Taking Figure’s Portfolio Manager for a Spin Around the Block(chain)

I’m here for the tour but I don’t know what I’m supposed to be looking at

In order to get a good idea of what Portfolio Manager does and how it interacts with blockchain, a little background information is necessary. At a high level, Figure’s Portfolio Manager is an application that is built on top of the Provenance Blockchain that allows investors to easily sell loans, transfer asset ownership, and view real time performance data.

What was that about the Provenance Blockchain?

The Provenance Blockchain is the leading public open-source blockchain for financial services. Blockchains provide a decentralized, distributed, and immutable record of transactions. These records of transactions are what Portfolio Manager uses when facilitating the buying, selling, and transferring of assets.

Wait a second, I thought everything on the blockchain was public. Is sensitive data viewable by anyone?

Everything on the blockchain is public, but your personal data is NOT stored there. What is this wizardry you ask? The Provenance Blockchain has an optional layer named “p8e” that allows data to be stored off-chain. Provenance Blockchain contracts take data from the user and transform the information into encrypted data in the user’s own private object store, then records a hash of that data on the blockchain; essentially the blockchain stores a method for verifying the data that has been stored somewhere else.

Now that we know what we are looking at, let’s take a closer look

Asset Sales — think of it like online shopping for loans

Portfolio Manager allows you to easily sell and transfer assets and because it uses the Provenance Blockchain, it accomplishes the transaction without counterparty risk. Counterparty risk is the probability that the other party in a transaction may not fulfill its part of the deal (think any deal you made with your siblings when you were a kid). Portfolio Manager is able to remove counterparty risk when selling assets because it takes advantage of Provenance Blockchain’s ability to transact bilaterally. Essentially, the blockchain acts as the custodian of the funds required for purchase and the asset being sold. This allows the funds and the asset to be swapped in a single transaction.

Participation — not just a trophy you got in Little League

Simply put, a participation allows multiple parties to own an interest in a collection of assets. In Figure’s Portfolio Manager application, creating a participation is as easy as choosing one or more assets, creating an agreement, and choosing how many units your participation is divided into. Once the participation has been created, units of the participation can be acquired by buyers.

Portfolio Manager does store participations on the blockchain, so let’s dive into what that looks like. Let’s say I create a participation using a single loan that I divide into 100 units. Portfolio Manager will create a marker on the blockchain with a supply of 100 (think of these like shares that represent 1/100 of the interest in the participation) along with an immutable transaction that shows that I am the owner of all 100 shares. Next, suppose a buyer wants to acquire a 20% interest in the participation. Portfolio Manager will use the Provenance Blockchain to facilitate the transaction and a new transaction will be created that transfers the ownership of 20 of the shares to the buyer, showing the 80/20 split as immutable records on the blockchain.

Securitization — difficult to spell, easy to create

A securitization is a financial asset that pools financial assets into a group to create a marketable security. When Portfolio Manager creates a securitization and writes the contributions to that securitization to the blockchain, it first creates a marker on the chain that represents the contribution (remember back to participation where we created an asset with 100 units). Instead of 100 units, however, the asset describing the securitization contribution is made up of only 1 unit, because there is no need to divide up the ownership of the single asset. Each asset that is added to the securitization is then owned and contained within another asset on the blockchain. Basically, you have a securitization record on the blockchain that is the owner of all the contributions that have been made to it!

Warehousing — no need to run out and buy a giant building

Investors and asset owners are able to create Warehouse Lines of Credit. This provides a way to place loans as collateral in exchange for a percentage of the value of the loan as cash. Portfolio Manager allows one to easily create a Warehouse Facility that loans are then pledged to. On the Provenance Blockchain, the Warehouse Facility is represented by a marker which acts as the value owner of any pledged assets. That’s it!

The Provenance Blockchain is so awesome, how do I start using it for my own app?

To learn more about the Provenance Blockchain and to get started using it, check out https://docs.provenance.io/#getting-started

Co-Written by JORDON TOLOTTI and CAROLYN JACKSON

Jordon and Carolyn are Software Engineers at Figure that work on the Portfolio Manager application. When Jordon isn’t creating immutable records on the blockchain, he enjoys the outdoors. When Carolyn takes a break from bilaterally transacting, she likes traveling to new places and learning different cuisines to cook.