The Value of Fractional Ownership in Physical Assets

The rapid and widespread growth of digital currency trading and the associated blockchain technology has gained traction in recent years. Digital currency is just ‘one component’ of this burgeoning new asset class using blockchain technology. However, one of the most exciting developments for injecting liquidity into the financial markets is tokenization.

This involves converting ownership rights of physical and other assets into digital tokens, using blockchain technology. Investors are burning the candle at both ends to formulate the best-practice methodology to shift these assets onto blockchain technology. This provides many inherent benefits to traders, notably fractional ownership of assets for a fully diversified financial portfolio.

A company making tremendous strides in this domain is LAToken. Liquid Asset Tokens, known as LAT make it easy for anyone to unleash the full potential of illiquid assets such as artwork, bank loans, and property through fractional shares trading in a secondary market. Not only are asset owners able to successfully leverage their holdings, it’s a great way to boost liquidity with minimal transactions costs.

Liquid Asset Tokens (LAT) are sold on a marketplace such as LAToken which facilitates the trading activity between buyers and sellers. This technology and set of services act as an effective online wallet for the management of liquid asset tokens and transactions. Plus, it provides a one size fits all service for buying, selling, investing and even a TestNet. Everything is stored on blockchain, and information is easily accessible via a host of tools, resources and analytics.

What Are the Benefits of Tokenizing Tangible Assets?

For starters, the world we live in comprises assets such as real estate, automobiles, equipment, vehicles, commodities (gold, silver, crude oil, etc.). It is near impossible to divide up these assets while still maintaining functionality, value and investment appeal. One way to do so is by disseminating ownership through fractional investments.

Buyers and sellers come together to trade these assets in such a way that investors can own fractions of these assets. The paper ownership system is riddled with bureaucracy, but a digital system which operates in a similar fashion to BTC, ETH, DOGE and the like is far more functional.

The usage of ‘paper’ as the de facto agreement between buyers and sellers has largely been eliminated. Electronic transactions are now the norm, however significant costs are involved in facilitating trade agreements and contracts between buyers and sellers vis-à-vis intermediaries, platforms and the like.

Enter blockchain technology and tokenization of tangible assets. At first glance, it may seem disingenuous to buy fractional shares in a tangible asset. These digital tokens are representative of a percentage share ownership of the actual asset.

How is LAToken Taking its Services Mainstream?

LAToken is one-of-a-kind; it allows asset owners to tokenize physical assets in a safe & secure fashion. All assets are fully insured by the underwriters, and shares of specific assets can be sold in the marketplace.

Investors looking for specific assets such as houses, apartments, villas, Châteaus, gold, silver, artwork etc. can purchase shares for cash. For investors, the benefits are clear: full ownership retention, with access to liquid capital from the shareholders.

On Wednesday, 26 July, LAToken announced its token sale. The Crowdsale begins on Monday, August 27 and ends on Friday, September 29. The ecosystem development phase of the operation begins in October 2017. This is a ground-breaking project, with far-reaching implications.

The management team and expert consultants behind the project are spearheaded by the work of founder and CEO Valentin Preobrazhensky. Other high-ranking officials involved in the project include HSBC heavyweight, Anish Mohamed, and the chairman of Blockchain Lab, Ismail Malik.

How Does This Work in Real Terms?

A classic case of digital share ownership could be a gold mine worth $50 million, and investors wanting to invest a percentage of their portfolio in the mining operation. Since the investors cannot physically take ownership of the gold mine in their homes, they simply purchase fractional pieces of the mine, or trade them accordingly.

Blockchain technology serves as the medium by which these fractional ownerships are possible. The digital option is far superior to the complex interactions between buyers, sellers and facilitators in the real world.

Improved accuracy, speed, reliability and protection against fraud are guaranteed. It is possible to tokenize a wide range of securitized assets. Some of these assets are fungible assets – those that can be replaced by identical items of the same sort (water, corn, oil etc.) others are intangible assets such as brand names, copyrights and patents.

If an asset is not fungible, additional abstraction options will be required in order to tokenize that asset for investors. Since fungible assets can be exchanged for one another, it is possible to standardize the buying and selling paradigm for this asset class.

With LAToken, these options are entirely possible. Among others, the company enables individuals to make their illiquid assets liquid by selling shares of them to the public. Homeowners will be able to access cash without having to pay interest on the money.

Additionally, this is creating a new paradigm – a shared economy where fractionized ownership through innovative blockchain technology is possible. LATs marketplace divides illiquid assets into multiple tradable fractions which can then be sold in the marketplace.

Can You Transfer Ownership of Tokenized Assets?

There are various forms of ownership and transfer inherent in different types of tokenized assets. Sometimes these depend on the specific country, territory or jurisdiction in question. Intangible assets can be enjoyed by many, without losing ownership rights. Examples include licensing agreements for operators, individuals or corporations, while ownership of the material remains with the founder/company.

There are also many legal models including redemption, trading systems, smart contracts and others. It is best to consult with professional traders and investors vis-à-vis tokenization and transfer of ownership. Presently, not all the movable assets or physical assets can be switched over to the blockchain model. There are legal requirements that need to be met, and lending rules may act as a hindrance to this innovative new technology.

It is a challenging paradigm, but certainly not a dilemma that cannot be overcome. LAToken is taking bold steps in this direction. The technology has rapidly evolved, thanks to the peer to peer, open source blockchain technology that allows for complete safety and security, relative anonymity and lower costs. A change in the legal framework may be required to facilitate this breaking technology, to help investors shore up their portfolios with a new asset class.