Introducing TrustToken: A Platform To Create Asset-Backed Tokens
TrustToken is a platform to create asset-backed tokens that you can easily buy and sell around the world.
Imagine you could tokenize any asset. What would you tokenize? You could start with real estate, businesses, private equity, patents, copyrights, sports teams, collectible art, and commodities such as gold and oil.
What would that mean for you? If you own assets that are difficult to trade (such as real estate, IP, or art), you could now have liquidity and fractional ownership for those assets. If you’re a creator or an entrepreneur, you could (following proper regulatory procedures) offer equity crowdfunding for any project to a global audience. If you’re an investor, you could have unprecedented access to investing opportunities for new asset classes around the world.
If you could tokenize any asset, it would enable blockchains to control and transact the $256 trillion worth of real-world assets, which would reshape both the crypto and mainstream economies.
But in order to legitimately tokenize real-world assets, we need a way to establish ownership that’s recognized by both blockchains and legal-financial authorities. Otherwise, you can’t reliably redeem the asset’s tokens for the underlying asset, and your tokens aren’t worth anything.
Today, the TrustToken team is proud to announce the TrustToken Platform: the world’s first platform to securitize and transact real-world assets on blockchains in a way that is legally enforced, audited, and collateralized. This post describes why that’s important and how the TrustToken Platform enables tokenization you can trust.
Why Do We Need A Bridge Between Blockchains and Real-World Assets?
Blockchains currently enable the global, liquid exchange of digital assets, yet also have the potential to become platforms for tokenizing, controlling, and transacting the $256 trillion worth of real-world assets.
Attempts to tokenize real-world assets have already started: the last year has seen seven projects to tokenize real estate, five projects to tokenize gold and other commodities, along with securities, currencies, and fine art.¹ However, these tokens all have little to no legal enforceability, audit trails, or collateral.
For example, Tether is a stablecoin “backed” by US dollars, but there exists no legal connection between the tokens and the $450 million USD in Tether’s reserve. This means that there is no legal recourse for token holders if Tether misappropriates the underlying assets. Tether is not far from the norm; no tokenization project yet offers strong guarantees over the underlying assets with collateral or criminal enforcement.
Without legal penalties to offset misappropriation rewards, the risk of defection will rise with increasing asset tokenization. Protocols, decentralized apps and exchanges relying on tokenized assets are all at risk. Ultimately, token holders need asset management that they can trust.
Creating a legal bridge between blockchains and assets is difficult because it requires novel legal entities designed around cross-jurisdictional property and tax law. A full solution requires an auditable protocol for smart contracts to interface with the fiduciaries managing these legal entities, as well as a cryptoeconomic system for trustworthy asset management.
That is why we are building the TrustToken Platform.
Tokenization You Can Trust
The TrustToken Platform enables asset tokenization that is legally enforced, audited, and collateralized. Its key legal instrument is a special type of trust called the “SmartTrust,” which appoints the beneficial ownership and control of assets in the trust to a smart contract on a blockchain.
The owner can design the tokens from that smart contract to have any arrangement of voting rights, equity stake, or usage abilities, and they can sell the tokens through any application or exchange. Through the auditing system provided by the TrustProtocol, token holders can verify that the tokens are backed by real-world assets. TrustToken can be used to purchase and collateralize fiduciary services; each tokenized asset can issue its own new coin (e.g. BobsHouseCoin, GoldCoin, ETFCoin).
Rather than trust a centralized asset manager (as you must do with other tokenization projects), you can choose your own fiduciary from an open market of professional fiduciaries. Each firm in this market is already audited by financial regulators and has billions of dollars of assets under management; new professional trust firms can join the market and compete to offer asset management services.
The TrustToken Platform offers the following components:
- SmartTrust, a type of legal contract that appoints beneficial asset ownership and control to a smart contract on a blockchain
- TrustMarket, where clients can hire fiduciaries who interface with legal-financial institutions and are legally bound to manage assets as instructed by the smart contract
- TrustProtocol, a protocol that specifies how smart contracts can direct fiduciaries
- TrustVault, a decentralized and secure storage system for complete audit trails of asset transactions
- TrustToken, the platform’s incentive layer to reward trustworthy behavior, create an audit trail, and collateralize property
The first SmartTrust was successfully launched in October 2017. It owns a bank account and is controlled by the Ethereum smart contract 0xa8efaa4d10be6211a0a5db4ccc9f22bd28ca60b3.
How Could You Use The TrustToken Platform?
Markets will discover the asset classes that benefit most from tokenization, and new markets will emerge for assets that were previously inaccessible or illiquid. Some examples include:
- A liquid, global market of tokenized real estate and rental properties
- International access to local stock, bonds, and other financial instruments
- Secure real estate transactions using smart contract escrow
- Stable cryptocurrencies backed by fiat currencies or commodities
- Early liquidity of intellectual property, such as patents, music, and software
Collaboration with Financial Regulators
To comply with securities policies, we currently support Reg. D and Reg. CF offerings for security tokens. This way, users know which legal precedents to follow, and can build on well-known frameworks for securitizing assets and funding businesses.
Fortunately, the smart contracts that issue tokens can help enforce financial law. For example, they can ensure that buyers are accredited investors or are citizens of certain countries. The TrustToken Platform will work with legal-financial authorities and application creators to help ensure legal compliance.
Towards the Tokenized Economy
We envision that the TrustToken Platform will be the trusted, global platform for tokenizing, controlling, and transacting real-world assets on blockchains.
We anticipate the economic implications of the TrustToken Platform will be far-reaching. Today’s $256 trillion worth of real-world assets will gain the benefits of digital assets: global access, liquid exchange, lower transaction costs, shared ownership, and programmatic control.
Let’s build the tokenized economy together.
Our Team
Our team includes attorneys, blockchain engineers, and machine learning engineers out of Stanford, Palantir, and Google. We are part of the Stanford StartX Accelerator.
Legal counsel is provided by Cooley, WilmerHale, Wilson Sonsini Goodrich & Rosati, the Law Offices of Oshins & Associates, LLC, and GATCA & Trusts Compliance Associates, LLC.
Want to Learn More?
¹ Some examples of tokenization projects: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12.
DISCLAIMER: In consultation with legal counsel, TrustToken reserves the right to change the distribution schedule and/or impose additional restrictions on transfer and resale if necessary to comply with securities laws. You should also review our most recent FAQs and PPM for a more complete discussion of these factors and other risks, particularly under the PPM heading “Risk Factors.”
