ICO in the real sector

With the development of blockchain experts start talking more often about soon tokenization of world economy. In this context tokenization is the process of emission of the cryptocurrencies with the value backed by tangible assets. Just like stocks and futures, a token can reflect the value of any tangible or legal objects like real estate, precious metals, mineral resources or debt service obligations. Information transparency and permanence in a blockchain guarantees safe storage of property rights data.
Despite there are no laws regulating such operations different fintech startups have been working on the concept of assigning cryptocurrencies to tangible assets. What’s more, they have achieved first success in some areas.
National currencies
Cryptocurrencies assigned to fiat money were the first to get that new wave of tokenization. Their appearance was the obvious reaction to a new market demand: many cryptocurrency exchanges do not support operation in national currencies due to difficult legal regulation. Appearance of a token assigned to one of popular currencies would let traders and investors instantly exchange bitcoins for less volatile coins.
Actually, this opportunity was successfully implemented in Tether (USDT) which is a cryptocurrency assigned to the US dollar. It is particularly remarkable that the system uses Bitcoin blockchain in combination with the software addition OMNI Layer to verify transactions. According to the data of Coinmarketcap service, daily turnover of Tether trading is over 600 000 US dollars – it’s more than most other cryptocurrencies have.
Investments into real industry
The year 2017 was marked with the real boom of ICO which is one of collective financing types. Its core idea is the phrase “initial coin offering” meaning that anyone may invest money into a startup’s development and get a cryptocurrency issued by this startup founders back. Due to low entrance threshold, ICO has become a mass kind of venture financing allowing hundreds thousands of users obtain small shares of prospective projects.
Firstly ICO was conducted only by IT and financial startups where cryptocurrency had the technical meaning mainly – it was used for paying different services, such as smart-contract completing (Ethereum) or storing data at a remote server (Sia).
However, the situation has been changing with the course of time – companies from the real sector use ICO more and more frequently to attract investments. In this case cryptocurrency is used exclusively for distribution of roles in a company. Cryptocurrency here is like stocks traded in the stock market.
GoldMineCoin (GMC) is the newest example. The founders of this project are planning to invest money into gold mining in the Magadan region. Each GMC virtual coin is assigned to a certain weight of gold and can be exchanged for a real golden coin in future. The development team has the active business in the area of gold mining and guarantees cryptocurrency buy-back at the market exchange rate. According to the information from GoldMineCoin official website ICO starts on December, 1 2017.
In May 2017 there was another ICO organized by ZrCoin (ZRC) – a project attracted over $7 000 000 for building a factory producing silicone dioxide. The price of each ZRC token is assigned to the market value of 1 kilogram of this substance. The users could purchase ZRC token for $1.4 each and the company guaranteed buy-back for all tokens after the factory is built.
Purchase of real estate and other tangible assets
Data permanence (inability to change) is one of the main blockchain features, therefore it perfectly suits for storing property rights information. In fact, we are speaking about creating a full-fledged infrastructure allowing to store data of operations with absolutely any objects. Such an approach is cheaper and simpler than running multiple independent state and private registries.
LAToken (LA) is one of the pioneers in this area. It is a digital assets record keeping system allowing for storing information regarding property rights, company shares, natural resources and other tangible assets. The platform does not just store property rights data – it lets exchange assets at its own trading place.
Tokenization: provisional results and prospects
As Pavel Kravchenko – a founder of Distributed Lab fintech company – thinks, use of blockchain in its assigning to tangible assets will allow to cut costs of IT infrastructure maintenance and will make venture investments available for a wide audience of private individuals. The main limiting factor of tokenization development is lack of the legal basis regulating legal aspects of decentralized currencies use. The number of the project using cryptocurrency for “digitalizing” tangible assets is growing and with no doubt it will lead to new laws which would determine the legal status of a token.