The Future of Investing: Tokenizing Traditional Assets on The Blockchain

11/17/2017 06:03 pm ET Updated Nov 17, 2017
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Blockchain technology has been causing quite a buzz lately - and for good reasons. From its ability to ensure the security of financial transactions, to the elimination of middlemen, blockchain technology is capable of transforming almost any of today’s highly regulated industries.

Financial service companies, of course, are one of the primary players being disrupted by blockchain technology. Financial transactions on the blockchain ensure that payments are more secure, while making transactions fully transparent. And while blockchain is commonly known for having a big impact on traditional financial services, the technology is also disrupting other areas of finance, such as investing.

In particular, investments in real-world traditional financial assets, such as real estate, stocks, oil or gold, often succumb to one common shortcoming - these assets are not liquidized. And since illiquid assets are difficult to physically divide or transfer, a new system was developed to get around this, which involved trading papers that represented these assets.

However, this new system still failed to solve the problems, difficulties and risks that arose from the complex, legal paper-based agreements. As a result, financial service companies are looking towards blockchain for a solution. Why blockchain? Because this technology can convert these rights into a digital token that is backed by the asset itself.

For example, Jibrel Network is the first decentralized protocol that allows for traditional, illiquid assets - such as currencies, bonds, equities, commodities and other financial instruments - to be placed on the blockchain. This enables network users to buy, store, manage and transfer traditional assets via the Ethereum network, which dramatically reduces the cost and creates a level of safety for investors.

Jibrel ultimately works towards the goal of providing investors with a stable platform to invest. In order to do so, the company has created tokens that represent the value of real world assets. These tokens are called CryptoDepository Receipts (CryDRs) and are backed by the Jibrel Network Token, known as JNT (e.g. a USD CryDR holds 1 dollar worth of JNT, a EUR CryDR holds 1 euro worth of JNT).

CryDRs can be used for remittances, global payments, trading, and hedging. They can also be used to create automated and decentralized financial instruments such as bonds, commodities, debt instruments, and securities. Additionally, CryDRs have regulation embedded, ensuring all token transfers on the Jibrel Network are always fully KYC / AML compliant.

In a nutshell, CryDRs have traditional regulations baked into the tokens, allowing investors to take their assets and tokenize them knowing that the rules are embedded with compliance, and therefore, some level of safety. These tokens also help ensure that high-level investors do not face fines in places where compliance can be a grey area.

Connecting Traditional and Crypto-Economies

Putting traditional assets on the blockchain could very well be the future of investing, as this concept is gaining momentum. Jibrel Network just announced today that they have successfully completed their token presale, raising over $3 million and selling almost 20 million Jibrel Network Tokens (JNT).

The presale attracted interest from both individual as well as institutional investors, with significant backing coming from active token investors such as TaaS Fund, Tech Squared, Aurora Partners, Arabian Chain, among others.

“We are delighted to form this strategic relationship with Jibrel.” said Ruslan Gavrilyuk, President of TaaS. “We encourage their progressive approach towards solving the real-world problems of global banking, and we are excited to contribute to their bright future”.

And while other players have looked to connect the traditional and crypto-economies, none have successfully introduced a comprehensive or holistic solution like Jibrel’s.

“For companies looking to incorporate blockchain technology in their operating models, integration can be a challenge. Our solution allows institutions to use tokens in the back-end, capitalizing on the benefits of blockchain, without the need to build-out dedicated functionalities and competencies.” commented Yazan Barghuthi, Jibrel Network’s project lead.

The Future of Investing

Looking towards the blockchain as the future of investing is helping to create a new market that connects the traditional economy with the crypto economy. Tokenization of illiquid assets is just one example of how investing is evolving, resulting in decreasing frictions to trade and more secure forms of investing. This new market also attracts people who previously didn’t have access to trading such assets, due to expensive processes and complex legal procedures.

Overall, tokenization of assets on the blockchain makes these items highly liquid, while enhancing their value. Finally, security is another large benefit, as digitally trading tokens ensures that buyers and sellers do not have to worry about physical and operational security. When all is said and done, tokenization clearly emerges as an easier and more secure investing process.

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