Crypto Case Study: Asset Exchange

Guides

The Problem

Asset trading and transfers have moved from a process of trading paper to online exchanges in the 21st century. However, these exchanges and brokers still have high fees and issues with latency time. Additionally, only certain assets, such as stock and bonds, can be traded on exchanges, leaving a lot of assets out which could be traded on free and open markets if given the opportunity. There are plenty of asset holders who would love the opportunity to sell assets, with plenty of potential buyers looking to diversify their investments across new asset classes, yet, there is no market on which these trades can be facilitated.

Current Options

Wall Street financial firms provide brokerages for high-wealth individuals, while discount brokerages such as Scottrade, ETrade, and more, have popped-up to suit the needs of the average retail investor. Still, even with discount brokers, fees run relatively high, especially for the investor with a small amount of capital. There is also a lack of transparency with centralized brokerages, who can utilize trading and user information however they please. Currently, there is no marketplace to buy and sell certain types of assets, like private equity shares, commercial real estate, or intellectual property.

Decentralized Solution

The tokenization of assets has become a widespread topic in the financial world. By taking any asset, from an ounce of gold to a share in a venture capital fund, and creating a token backed by that asset, the door is opened for the creation of more financial markets and transactions. Liquidity is created for brand new markets, and assets which could previously be traded are now able to be subdivided so that investors can purchase only a small portion of an asset, thereby able to diversify more efficiently with less capital. Smart contracts ensure all tokens are verifiably backed by assets, and the creation of tokens allows any asset to be traded as long as there are a buyer and seller willing to agree on a price.

Crypto Projects

Polymath is creating a network to tokenize any security and create a perpetual marketplace for assets. Any user can create a token based on an underlying asset and sell it on the platform, while also eliminating any middlemen previously utilized in this process.

LEXIT is creating a marketplace where assets which never could be previously bought and sold, such as intellectual property and intangible assets. The LXT token serves as the medium of exchange on this new merger and acquisition platform where any company can participate.

These two companies have even partnered together, with LEXIT providing M&A services to Polymath token issuers and the tokenization of even more asset-types is on the way.

Dan is a freelance cryptocurrency and blockchain content writer. He has written content for startups, ICOs, financial planners, venture capital firms, and more. Previously he founded an e-commerce company that grew to $1 million in revenue and profitability in less than 3 years. Dan has a degree in Economics and Finance from Bentley University.

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