Note: This blog post was originally published on Medium on February 22, 2018.
When you normally think about securities on the blockchain, you might think about Wall Street billionaires launching their own tokens. “Goldman Sachs Coin”, if you will.
However, Polymath believes the impact of tokenized securities might be felt more immediately at the local level. Investors currently don’t have an effective way to express their localized knowledge without deploying large sums of capital and purchasing entire businesses.
Security tokens could help provide a high level of liquidity at a much lower level of the economic pyramid by tapping local knowledge.
Imagine a world where you went out to a restaurant and you had a really good time. The wait staff and the host or hostess was rocking, and the meal was great. As you’re experiencing this, you could easily invest $100 into the restaurant’s equity.
In other words, security tokens create a new financial inroad for retail investors who may not have a huge amount of money they can invest. The platform could serve as a liquidity layer for companies that could never IPO because they are sub-million dollar to $10 million businesses.
It would be a huge benefit to investors to be able to access companies who can grow quickly, but are not at the stage to do an IPO, and may never IPO. Investors would have access to a full basket of investments that exposes them to a wide variety of industries or the ability to invest in businesses with which they have direct experiences and can directly impact.
We contend direct experiences are more tangible at the local level. (And we’re not talking about conversations with Siri or Alexa).
Let’s say you own Apple stock. Sure, you may then be more likely to buy an Apple iPhone, but that doesn’t exactly affect Apple’s bottom line. Even your recommending the stock to a friend or family member has no tangible effect on Apple’s bottom line. It’s different at the local level.
The smaller the business, the more valuable it would be to have an array of owners with a vested interest in their success.
With security tokens, investors could theoretically take advantage of their local and specific knowledge of those places or devise a portfolio that involves a wide variety of businesses. And the businesses get access to liquidity they would not otherwise have.
There is huge value here for businesses as well as individual consumers and investors.
Individuals could finally enjoy the same access to investments as venture capitalists or individuals who invest minimums of $50,000 into 100 different ventures.