Token issuing, setting up liquidity pools, simulation and trading with Unibright Freequity

In this blog post we present an explanatory video to showcase the current state of development of some key components of Unibright Freequity, our vision of an 360° tokenization platform. This covers the token definition and issuing part, setting up liquidity pools, simulation and trading — all based on guaranteed liquidity.

Check out the following video on our YouTube channel to see the token definition process for a real estate asset. Additionally we show the liquidity pool setup and simulation, specific to that very asset, providing liquidity for trading. The presentation closes with our component for trading tokenized assets against stable coins, based on our liquidity pool concept. The software architectural concept of using a hybrid approach (containing a blockchain based transaction settlement and a real-time centralised web frontend) is explained as well. Here is the video — enjoy!

What is Freequity?

Freequity is Unibright’s vision of a regulatory compliant 360° security token platform. A platform that covers all relevant stages of a tokenization process and integrates them into markets and system landscapes.

Central part of this security token platform is token issuance, a marketplace for trading and guaranteed liquidity within the platform. These are the topics covered by the video above.

For all customers and interested parties, the Unibright Token (UBT) is needed for using the Freequity components.

You can read more on Freequity here.

Token issuance and simulation

Easy-to-use token definition and issuing

As an asset owner, you need to describe the underlying asset and security connected to it. This process and the imposed responsibilities (e.g. the obligation to publish a prospectus) does not change “with Blockchain” and is still handled “off-chain”. Tokenization only is as good as the underlying legal contract; a token is just a digital reflection of the underlying legal agreement between the parties involved. Existing tokenization platforms only offer partial customization options. All the legal groundwork (like the regulatory and tax implications of the tokenization process for all involved jurisdictions, the needed KYC level and much more) is still open to the issuer.

Within Freequity, we abstract from the technical conclusion on how a token should be designed, and guide the issuer through a graphical process commensurate to their knowledge level (well-known from our Workflow Designer approach). After this definition, the token and the related smart contracts can be generated automatically for a desired blockchain protocol.

Liquidity Pools

One of the initial promises of STO (Security Token Offerings) is that the fractionalization of an asset into tokens alone will provide liquidity. The reasoning for this is that the token could be traded on an exchange after the initial issuing. This is why many existing STO Platforms mainly care about issuing a security token and selling it to investors. Afterwards, both investor and issuer are dependent on the so-called “secondary market”, if they want to buy or sell tokens, which has shown in recent years to be very intransparent, fee-consuming and in many cases operating without any regulatory compliance.

Instead of hoping for an external exchange, or trying to set up an own, dedicated bid-/ask-exchange for every security token, the Unibright Freequity approach is based on liquidity pools, serving as an option to become a regulatory compliant replacement to classical bid/ask exchanges.

Liquidity pools are put on top of the tokenized asset, consisting of two parts: one part containing a certain amount of the underlying token (the “Token Pool”), and the second containing a stable coin backed by fiat currencies.

The future performance of a token based on different pools can be simulated within Unibright Freequity before it is issued. The deterministic price building mechanism can be matched against different buy/sell pressure scenarios, including different distributions and consideration of external events.

The simulation helps the issuer to find the right customization of the Liquidity pool during the token definition process. It also shows the simulated outcome of different investors profiles, including the option to define project specific kick-backs of trading fee to the liquidity provider, the platform or the token holders. You can find more on our liquidity concept here.

Trading component

Our 360° platform offers a liquidity backed exchange service from the very beginning. This not only guarantees buyers and sellers to exchange tokens on the same legal base the issuance took place, but it also allows the platform provider (and all participants by kick-backs) to benefit hugely on the trading fees occurring with every trade.

One of the main reasons existing token issuing platforms leave out the trading part may be the high (regulatory) hurdles of setting up a own classical bid/ask exchange, acting as an intermediary between buyer and seller. Therefore, the investor is left pretty much alone after the initial process of token issuing. A huge business opportunity of collecting related trading fees that occur with every token trade, and the opportunity of providing liquidity and earning interest is left to intransparent external exchanges, not working on the legal and regulatory base the issuer had in mind when tokenizing his asset. This is what we address with building Freequity with the goal to be regulatory compliant.

We will add updates and walkthroughs of other Freequity components here in our blog, soon — stay tuned.

Unibright is a team of blockchain specialists, architects, developers and consultants with 20+ years of experience in business processes and integration. Unibright turns ideas into businesses, and improves processes with the help of blockchain technology.

Unibright develops enterprise solutions, invests in start-ups, builds process modelling tools and integration platforms and offers a 360° ecosystem around tokenized assets.

Verticals of https://unibright.io

Learn more by visiting the Unibright website, Twitter and Medium.