Digital Securities: This Blockchain-Powered Financial Tool is Set to Unlock Value
Digital securities (sometimes also known as ‘security tokens’) are ownership units managed by the blockchain in a tradable asset.
Contrary to what many think, this new financial tool is not a new invention at all. It is simply the logical next step that will take the current securities to a new level of digitalization.
Cheapest Capital in a Free Market
Digital securities enable higher liquidity and fractional ownership, in addition to breaking of controls on the capital. It is safe to say that they are set to empower a truly free market because they are going to be the cheapest capital around.
This should not really come as a surprise. In the 1980s (when the economy was doing well like it is now), Mike Milken, the ‘junk bond king’, had found a new financial tool to access the cheapest capital in the market and promoted junk bonds for leveraged buyouts (LBO).
This created a serious gold rush that made numerous financial institutions incredibly wealthy over the last 30 years.
Now, the blockchain has come up with a brand new financial tool — Digital Securities.
As history suggests, the next few decades will belong to individuals and financial institutions that will be committed in their pursuit to dominate the digital securities market. These market players will have the most liquidity, cheapest capital, and the largest number of prospective opportunities at their disposal.
Dominant Strategies to Win in the Digital Securities Market
Here are two winning strategies to succeed with digital securities:
It is called the ‘unbundler’ approach when asset owners start ‘unbundling’ their single-owner, illiquid asset into a multi-owner, liquid asset. In other words, they change their analog holding system into digital securities.
It is almost a given that prices of assets will increase due to a combination of factors, such as geographic arbitrage, liquidity premiums, and the growing number of possible investors from asset-sharing.
The ‘unbundlers’ seize value via capital appreciation in the assets they used to own.
These are investors that build portfolios of digital securities in assets that were previously illiquid. These investors ‘bundle’ small amounts of asset-sharing, or commonly known as fractional ownership, in an assortment of assets to create new financial opportunities and products.
One of the ways in which a ‘bundler’ gains value is by offering retail investors a large range of digital securities portfolios.
This allows the investors to possess a diverse range of assets that were previously illiquid. This is actually very similar to what happens in the Exchange Traded Funds (ETFs) today.
Case Study: How this Twin-Strategy Impacted NYC Real Estate
Some experts think that these two strategies can co-exist, but a team of analysts recently proved this fact beyond any doubt. They observed how bundling and unbundling can affect the New York City real estate market.
An organization bought separate real estate properties through fiat currency. Each property had an analog ownership structure which was later altered into a digital securities structure. This created a number of shares available for trade for every individual property.
Now, these digital securities are completely in compliance with the regulations and will be listed on Security Token exchanges. Investors from around the globe will be able to buy and sell these securities 24x7x365. That’s what happens in the world of unbundlers.
This re-bundling and unbundling of real estate that was previously illiquid will enable people to invest in different property types, neighborhoods, and individual streets.
The biggest benefit of these strategies is they empower the investors to be able to invest in assets which were previously reserved for only the highly-connected and ultra-wealthy i.e., the 1-percenters.
This model not only works for both small and large investors but it transcends across various asset types located in absolutely any place in the world. The world is truly getting flatter.
Digital Securities: What the Future Holds
Thanks to the blockchain, digital securities are going to flood the market with the cheapest capital this world has ever seen.
This creates a very conducive environment for serious investments. Institutions that have large pools of capital, high levels of conviction, and a hearty appetite for moving quickly, will dominate this market.
The financial system is changing in real time. Unlike the current structure, the future system will hold more global involvement and fewer entry barriers. It might not be as ground-breaking as many people imagine, but it will be a more efficient system that rewards those who adapt to it first and fast.
BRITE — Digital Securities Done Right
BRITE is a white-label stand-alone crowdfunding platform that’s built on top of Hyperledger DLT, which means it provides greater privacy, security, and reliability than any other platform in the industry.
Want to know more about how you can invest in asset classes which were previously reserved for the super-rich? Give us a call at +1 321–558–6868 or visit us at BRITE.us