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Swarm Launches Tokenized Asset Sale

"Invest on Robinhood" becomes "Invest in Robinhood" according to Swarm.

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Robinhood is known for making investing easy, but now it is also becoming a crypto-asset. Investors can now bet on the company, through one of the first blockchain-based equity tokens.

Pre-funding for the Robinhood Equity Token, or RHET, went live yesterday on the Swarm platform. Accredited investors will be able to reserve a stake in a fund, allowing fractional ownership of Robinhood equity. 

However, the tokens are not actually being launched by Robinhood—rather, the Swarm fund will buy large blocks of the investing company, and the tokens will represent shares of those blocks. “Once the minimum funding goal is reached,” Swarm said in a press release, a Swarm manager “will form an entity using Swarm, acquire equity through established relationships with former employees and other equity holders, and convert committed funds into RHET equity tokens.”

Such transactions “are not new,” said Swarm CEO Philipp Pieper, in a statement to Crypto Briefing. “What’s new here is the tokenization of these assets, and the doors opened by this innovation… One of the key innovations of tokenization is that token owners can participate in the value creation of the very network they are part of.”

A Robinhood spokesperson, however, informed Crypto Briefing that “We are not aware of Swarm, or any such plans.”

A New Token For Assets?

RHET is an SRC20 token, a protocol explicitly devised for trading blockchain-based assets and securities. Unlike the ERC-20 standard which has become de facto for initial coin offerings, SRC20 tokens exist on a private blockchain based on the Stellar protocol, according to Swarm’s website.

An ERC-20 token, SWM, will also be used to provide similar functionality to ether, including gas fees and governance.   

However, strict cypherpunks may be turned away by the degree of centralization involved in Swarm’s prospective investing system. Despite the goal of “democratizing finance,” Swarm’s tokenized assets do rely heavily on a trusted third party. Moreover, the use of a private blockchain–with only four nodes, as of August 8th–raises questions about how distributed the ledger really is.

Swarm hopes that the SRC-20 standard will be used to tokenize all sorts of assets, from farms and buildings to “football teams, concerts, highways, schools and banks.” Because the tokens are divisible into small fractions, they are available to investors who would not otherwise be able to own them.

The company believes that tokenization will double the market cap for private equity, to $5 trillion, within five years. 

Tokenholders can also engage in collaborative decisionmaking, via a voting system baked into the SRC-20 protocol. “Token holders “govern” the underlying asset using Swarm’s Liquid Democracy Voting Module, built by SecureVote, a pioneer in eVoting,” the company says.

The Swarm fund is part of a growing tendency away from utility tokens and towards explicitly security- or asset-backed tokens. Binance-backed Founders’ Bank has recently announced an “Equity Token Offering,” to be conducted under German securities laws. Other developers, like Polymath, are developing their own protocols for security tokens.

 

The author is not invested in Swarm, but does own other cryptocurrencies.

This article has been updated to reflect a comment from Robinhood.

 

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