The Fluidity Stack
Establishing the new pipes of the modern financial system.
We all believe in the incredible potential of blockchain and its benefits on society. But the explosive wave of growth in 2017 did not continue, and by the end of 2018 we are left with a question: with fewer assets, lower prices and volumes, and less interest in the ecosystem overall, how do we grow?
Our team firmly believes in tokenization — a process to bring asset ownership online using distributed ledger technology. The ability to program asset functionality is a powerful solution to the growth conundrum and will enable the blockchain ecosystem to continue on its path. At minimum, we can replicate Venmo with decentralized stablecoins that represent USD, or make efforts like wBTC to represent Bitcoin on Ethereum. At maximum, we can bring all of Wall Street’s functionality onto an open peer-to-peer network. Money market instruments, for example bonds, can now be programmed on top of stablecoins with relative ease.
Digital assets are the cryptographic, programmable version of their analog counterparts. With Bitcoin, we solved the double-spend problem, and in a new leap we can put digital wrappers around securities to move any type of value in a compliant way with very little friction.
In May 2018, we introduced Fluidity, our commitment to bring real world assets online. In October 2018, we announced our partnership with Propellr, a digital end-to-end securities platform with significant infrastructure to tokenize securities. Together we introduced The Two Token Waterfall, a liquidity-optimized framework for replicating the entire financial stack of a private securities transaction, which was designed to push the ecosystem forward and encourage the community to think beyond compliance.
In the structure, all participants have the same information and since the entire capital stack is replicated, both token A and token B can be easily priced. Transparency begets liquidity, and with correctly designed tokens we can expect liquid secondary markets to emerge.
Our application of the principles set forth in The Two Token Waterfall, Manhattan’s first tokenized offering THIRTEEN EAST + WEST, is expected to close at the end of 2018.
Introducing the framework and expanding into real world assets has captured the imagination of many on and off Wall Street, and we are building towards a future where real world assets live online and can move with fluidity. The blockchain community will benefit as more assets come online and allow for trade. Classic securities markets will benefit because standardized asset structures will reduce costs associated with bespoke spreadsheets and back office work.
Once these assets are available for trade, we anticipate they will eventually be found on secondary markets, including AirSwap, provided they are otherwise compliant with all applicable laws. Issuers will have the choice to make their asset available for trade on AirSwap, as these assets live on the decentralized Ethereum network. We will be building customized products to support these new assets and will integrate them into the existing AirSwap ecosystem.
The Two Token Waterfall unveiled chapter one of our book. We have the opportunity to expand the framework and as we automate more of the stack, more opportunities to create and provide value will emerge. Our tokenization structure will expand horizontally into new asset classes creating an institutionally adoptable framework for trading, settling, reconciling, servicing, and reporting for every asset.
We’ve already seen with many other teams moving into this space that 2019 will be an exciting year for tokenized asset projects. Those properly designed, through expertise and experience, will achieve meaningful liquidity. Programmable value will take a new form, and we are doing our part to push this movement forward to new heights.
In all of this we must remember that the best days are yet to come. No matter the prices, no matter the sentiment, there is one mission, goal, and word that ties us all together: