Asset Tokenization: The Millennium Sapphire Case

Bitcoin is the gift that keeps on giving.

Why?

Because it is truly decentralized and has made many more things possible beyond censorship-resistant money and cross-border payments. This article will look at one of those things: asset tokenization.

What is Asset Tokenization?

Imagine that you have a piece of land that is for sale and a buyer that is offering a great price lives on another continent. Against your better judgment, you decide to take this offer. You know it could take time to close, but heck, the extra zero seems worth the trouble. So, while you wait for your buyer to get a visa, book a flight, land, get a hotel, and finally schedule a meeting with you, a seller with a tokenized asset will have closed the deal online in a matter of minutes. That is what makes asset tokenization so efficient and life-changing.

But first, what is the definition?

Asset tokenization is the process of using tokens to represent ownership rights in an asset. These tokens are created on a blockchain that supports asset tokenization.

Let us say the value of your asset is $1 million. You can decide that one token will represent one-hundredth of a share in that asset.

Therefore, you will sell the tokens that represent the piece of land. The buyer does not have to be physically present for the transaction to take place. However, you will have to show proof that the asset exists and you own it with a clear title, etc. To do this, you should make the ownership documents easily accessible on a distributed data storage network like IPFS. Also, the hash representing this data should be added to each token.

What Are the Merits of Asset Tokenization?

The table below shows a comparison between tokenized and non-tokenized assets.

From the table above, it is clear that tokenization has numerous advantages. They include:

  • Accessibility: anyone eligible can own an asset despite of where it is located.
  • Fractional ownership: you do not need to buy a full asset. That means that you can buy one or more tokens that give you fractional ownership.
  • Low-cost: fractional ownership reduces the cost of an investment. For example, instead of investing $1 million, you can invest as little as $1. That enables small investors to invest in assets that are traditionally out of their financial capability.
  • Tracking: you can track asset ownership on the blockchain.

What Can You Tokenize?

There are many financial instruments that you can tokenize, both tangible and intangible. Below is a list of a few examples of items that you can tokenize.

Bonds

The process of issuing bonds is expensive because numerous intermediaries are involved. However, when issuers tokenize bonds and issue the representative tokens, these costs can decline. Additionally, issuers can use smart contracts for post-issuance management activities like making regular payments. For instance, Banco Santander issued a tokenized bond in 2019.

Private equity shares

By tokenizing private equity shares, companies can raise funds easily efficiently because more people can participate in the fundraising process.

Real estate

In case you only want to sell a certain percentage of your property, you can tokenize it to give investors fractional ownership. Traditionally, this is impossible unless you subdivide your piece of land. Also, tokenized real estate gives more investors access to valuable properties. For example, this tokenized beach property gives anyone in the world a chance to own prime asset on the best beach in the Philippines.

Loans

You can tokenize loans for increased market participation, automation, low operational risk, and reduce costs. Case in point, BBVA tokenized a syndicated loan in 2018.

Intellectual Property

Tokenizing intellectual property creates new opportunities for ownership and participatory income streams.

Art

Traditionally, art is illiquid and does not provide any income. When tokenized, however, it can become far more liquid. Tokens traded on an exchange can create gains for the token holders through token value appreciation as well as potential dividends from business activities..

The Millennium Sapphire Case

For about a decade, the Millennium Sapphire was illiquid. It spent most of its time in a secure vault where it was not generating income. However, this is going to change. The Millennium Fine Art, Inc. (MFAI) is in the process of tokenizing the sapphire on the Ravencoin blockchain, allowing any qualified investor to enjoy fractional ownership.

The security token, MS Token, will be available for sale soon. Anyone that owns it may receive income generated from potential exhibitions across the globe. Note that the income investors may receive will depend on the number of tokens you hold.

In the tokenization of the Millennium Sapphire, we will choose the number of tokens to issue and the name. The number of tokens issued at the STO date will be fixed and will not increase so token holders interest in the Sapphire will not be diluted over time.

We chose Ravencoin because:

  1. You can tokenize assets in minutes.
  2. Companies can create unique token names with uppercase letters only, a dot (.), and an underscore.
  3. Ravencoin supports IPFS meta data allowing token owners to add documents to the token.
  4. Token issuers can communicate with token holders. Bruce Fenton and Tron Black explain this feature in the whitepaper as follows: “The messaging system uses unique tokens to allow communication on the main token channel. For example, the COMPANY token would have a ~COMPANY:Alert token which allows alerts to be sent to all holders of COMPANY.”
  5. Ravencoin was created for asset creation and issuance.

Therefore, while Ethereum is an option for tokenization, Ravencoin stands out because of these and other special features.

How to Create a Token on Ravencoin

The process of token creation on Ravencoin is easy. Here are the steps:

  • Get the Ravencoin wallet and set it up.
  • Go to “Create Assets” within the wallet.
  • Find out if the asset name of your choice is available.
  • Choose the quantity and the units (decimal places).
  • If you want to change the token quantity in the future, check the “Reissuable” box.
  • Paste the hash of your IPFS documents to attach them to the token.
  • Click “Create Asset” and pay the 500RVN for creating a new token.
  • Next, go to Asset Explorer to view your new token.

Tokenizing an asset is straightforward, especially if you are using a platform like Ravencoin. To learn more about the upcoming Millennium Sapphire STO, join us on Telegram. Also, read our previous article that gives you a lowdown about this asset.

A tokenized sapphire that is now open for purchase by anyone in the world.