Great Power, Great Responsibility
Since their 2013 resurgence, cryptocurrencies have soared in popularity due to increased visibility, an influx of investment1, and the psychological appeal of disintermediation2. With this newfound momentum, came an acceptance that this new technology and a decentralized structure can be applied to an old system. It has now become clear that we can use distributed ledger technology (DLT) to optimize capital markets in ways that have never been seen before. This technology can be used to streamline protocols for custody, clearing, and trading financial instruments.
Rapid adoption of the DLT within financial markets must structure blockchain and token implementations in a manner that facilitates the evolution of the existing actors to DLT systems, software, and protocols. Recognizing this, Inveniam has developed and launched a completely new type of digital token—one we believe will facilitate a sustainable transformation of the global private debt markets and eventually the entirety of the debt markets.
This Is No Ordinary Digital Token
In the short history of blockchain technology, most digital tokens have been used to represent the right to a service or asset. Inveniam has expanded this idea by tokenizing the transaction of an associated debt instrument. This process of tokenizing debt transactions transforms these instruments into digital assets that are secured cryptographically. Consequently, the Inveniam token is not a conventional utility token. Instead, it is a passkey to the all the information and documentation associated with the transaction.
This new type of token represents a digital “manila envelope” containing references to all the crucial documentation (the historical paperwork) — origination and structuring documentation, proof of regulatory compliance, performance records, and any other accompanying information. This data is homogenized and stored chronologically in an event series. The token therefore allows for the certification of ownership and for participation in the event series. In other words, the token not only confers ownership of the “manila envelope,” it also grants access to everything inside the envelope. This capability creates enormous functionality. Rather than a token representing mere ownership of an off-chain, dumb document, the token itself becomes the access point for incredible functionality with regard to data utilization and efficacy.
Working Together with Legacy Systems
Inveniam’s new approach to token structuring benefits the global debt markets by ensuring levels of transparency, safety, accessibility, and efficiency yet to be seen in the current marketplace. Instead of being stored on the centralized database of an intermediary, data from Inveniam transactions is hashed and deployed to a distributed ledger, where it is cryptographically secured. Access is streamlined: an asset’s performance, payment history, compliance reviews, audits, and communication records are available to the token holder immediately. Since all data deployed to the blockchain is immutable, transactional information is tamper-proof, providing a high level of security for all parties involved. Moreover, these new tokens integrate with existing market systems, allowing for a transition to the new DLT technology in a manner which can be process driven for regulated entities. The token becomes the latest form or certification of the fixed income instrument as this has evolved over time, from a bearer bond, to a registered bond that certificated, to one held in street name in a master security file, to a decentralized ledger in token form. This time the certification not only acknowledges value, identity, but itself provides the provenance of the life of the instrument, and acts as the passkey for 100% of the data associated with the instrument.
As the first organization to tokenize fully functioning debt instruments in a commercial transaction, we believe that the adoption of new technologies must work in conjunction with the prevailing industry standards. This approach has enabled us to develop a comprehensive platform that serves as a bridge between cutting-edge blockchain technology and legacy processes within the financial industry. To learn more about Inveniam’s groundbreaking token structure and how it can transform the fixed income market, you can read our complete white paper, Introducing the Tokenization of the Global Debt Markets.