The Tokenization of Assets: Using Blockchains for Equity Crowdfunding

33 Pages Posted: 19 Sep 2019

See all articles by Jakob Roth

Jakob Roth

Independent

Fabian Schär

Center for Innovative Finance, University of Basel; University of Basel - Economics Department

Aljoscha Schöpfer

Center for Innovative Finance, University of Basel

Date Written: August 27, 2019

Abstract

In this chapter, we present tokenization of equity crowdfunding on a Blockchain as a possible approach to ease access to capital for startups. We propose a categorization of token standards into UTXO-based, layer-based and smart contract-based tokens. In a second step, we analyze the advantages that tokenization can bring, such as cryptographically secured ownership, programmability of assets, access to the Blockchain-ecosystem, enhanced divisibility of shares as well as the formation of a well-functioning secondary market. Tokenization allows to decouple the ledger of assets from the crowdfunding platform, thus lowering the cost of secondary market trading and the intermediary’s power. We conclude by mentioning several drawbacks including information asymmetries between investors and campaign creators, regulatory issues and high energy intensity of Proof-of-Work-secured Blockchains.

Keywords: Tokenization, Blockchain, Token standards, DLT, Crowdfunding, Secondary markets, Sustainable finance, Sustainability

JEL Classification: G23, G24, O35

Suggested Citation

Roth, Jakob and Schär, Fabian and Schöpfer, Aljoscha, The Tokenization of Assets: Using Blockchains for Equity Crowdfunding (August 27, 2019). Available at SSRN: https://ssrn.com/abstract=3443382 or http://dx.doi.org/10.2139/ssrn.3443382

Jakob Roth

Independent ( email )

Fabian Schär (Contact Author)

Center for Innovative Finance, University of Basel ( email )

Basel, 4001
Switzerland

HOME PAGE: http://cif.unibas.ch

University of Basel - Economics Department ( email )

Petersgraben 51
Basel, CH-4003
Switzerland

Aljoscha Schöpfer

Center for Innovative Finance, University of Basel

Basel, Basel 4001
Switzerland

HOME PAGE: http://cif.unibas.ch/

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