In the previous article we have reviewed the STO market by giving precise definitions to ICOs, IEOs, and DSOs. In this post, we are going to give you a succinct technical insight on how digital securities are created at Securer with the example of real estate.
Step 1: Choosing an object
Digitizing an asset is beneficial for two clear reasons: huge efficiency and reduction in time. Instead of having a different ledger, everyone is working on the same ledger without unnecessary control of intermediaries. In this example, we chose to digitalize Huayuan underground parking lots for the Easy Park project in Beijing city center and divide its ownership among investors.
Step 2: Dividing the property into legal units
For instance, we have broken up the area of 1800 parking lots in 1800 units that are ought to be equally distributed among 60 investors, 30 each. These units are assigned a certificate of fractional ownership and registered in the local registry. After following the compliance process, these entries in the registry can be digitized and stored on the distributed ledger. Alternatively, the registration process is settled directly in Securer with the owner of the (real estate) property, Easy Park in our case.
Preparing to tokenize our assets. A screenshot from Securer
Step 3: Assign and convert each unit into a digital security
There are several protocols developed to increase adoption of the field and improve the interoperability of the securities ledgers. While you can find the basic information about most prominent protocols here, it will be useful for you to know that we operate on the ERC-1400 standard. This allows Securer to add more features on top of the Ethereum token standard and be compatible with a variety of other projects.
As we assign the 1,800 units that represent our parking lots, they are ready to be distributed.
Notably, tokens are not always necessary. The system of account is what matters. We developed Securer with business models in mind: if you need to set certain restrictions or specific parameters, this can be easily done in the Dashboard.
Step 4: Prepare for the DSO: choose the necessary features
Now, as we are ready to handle our first DSO, we can divide the securities into tranches. You as admin can specify what type of share each security represents: does it allow voting or not? You can also enforce a lockup period for specific portions of a user’s balance. Include any additional functionality or assign metadata as you make the distribution of digital securities.
With Securer, you can store legal documents on the blockchain while preserving privacy, emit and buy out the securities to control their supply, and upgrade their status throughout the lifecycle of the DSO.
Step 5: Selling the Security Token to Investors
After the pool of our investors have completed the KYC/AML procedure, we may proceed to the selling of the digital securities. They are issued, managed and traded within the Securer platform. It may happen automatically with the support of smart contracts, as well as through the joint trusted parties.
Depending on the rules that the participants agreed to, these newly created digital securities can be traded on the open market. In this case, digital securities are exported from Securer and traded on various exchanges like tZero and Open Finance.