How do we tokenize an asset?

Topics

Tokenization is growing every day as an alternative to the traditional financial market and many people are already thinking about tokenizing their assets. If you want to get ahead , be sure to check all the content below. Get ahead! Tokenize with BLOCKBR!!!

Topics

"Tokenization through Blockchain makes structured products 100% cheaper, faster, safer and more transparent, breathing new life into the trillion dollar structured product markets."

Tokenization through Blockchain drastically simplifies the work of such complex products, which many investment banks had previously dealt with. Regulation and increased investor attention to commission costs have significantly weakened the competitive position of structured finance products compared to exchange traded funds (ETF); however, the use of blockchain is changing this situation every day.

Lower level of fees and higher level of security. Sales of structured products have steadily declined in recent years, in part as a result of regulatory changes.

The benefits of blockchain tokenization at a glance;

  • Transparency
  • reduced costs
  • Less chance of human error
  • Minimized settlement risk
  • Potential absence of mediators
  • Democratization of product offer
  • Decentralization of structured products
  • Greater profitability for asset owners and investors

How do we tokenize an asset?

Basically any type of asset can be tokenized, but not everything is worth tokenizing .

When we talk about tokenization, we are referring to transforming physical assets into digital assets, which we call tokens, so that they can be easily traded .

The entire process brings several advantages both for the owner of the asset that will be tokenized, and for those who will invest in the tokens.

The tokenization process takes place in Five (05) steps:

1 - Tokenization Feasibility

In the first step, your asset to be tokenized will be analyzed for the responsible tokenizer to guarantee your truthfulness and if it meets the necessary requirements.

2 - Token Structuring

Once everything is approved for the token's viability, we enter into the structuring and characterization of the token. In this process, legal and financial contracts are created that will establish all the rights as the token holder. While this process is taking place, an Escrow account is created. It is important for everyone to receive their share of investments, but it is not always necessary.

3 - Issuance of Tokens

The second step in the tokenization process is when Smart Contracts are created. All this takes place within a secure and encrypted network call Blockchain , so that the tokens can be distributed to investors.

It is like a kind of public and distributed accounting book, formed by informational blocks, sequential and chained processed by several computers around the world. And the Blockchain who is responsible for keeping the information inviolable and secure .

4 - Distribution

It is in this third stage that people interested in investing in their tokenized asset have access to the offer within the tokenizing company's platform, as well as in partner exchanges where financial products (tokens) can be distributed.

5 - Governance

The last step in the asset tokenization process is the governance . So investors inject capital in your token, must receive what is rightfully theirs, which may be dividends, interest and the profitability of the tokens.

For investors to have the necessary updates on the progress of the project in question from the issuer of the token, everything needs to be on display on the platform.

This whole process generates transparency , safety , efficiency , agility , decreases the intermediaries between the investor and the assets and, finally, it is absolutely scalable !

Tokenized Asset Owner Responsibilities

Briefly, you, as the asset owner, must to supply the documentation and provide any documents and information related to the asset to be tokenized .

It should also:

  • be responsible for the veracity of assets;
  • refrain from assigning, trading or otherwise encumbering the tokenized assets;
  • perform the payment (transfer) of the remuneration due to the token purchasers.

For us at BLOCKBR we define tokenization in two categories of tokens

1 - Guarantee Tokens

They are those that have guarantees and guarantees and bring security to investors and less risk to regulators, given that they have a fixed payment amount to the investor and a term. They are mostly tokens that represent advances and receivables.

2 - Speculation tokens with ballast

Tokens can even be created by a meme, as is the case with DOGE COIN and its influencer Elon Musk. This type of token is bad for the market because it has no guarantees or backing, it only collaborates for market manipulation and non-transparent funding, the model does not close. The bright side of this is that its days are numbered from the moment regulators around the world move on to the next step, the real importance and performance of DEFI.

BLOCKBR Digital Assets tokenizes;

= Reserves of a monetary value – Payment token (Bitcoin)

= The right to use a service – Utility Token

= The right of ownership of a certain real asset – Asset Token

= The right to dividends – Security Token

= The right to vote in a company's decisions – Equity Token

= Non-fungible tokens (NFT's) subject to DEFI

No ! We are already working on continents.

BLOCKBR understands that cryptoassets are digital assets capable of operating in a decentralized manner, just like cryptocurrencies, giving access in a democratic way to any individual, wherever they are.

BOCKBR made tokenization possible in countries where legal and regulatory ties have brought us together for major advances in the financial market for digital assets, as well as technology and innovation.

What is an asset?

An asset is anything that has a market value and is owned by people or institutions (Companies).

personal assets

Personal assets are those that have present or future value that belong to an individual or a group of individuals.

Among personal assets, we can mention: money (in your possession or in a bank), property and land (and everything related to them), personal property (jewelry, clothing, vehicles, works of art) and investments (stocks) , bonds, annuities).

commercial assets

Commercial assets are those that sustain the production and growth of a company. When it comes to this type of assets, we can cite as examples: machinery, raw materials, patents and royalties.

In the case of commercial assets, there are two subcategories:

  • current assets , which can be converted into short-term cash (such as cash, receivables, marketable securities, and stocks of commodities or raw materials available for sale).
  • fixed or non-current assets , which take a longer period to convert to cash (such as machinery, buildings, office furniture, and vehicles). These assets are also called tangible.

What licenses do I need to tokenize?

They are not all the tokenization processes that will request licenses . Tokens that do not represent mobile values , for example, not need to be licensed by any agency.

Tokens representing securities need license provided by the regulatory body that protects and oversees the capital market.

What is the lifecycle of a token?

The lifecycle of a token can be comprised within three phases : Pre-issuance (or issuance); Post-issuance (or governance) and Redemption.

You may view this cycle from the image below:

Many of these processes explain the general workings of other tokens.

Knowing this, let's explain each of these steps in detail!

issue

In the receivables token for example, like any traditional bond offering, it is necessary to define the relevant lending parameters , such as the offering volume, interest rate and duration.

These parameters are expressed directly into the logic of the smart contract , typically within a contract template. Running on a public Smart Contract platform ensures adherence to terms.

It is possible to move the entire bidding process, valuation and investor survey on the blockchain, but it is also more common and practical to apply the same procedures as traditional offerings.

The advent of tokens and stable coins, however, has made more attractive to make the actual purchase of titles already inside the blockchain .

In this way, the final delivery of rights to the securities is made in a pre-programmed manner, alleviating the need for agents payment and escrow services, thus reducing issuance costs.

However, compliance with KYC standards ( Know Your Customer ) in Smart Contract functions is still seen as the main challenge, although many companies have already developed efficient methods to deal with this issue.

governance

The governance stage concerns the maintenance , possible negotiations and periodic remunerations of the tokens. At this stage, there are some factors to consider.

Custody

As with (almost) all digital assets, tokens representing titles need to be storable, transferable, tradable and recoverable safely over the life of the title.

Financial institutions have many options for custody and storage of digital assets , and these options are also available for receivables tokens. For these purposes, it is an advantage for the smart contract to adhere to standards such as the ERC-20 specification.

Unfortunately, however, the ecosystem is still in the consolidation phase when it comes to patterns that support more complex functionality.

Negotiations

How tokenized bond issuing institutions are subject to several regulations in virtually all jurisdictions, transfer without permission is impractical.

However, approaches have emerged to reconcile the intentional behavior of token owners and the censorship-resistant nature of public blockchains, either with a simple whitelist or with "just-in-time" transfer approvals .

Finding the best balance between end-user experience and structural platform scalability remains a challenge.

A key requirement when it comes to tokenizing receivables is the ability to pricing the token and its risks in a secondary market .

For many titles, this can happen in centralized exchanges or by the blockchain in decentralized exchanges . However, avoiding liquidity fragmentation across platforms is even more important with the frontloading of receivables, which usually suffers from a lack of liquidity.

Even though the security of Smart Contracts is very advanced, receivables tokens usually contain a admin functionality to allow performances in unforeseen circumstances , for example, pausing all transfers.

In addition, it is advisable for issuers to be able to handle the loss of private keys by the token owners. This is especially relevant when payouts and redemptions happen over the blockchain.

Remunerations

Finally, the prepayment of receivables may include regular remuneration payments even when tokenized.

The public blockchain makes it more convenient for issuers to determine the ultimate beneficiaries of these payments: the wallets with the same addresses that have the token on a certain date in time.

Thus, token owners can receive the appropriate amount of stablecoins or of other suitable payment method for the blockchain.

In this way, the flexible nature of smart contracts allows corporate calendar events to be integrated into the asset itself.

Rescue

Generally, at the end of the project, the main contribution is returned current token holders.

In the same way as with remuneration, this can be carried out in a practical way by the blockchain with the use of stable currencies and usually happens after the receivables token transfers have been disabled.

At this moment, the tokens are also collected and the smart contracts are destroyed or permanently disabled.

Thus, token lifecycle comes to an end . And the same process goes for other receivables tokenizations.

What is an Escrow Account and how does it work?

First, it is important to understand that the term “Escrow Account” or “Escrow Account” does not have a literal translation into our language, so we use the original language in our daily lives.

It can be said that an Escrow Account is a “ controlled account ” or “ escrow account ”.

It is used as a mechanism for transactions involving large amounts between parties. Thus, the big risks that would be present in these voluminous transactions can be mitigated .

When the account is created, the parties involved open an account, which is formalized through a Escrow contract . In this agreement, the parties in common determine which rules investment or disbursement of deposited resources.

In the act, it is necessary that the parties choose a third , call of escrow agent (or escrow keeper ) to represent the neutral party of the negotiation.

Typically, the third part indicated is a banking institution and it is she who will be responsible for the guard , management and destination of the assets deposited in the Escrow account, obeying everything that is pre-established in the contract.

So, there is a greater guarantee that the negotiation between the parties will take place, after all, they will be sure that the amount will be released in accordance with the agreed terms and only if the conditions and stages of the negotiation are fulfilled.

Escrow account and tokenization

Creating an Escrow Account in the tokenization process will depend on your needs . To better understand, it is important to know what tokens are and the tokenization process.

tokens are digital representations of parts of an asset. They can represent so much tangible assets (such as real estate, automobiles and works of art, for example) how much intangibles (such as patents and professional careers).

They serve to bring advantages to both issuers and investors, increasing asset liquidity, offering access to high performance assets and reducing the costs.

When to create an Escrow Account in your asset tokenization?

It is in the first step that you will verify the need to create the Escrow Account.

Initially, the tokenizing company evaluates the asset that an issuer intends to tokenize to verify its existence and if it frame on certain requirements. In addition, a legal contract establishing all rights token holders.

Smart Contracts are then instantly created within a network. safe and encrypted called Blockchain.

When it comes to the Escrow Account in the tokenization process, it will receive and hold all invested capital until the target fundraising has been reached and the due diligence of the target asset has been completed.

If these two criteria are met, then equity will be released to the asset owner and investors will receive their corresponding tokens.

However, the Escrow Account is only necessary for some investments, especially those with high values, in which it is necessary to guarantee that the transition is not risky and that everyone receives their due shares.

What are Security Tokens?

To understand what the Security Tokens , just keep in mind the stocks of the Stock Exchange or securities. In fact, the actions are quite compared to these tokens, since the value derives from a external asset that can be traded.

An important feature of Security Tokens is that they are subject to federal laws that govern the mobile values . The consequences of not complying with current legislation may include various types of penalties, even the discontinuity of a project under development.

On the other hand, token holders who meet the regulation of laws have a variety of applications. The most promising of these is usually tokens from Company Participation .

another important advantage is that holders of this type of token usually receive the dividends of your investments through additional tokens !

Ethereum Standard Security Tokens

The main patterns to represent the Security Tokens of the Ethereum pattern include ERC-20 and ERC-1400 . However, there are some additional patterns , like the DS Protocol , O R-Token , O T-REX , O SFT it's the ERC-1404 .

To be compatible with Wallets and Blockchains, an issuer must use the same patterns than other players. However, the ERC-20 standard does not allow the application of rules and regulations governing private securities.

There are some options Security Token issuers should look for when choosing the appropriate pattern . Are they:

  1. Coded Compliance – transfer rules are embedded in bonds and can never be transferred to an ineligible individual in primary or secondary markets.
  2. reduced costs – settlement and reconciliation fees are dramatically reduced with supported P2P transfers.
  3. Controlled Securities – issuers remain in control of the tokens, even with investor self-custody.
  4. Greater Transferability – lowering friction points across the value chain unlocks highly transferable assets.

O ERC-20 protocol it's the original pattern and older for issuing tokens. However, he has his own vulnerabilities and disadvantages . For example, tokens could be withdrawn of the Smart Contract without the possibility of recovery .

Furthermore, an investor could not recover your tokens if you sent them to a wallet with a different pattern of the ERC-20. he could also not recover your tokens case lost your private key .

There are also questions regulatory it's from compliance , such as difficulty to define all necessary KYC and AML procedures within the ERC-20 standard. For example, you cannot impose a KYC procedure for trading on the secondary market.

In this case, many alternative protocols were developed to help meet the needs of the Security Tokens market. All these alternatives are compatible with the ERC-20 standard, which means they can be easily stored , exchanged and transferred with ERC-20 infrastructure.

Alternatives to the Ethereum ERC-20 include:

DS Protocol

The DS Protocol is an open source protocol, which was developed by Securitize specifically for titles and supports third-party applications.

There are special DS applications, which handle relevant events related to tokenized economic rights (issuance, trading, threshold table generation, governance events, required payments). This protocol also has built-in compliance and registration services.

Tokens made using this protocol are easy for owners to manage, who regularly receive various related updates.

R-Token

The R-token is an ERC-20 type token made by Harbor with some extra features added: built-in KYC, AML and tax services, as well as some flexible functionality that helps the issuer do the necessary regulatory configuration. The R-token standard allows the creation of tokenized regulated bonds.

T-REX

T-REX is a protocol built on the Ethereum network that was created by Tokeny Solutions, recently renamed Tokeny Sarl. Although the T-REX is based on the ERC-20 standard, it has more than 100 options that issuers can use to ensure compliance and manage control for the issuer, agents and investors.

SFT

Hyperlink Capital's SFT protocol uses the Solidity programming language used by the developers of the Ethereum network, which makes the SFT part of the network. Basically, this protocol is similar to the ERC-20, with the same comfortable features that allow you to easily build Smart Contracts. However, it is more complex and secure, which is why it allows tokenize debt and equity-based securities.

ERC-1404

The ERC-1404 was developed by Tokensoft and is based on the ERC-1400 standard. It is the approved standard of Security Tokens based on the Ethereum network. Which means it meets the necessary security and compliance requirements, including built-in KYC and AML (for the primary and secondary market).

These are the top 5 Security Tokens patterns of the Ethereum pattern!

Do you want to Tokenize your company or business?

We created a form via QRcode to get to know you. Please fill in the form and it will be a pleasure to assist you.

"Tokenization through Blockchain makes structured products 100% cheaper, faster, safer and more transparent, breathing new life into the trillion dollar structured product markets."

Tokenization through Blockchain drastically simplifies the work of such complex products, which many investment banks had previously dealt with. Regulation and increased investor attention to commission costs have significantly weakened the competitive position of structured finance products compared to exchange traded funds (ETF); however, the use of blockchain is changing this situation every day.

Lower level of fees and higher level of security. Sales of structured products have steadily declined in recent years, in part as a result of regulatory changes.

The benefits of blockchain tokenization at a glance;

  • Transparency
  • reduced costs
  • Less chance of human error
  • Minimized settlement risk
  • Potential absence of mediators
  • Democratization of product offer
  • Decentralization of structured products
  • Greater profitability for asset owners and investors

How do we tokenize an asset?

Basically any type of asset can be tokenized, but not everything is worth tokenizing .

When we talk about tokenization, we are referring to transforming physical assets into digital assets, which we call tokens, so that they can be easily traded .

The entire process brings several advantages both for the owner of the asset that will be tokenized, and for those who will invest in the tokens.

The tokenization process takes place in Five (05) steps:

1 - Tokenization Feasibility

In the first step, your asset to be tokenized will be analyzed for the responsible tokenizer to guarantee your truthfulness and if it meets the necessary requirements.

2 - Token Structuring

Once everything is approved for the token's viability, we enter into the structuring and characterization of the token. In this process, legal and financial contracts are created that will establish all the rights as the token holder. While this process is taking place, an Escrow account is created. It is important for everyone to receive their share of investments, but it is not always necessary.

3 - Issuance of Tokens

The second step in the tokenization process is when Smart Contracts are created. All this takes place within a secure and encrypted network call Blockchain , so that the tokens can be distributed to investors.

It is like a kind of public and distributed accounting book, formed by informational blocks, sequential and chained processed by several computers around the world. And the Blockchain who is responsible for keeping the information inviolable and secure .

4 - Distribution

It is in this third stage that people interested in investing in their tokenized asset have access to the offer within the tokenizing company's platform, as well as in partner exchanges where financial products (tokens) can be distributed.

5 - Governance

The last step in the asset tokenization process is the governance . So investors inject capital in your token, must receive what is rightfully theirs, which may be dividends, interest and the profitability of the tokens.

For investors to have the necessary updates on the progress of the project in question from the issuer of the token, everything needs to be on display on the platform.

This whole process generates transparency , safety , efficiency , agility , decreases the intermediaries between the investor and the assets and, finally, it is absolutely scalable !

Tokenized Asset Owner Responsibilities

Briefly, you, as the asset owner, must to supply the documentation and provide any documents and information related to the asset to be tokenized .

It should also:

  • be responsible for the veracity of assets;
  • refrain from assigning, trading or otherwise encumbering the tokenized assets;
  • perform the payment (transfer) of the remuneration due to the token purchasers.

For us at BLOCKBR we define tokenization in two categories of tokens

1 - Guarantee Tokens

They are those that have guarantees and guarantees and bring security to investors and less risk to regulators, given that they have a fixed payment amount to the investor and a term. They are mostly tokens that represent advances and receivables.

2 - Speculation tokens with ballast

Tokens can even be created by a meme, as is the case with DOGE COIN and its influencer Elon Musk. This type of token is bad for the market because it does not have guarantees or backing, it only collaborates for market manipulation and non-transparent funding, the model does not close. The bright side of this is that its days are numbered from the moment regulators around the world move on to the next step, the real importance and performance of DEFI.

BLOCKBR Digital Assets tokenizes;

= Reserves of a monetary value – Payment token (Bitcoin)

= The right to use a service – Utility Token

= The right of ownership of a certain real asset – Asset Token

= The right to dividends – Security Token

= The right to vote in a company's decisions – Equity Token

= Non-fungible tokens (NFT's) subject to DEFI

No ! We are already working on continents.

BLOCKBR understands that cryptoassets are digital assets capable of operating in a decentralized manner, just like cryptocurrencies, giving access in a democratic way to any individual, wherever they are.

BOCKBR made tokenization possible in countries where legal and regulatory ties have brought us together for major advances in the financial market for digital assets, as well as technology and innovation.

What is an asset?

An asset is anything that has a market value and is owned by people or institutions (Companies).

personal assets

Personal assets are those that have present or future value that belong to an individual or a group of individuals.

Among personal assets, we can mention: money (in your possession or in a bank), property and land (and everything related to them), personal property (jewelry, clothing, vehicles, works of art) and investments (stocks) , bonds, annuities).

commercial assets

Commercial assets are those that sustain the production and growth of a company. When it comes to this type of assets, we can cite as examples: machinery, raw materials, patents and royalties.

In the case of commercial assets, there are two subcategories:

  • current assets , which can be converted into short-term cash (such as cash, receivables, marketable securities, and stocks of commodities or raw materials available for sale).
  • fixed or non-current assets , which take a longer period to convert to cash (such as machinery, buildings, office furniture, and vehicles). These assets are also called tangible.

What licenses do I need to tokenize?

They are not all the tokenization processes that will request licenses . Tokens that do not represent mobile values , for example, not need to be licensed by any agency.

Tokens representing securities need license provided by the regulatory body that protects and oversees the capital market.

What are the legal restrictions on asset disclosure?

Restrictions on Disclosure depend of the asset that has been tokenized.

In the Solidarity Mechanism token family, there are almost no legal restrictions , because it is not understood as an investment.

In the Companies Participation and Prepayment of Receivables families, there can be no public offering . In these cases, it is allowed to explain what the asset is, but not to advertise and advertise.

When the offers are closed (private), the material must be directed or accessed in individualized form , like extra care not to appear public disclosure, “public science”. Thus, these offers only appear to investors registered on the platform.

Investing in startups, projects and start-up companies involves scratchs . there is always the possibility of total or partial loss of the invested capital, as a result of the failure of the initiative.

be sure to stay tuned , since the tokenizers not responsible by the risks inherent to the investment, by the profitability of the assets or by possible losses on the part of the investor.

What is the lifecycle of a token?

The lifecycle of a token can be comprised within three phases : Pre-issuance (or issuance); Post-issuance (or governance) and Redemption.

You may view this cycle from the image below:

Many of these processes explain the general workings of other tokens.

Knowing this, let's explain each of these steps in detail!

issue

In the receivables token for example, like any traditional bond offering, it is necessary to define the relevant lending parameters , such as the offering volume, interest rate and duration.

These parameters are expressed directly into the logic of the smart contract , typically within a contract template. Running on a public Smart Contract platform ensures adherence to terms.

It is possible to move the entire bidding process, valuation and investor survey on the blockchain, but it is also more common and practical to apply the same procedures as traditional offerings.

The advent of tokens and stable coins, however, has made more attractive to make the actual purchase of titles already inside the blockchain .

In this way, the final delivery of rights to the securities is made in a pre-programmed manner, alleviating the need for agents payment and escrow services, thus reducing issuance costs.

However, compliance with KYC standards ( Know Your Customer ) in Smart Contract functions is still seen as the main challenge, although many companies have already developed efficient methods to deal with this issue.

governance

The governance stage concerns the maintenance , possible negotiations and periodic remunerations of the tokens. At this stage, there are some factors to consider.

Custody

As with (almost) all digital assets, tokens representing titles need to be storable, transferable, tradable and recoverable safely over the life of the title.

Financial institutions have many options for custody and storage of digital assets , and these options are also available for receivables tokens. For these purposes, it is an advantage for the smart contract to adhere to standards such as the ERC-20 specification.

Unfortunately, however, the ecosystem is still in the consolidation phase when it comes to patterns that support more complex functionality.

Negotiations

How tokenized bond issuing institutions are subject to several regulations in virtually all jurisdictions, transfer without permission is impractical.

However, approaches have emerged to reconcile the intentional behavior of token owners and the censorship-resistant nature of public blockchains, either with a simple whitelist or with "just-in-time" transfer approvals .

Finding the best balance between end-user experience and structural platform scalability remains a challenge.

A key requirement when it comes to tokenizing receivables is the ability to pricing the token and its risks in a secondary market .

For many titles, this can happen in centralized exchanges or by the blockchain in decentralized exchanges . However, avoiding liquidity fragmentation across platforms is even more important with the frontloading of receivables, which usually suffers from a lack of liquidity.

Even though the security of Smart Contracts is very advanced, receivables tokens usually contain a admin functionality to allow performances in unforeseen circumstances , for example, pausing all transfers.

In addition, it is advisable for issuers to be able to handle the loss of private keys by the token owners. This is especially relevant when payouts and redemptions happen over the blockchain.

Remunerations

Finally, the prepayment of receivables may include regular remuneration payments even when tokenized.

The public blockchain makes it more convenient for issuers to determine the ultimate beneficiaries of these payments: the wallets with the same addresses that have the token on a certain date in time.

Thus, token owners can receive the appropriate amount of stablecoins or of other suitable payment method for the blockchain.

In this way, the flexible nature of smart contracts allows corporate calendar events to be integrated into the asset itself.

Rescue

Generally, at the end of the project, the main contribution is returned current token holders.

In the same way as with remuneration, this can be carried out in a practical way by the blockchain with the use of stable currencies and usually happens after the receivables token transfers have been disabled.

At this moment, the tokens are also collected and the smart contracts are destroyed or permanently disabled.

Thus, token lifecycle comes to an end . And the same process goes for other receivables tokenizations.

What is an Escrow Account and how does it work?

First, it is important to understand that the term “Escrow Account” or “Escrow Account” does not have a literal translation into our language, so we use the original language in our daily lives.

It can be said that an Escrow Account is a “ controlled account ” or “ escrow account ”.

It is used as a mechanism for transactions involving large amounts between parties. Thus, the big risks that would be present in these voluminous transactions can be mitigated .

When the account is created, the parties involved open an account, which is formalized through a Escrow contract . In this agreement, the parties in common determine which rules investment or disbursement of deposited resources.

In the act, it is necessary that the parties choose a third , call of escrow agent (or escrow keeper ) to represent the neutral party of the negotiation.

Typically, the third part indicated is a banking institution and it is she who will be responsible for the guard , management and destination of the assets deposited in the Escrow account, obeying everything that is pre-established in the contract.

So, there is a greater guarantee that the negotiation between the parties will take place, after all, they will be sure that the amount will be released in accordance with the agreed terms and only if the conditions and stages of the negotiation are fulfilled.

How is the Escrow Account related to the prepayment of receivables?

when it comes to prepayment of receivables and your company creates an account, granting the right to move to securitizers or to a FIDC (Receivables Investment Fund) , your company's receivables are advance at the same time.

When customers pay, the amount will be deposited into the Escrow Account.

In this way, the account will serve as Warranty for enlarge a credit limit for your business. It is an excellent option if you have searched for other credit options in the market that do not meet your company's needs.

Escrow account and tokenization

Creating an Escrow Account in the tokenization process will depend on your needs . To better understand, it is important to know what tokens are and the tokenization process.

tokens are digital representations of parts of an asset. They can represent so much tangible assets (such as real estate, automobiles and works of art, for example) how much intangibles (such as patents and professional careers).

They serve to bring advantages to both issuers and investors, increasing asset liquidity, offering access to high performance assets and reducing the costs.

When to create an Escrow Account in your asset tokenization?

It is in the first step that you will verify the need to create the Escrow Account.

Initially, the tokenizing company evaluates the asset that an issuer intends to tokenize to verify its existence and if it frame on certain requirements. In addition, a legal contract establishing all rights token holders.

Smart Contracts are then instantly created within a network. safe and encrypted called Blockchain.

When it comes to the Escrow Account in the tokenization process, it will receive and hold all invested capital until the target fundraising has been reached and the due diligence of the target asset has been completed.

If these two criteria are met, then equity will be released to the asset owner and investors will receive their corresponding tokens.

However, the Escrow Account is only necessary for some investments, especially those with high values, in which it is necessary to guarantee that the transition is not risky and that everyone receives their due shares.

What are Security Tokens?

To understand what the Security Tokens , just keep in mind the stocks of the Stock Exchange or securities. In fact, the actions are quite compared to these tokens, since the value derives from a external asset that can be traded.

An important feature of Security Tokens is that they are subject to federal laws that govern the mobile values . The consequences of not complying with current legislation may include various types of penalties, even the discontinuity of a project under development.

On the other hand, token holders who meet the regulation of laws have a variety of applications. The most promising of these is usually tokens from Company Participation .

another important advantage is that holders of this type of token usually receive the dividends of your investments through additional tokens !

Ethereum Standard Security Tokens

The main patterns to represent the Security Tokens of the Ethereum pattern include ERC-20 and ERC-1400 . However, there are some additional patterns , like the DS Protocol , O R-Token , O T-REX , O SFT it's the ERC-1404 .

To be compatible with Wallets and Blockchains, an issuer must use the same patterns than other players. However, the ERC-20 standard does not allow the application of rules and regulations governing private securities.

There are some options Security Token issuers should look for when choosing the appropriate pattern . Are they:

  1. Coded Compliance – transfer rules are embedded in bonds and can never be transferred to an ineligible individual in primary or secondary markets.
  2. reduced costs – settlement and reconciliation fees are dramatically reduced with supported P2P transfers.
  3. Controlled Securities – issuers remain in control of the tokens, even with investor self-custody.
  4. Greater Transferability – lowering friction points across the value chain unlocks highly transferable assets.

O ERC-20 protocol it's the original pattern and older for issuing tokens. However, he has his own vulnerabilities and disadvantages . For example, tokens could be withdrawn of the Smart Contract without the possibility of recovery .

Furthermore, an investor could not recover your tokens if you sent them to a wallet with a different pattern of the ERC-20. he could also not recover your tokens case lost your private key .

There are also questions regulatory it's from compliance , such as difficulty to define all necessary KYC and AML procedures within the ERC-20 standard. For example, you cannot impose a KYC procedure for trading on the secondary market.

In this case, many alternative protocols were developed to help meet the needs of the Security Tokens market. All these alternatives are compatible with the ERC-20 standard, which means they can be easily stored , exchanged and transferred with ERC-20 infrastructure.

Alternatives to the Ethereum ERC-20 include:

DS Protocol

The DS Protocol is an open source protocol, which was developed by Securitize specifically for titles and supports third-party applications.

There are special DS applications, which handle relevant events related to tokenized economic rights (issuance, trading, threshold table generation, governance events, required payments). This protocol also has built-in compliance and registration services.

Tokens made using this protocol are easy for owners to manage, who regularly receive various related updates.

R-Token

The R-token is an ERC-20 type token made by Harbor with some extra features added: built-in KYC, AML and tax services, as well as some flexible functionality that helps the issuer do the necessary regulatory configuration. The R-token standard allows the creation of tokenized regulated bonds.

T-REX

T-REX is a protocol built on the Ethereum network that was created by Tokeny Solutions, recently renamed Tokeny Sarl. Although the T-REX is based on the ERC-20 standard, it has more than 100 options that issuers can use to ensure compliance and manage control for the issuer, agents and investors.

SFT

Hyperlink Capital's SFT protocol uses the Solidity programming language used by the developers of the Ethereum network, which makes the SFT part of the network. Basically, this protocol is similar to the ERC-20, with the same comfortable features that allow you to easily build Smart Contracts. However, it is more complex and secure, which is why it allows tokenize debt and equity-based securities.

ERC-1404

The ERC-1404 was developed by Tokensoft and is based on the ERC-1400 standard. It is the approved standard of Security Tokens based on the Ethereum network. Which means it meets the necessary security and compliance requirements, including built-in KYC and AML (for the primary and secondary market).

These are the top 5 Security Tokens patterns of the Ethereum pattern!

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