In a recent publication, the team behind TE-FOOD illustrated the many advantages offered through securities tokenization. They claim the emerging industry will go on to change the current methods of fundraising in agriculture.
TE-Food offers a farm-to-farm traceability solution. Their blockchain-based system currently processes 400,000 business transactions each day and serves more than 6,000 customers.
Per their recent publication, they’re well aware of the cryptocurrency-wide transition towards security tokens, claiming 2019 will be “the year when security tokens gain ground”. They believe it will even create a revolution in agriculture. The following explains why.
The Advantages of Security Tokens Explained
First, there are several benefits which tokenization brings to traditional financial securities, such as bonds, equity, commodities, real estate, fine art, or other real-world assets. Tokenization brings immutable ownership claims to such assets which are safely stored through a distributed ledger. There are numerous benefits with such a process:
- Transparent automatization: Smart contracts allow for an automatized system to perform all of the steps associated with the compliant transfer of real-world asset ownership. Already, more than 8 ERC20 compatible security token standards have been established on Ethereum, some of which are outlined by Atomic Capital’s CEO Alexander Blum.
- Ease of purchase/transfer: Since the process is done electronically, there is no need to manage any physical documents when it comes to purchasing, selling, or transferring asset ownership.
- Increased Access to Investors: The traditional securities market features an inherent difficulty in trade to securities to individuals in varying countries. Yet with automated compliance through programmable smart contracts, owners of security tokens can easily interact with individuals in foreign countries.
- Liquidity: Exchanges offer a significant increase when to it comes to investor access. The New York Stock Exchange, for example operates Monday – Friday, 9:30am – 4:00pm, excluding nine holidays. Exchanges— such as the US-Regulated OpenFinance Network— allow for the trade of security tokens 24/7/365. Since they can be accessed in anywhere in the world, they subsequently entail access to more investors, and more assets.
- Fractionalized Ownership: With tokenization, asset ownership can easily be divided into small portions, with each portion sold at a low price which opens the door to more investors. For example, a real estate developer looking to raise $5 million can circumvent the need to find liquid investors by tokenizing the $5 million asset into 500 tokens. Now, each token can be sold for $10,000— which is much more feasible for the majority of investors. Further, as explained by Harbor’s CEO Josh Stein, additional benefits can be ‘rebundled’ into such tokens.
How Security Tokens Can Impact the Agriculture and Farming Industries
As explained by TE-FOOD, most agricultural companies— especially smaller farmers— have a very difficult time when it comes to raising capital.
They have limited access to financing, tedious and slow processes which involve heavy amounts of paperwork, and they typically lack collateral.
That’s why TE-FOOD says such enterprises can utilize tokenized produce and livestock as a means to provide collateral to prospective investors. In this way, investors have added security, while farmers can significantly benefit from the ability to raise private capital with security tokens.
From purchasing new equipment to expanding operations, agricultural businesses can experience significant benefits offered by blockchain technology. With the collateral issue tackled, security tokens could significantly disrupt fundraising in agriculture.
What do you think of TE-FOOD’s speculation on the integrating of farming and security tokens? What other industries are susceptible to such disruption? Let us know what you think in the comments below.
Image courtesy of TE-FOOD.
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