Tokenization of industrial capital goods

Industrial capital goods (e.g. machines, energy infrastructure) inherit a crucial value to the worlds economy, yet they are suffering from limited financing and investment possibilities. These hurdles could be overcome with an efficient implementation of an Ethereum layer by Amazing Blocks. Machines, commercial vehicles and even cars could then not only operate autonomously but also be integrated in financial services such as leasing or factoring. With Amazing Blocks these tokenized industrial capital goods will be legally in line with the TVTG (Liechtenstein Token Act). This marks a significant step toward a digital token economy changing the way we will invest in the future and ultimately transforming the financial system. — Author: Nicolas Weber

Advantages of tokenization

The ability to sell fragments of ownership on the secondary market enables the company’s internal emission of respective tokens which can attract new capital inflow. The Liechtenstein Token Act was implemented in January 2020 and provides the legal conditions for true equity and ownership tokens. This framework allows service providers to offer legally compliant solutions to tokenize ownership-based rights of industrial capital goods.

Resulting in lower transaction costs the application of tokenization will give companies a competitive advantage. The ability to conduct variable payouts to investors gives companies a significantly larger choice of options. in the ecosystem of usage, emission, storage and trade.

CTO Raphael Hess issued the following statement regarding the advantages: “We permit the creation of an interdependent combination between investment and utility. Better scalability and cost-efficiency of financing processes are two major benefits of the connection of industrial capital goods, IoT and smart contracts on a blockchain-based system.” Given the expected amount of 75 billion devices in the machine economy by 2025 tokenization will be indispensable (see Figure 1). Merging two advanced industries and integrating them on a blockchain layer also enables automated processes and transactions as well as global transferability and tradeability within seconds. Faster settlements, digital fundraising, enhanced scalability and higher efficiency further stress the enormous potential. Therefore one can not stress enough the impact of the first mover advantage in this field. It will grant a substantial competitive advantage in the future of the rapidly evolving world of technology.

Figure 1: IoT connected devices from 2019–2030 (source: Statista)

Why tokenization is needed in this sector

Additionally, pricing disputes across different industry segments lead to cyclical imbalances. Another pain point is the lack of transparency surrounding the machine economy. Knowledge of certain attributes is essential when considering them from the perspective of an investor. Therefore the result is an industry that is not equipped for mainstream adoption from investors. Nevertheless, there lies a lot of unlocked potentials when combining efficient value-producing, utilization and blockchain-based transaction features (e.g. peer to peer, decentralized, instantly available 24/7). On a positive note: Debt ratios in this branch are pretty solid, therefore enabling better profitability will allow these companies to sustainably accelerate growth for their business. CTO Raphael Hess further coined the following statement regarding the vision of Amazing Blocks in this sector: “Features like the automatic distribution of the machine’s additional capital gains are the final result and motivation for actually taking a shot at this disruptive model to reshape the machine economy as a whole. Smooth ownership issuance to investors will be a crucial driver for the future.”

How to tokenize industrial capital goods with Amazing Blocks

After the establishment period, the software of Amazing Blocks finds its use case. The Tokenpad functions as the base for administering the tokenized entities and is ready to be utilized for investor onboarding, subsequent issuance of equity, debt and ownership tokens as well as further management decisions. The owners receive Ethereum-based digital tokens that represent the ownership rights to the industrial capital goods. On the other hand, the Investor Suite functions as the frontend through which investors can manage their holdings, conduct KYC, AML and have a dashboard enabling them to invest with just a few clicks. Of course custody has to be taken care of as well. But this is not an issue, as any ERC20 compatible wallet like Metamask can be used to store the tokens. Custody can also be fulfilled with any other ERC20 compatible custodian like exchanges where access to the secondary market is granted. Now stored in ERC20 wallets, the machine’s ownership can be fragmented, traded, sold and bought on the secondary market. All whilst enjoying the instant, peer-to-peer features of Ethereum. Additionally, capital gains can be automatically distributed. Thus the final result is an alternative, dynamic asset class.

Future outlook and conclusion

Remarks

Amazing Blocks offers a tokenization solution that enables its clients to tokenize various assets according to the Liechtenstein Token Act (software-as-a-service). The software covers both the issuance of tokens and investing in tokens. It suits the needs for tokenizing all kinds of assets (e.g. machines, cash flow generating contracts, trademarks, real estate, cars). Imagine that some asset should be tokenized. For this asset various tokens would make sense: Equity tokens, debt tokens, participation rights as tokens, ownership tokens, or any mixture of these tokens. The software of Amazing Blocks helps issuers to handle multiple assets and to issue multiple tokens for these assets. This is possible by integrating blockchain technology with the law (that is, the Liechtenstein Token Act). At the core, there is the “digital legal entity in Liechtenstein” based on “tokenized shares” which allows a very efficient foundation, a very efficient operation of the company and, thus, an efficient and flexible possibility to tokenize assets. This should now make a wide variety of tokenization projects possible, because the costs for tokenization are significantly reduced.

Interested? Then, contact us! Are you interested in what Amazing Blocks is doing? Visit our website, write an email to hi@amazing-blocks.io, or follow us on LinkedIn or Twitter. Or provide your email address here and we will immediately send you more information.

Digital legal entities in Liechtenstein based on true equity tokens to tokenize any asset in a standardized way to save time and money. - www.amazingblocks.io