Recently, Harbor, a blockchain startup focused on tokenizing securities, such as real estate, fine art or private equity, launched its initial offering – the sale of a $20 million students dorm near the University of South Carolina. According to the company, the property will be split into 955 tokens valued at $21,000 each, for a total of $20 million.
New Age for Private Securities Investments
It is undeniable that it is profitable to invest in real estate, as well as others illiquid assets, such as company equity, investment funds, or fine art. Unfortunately, there are no easy ways to make money, and this isn’t an exception. Investing in real-estate might sound easy at first, but that quickly changes. Some even say that investing in real-estate is harder than in stocks and they would be right — the mountains of paperwork required are just mindboggling.
The other downside is that even if you do manage to get through the tedious process successfully, you will most likely end up selling it for less than its actual value. According to some researchers, illiquid assets are estimated to get about a 20–25% reduction to their value. But what exactly are illiquid assets?
To put it simply, “illiquid refers to the state of a security or other asset that cannot easily be sold or exchanged for cash without a substantial loss in value.” This is usually due to the lack of willing buyers for the given asset.
The issue with tokenizing securities is that it takes a lot of work to comply with their regulations. To help with the tedious processes and solve the illiquidity issues of those assets, Harbor is building a protocol that ensures each token transaction complies with the securities laws all over the world.
Joshua Stein, the chief executive officer of Harbor, said that “At any given moment we can tell the issuer the exact person or entity who owns what and when.” Since this is required by law, the company demands new customers to go through a “know your customer,” or KYC process. Besides that, setting up an account on their platform is as easy as opening up a brokerage account.
Stein believes that the “Tokenization of private securities can bring liquidity to trillions of dollars of traditionally illiquid assets.”
The Mega-Dorm You’ve Probably Never Dreamt Of
The building, owned by Convexity Properties, is a 14-story complex that has “world-class amenities,” or at least that how it is described on the website. The rooftop of the build is complemented with a pool, a hot tub, and a 2,200 square foot fitness center.
With the initial sale of Harbor, the property owner intends to raise a minimum of $15 million. On the company’s platform, investors will be able to exchange USD, Bitcoin, and Ethereum for the tokenized securities.
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