries, etc. Both parties not only save time, but also costs for intermediaries. Furthermore, companies gain strategic freedom since they can direct their offers directly to the target market.

7. Programmability

UnitedCrowd offers programmable tokens. The digital representations of values created for our clients can thus be equipped with various automated functions that previously had to be performed manually. For example, values from one entity can automatically transit to another if certain conditions are met without requiring any labour.

A concrete example of this is the dividend function. A token is hereby programmed to pay a certain percentage of its net income to the token owner as a quarterly dividend if its quarterly net income is positive. Pre-programming this dividend function into our clients’ tokens significantly reduces the manual and labour-intensive process of issuing its quarterly dividends. The transparency of the public blockchain allows anyone to track that the log is working properly.

8. New financial products

Not only does UnitedCrowd tokenization of existing financial products, it also provides the opportunity to create new, innovative financial products. For example, digital, intelligent assets with programmable logic can be modelled to best meet the needs and objectives of raising capital, investing, or real-life processes under different circumstances. Likewise, a combination of different asset classes, adapted to the needs of our clients, is possible.

Are you looking for a digital solution for your corporate financing? Apply for a tokenization with UnitedCrowd in minutes here.