New White-Label Client in the Real Estate Industry

DigiShares has recently signed up a new white-label client in the real estate industry. Even though we are not allowed to publish the name of the client under our contractual relations, we are allowed to speak in general terms about the project and its implications.

The project is based in the US and will work under the jurisdiction of Wyoming. Wyoming is one of the most forward looking jurisdictions world-wide when it comes to tokenization. They have recently introduced and passed a bill that allows corporate stocks to be tokenized (i.e., issued as tokens on the blockchain). In addition, a Wyoming-based LLC can be created for as little as $150, making Wyoming a perfect spot for US-based tokenization platforms that want to run frequent STOs (Security Token Offerings). The project expects to conduct 10-20 real estate tokenization projects already in year 1. With the very low cost of a Wyoming-based LLC, this becomes realistic.

As opposed to this, Europe as yet doesn’t have any inexpensive jurisdictions to set up tokenization projects. To begin with, there are only a few countries (Switzerland, Liechtenstein, etc.) where the legalities of tokenized securities have been reasonably clarified, but in these countries average fees per tokenization project easily exceeds EUR 100,000 including incorporation costs, legal fees, banking fees, etc. DigiShares is constantly monitoring jurisdictions and will always maintain an up-to-date overview of this with recommendations.

For this particular project, we are collaborating with Polymath and will use their standardized security token protocol framework, ERC1400. ERC1400 is a flexible and open source framework that is available for any tokenization project to use. It is a set of smart contracts for the issuance and management of security tokens, including modules for document handling, token transfers, whitelist management, and fungible tokens. The DigiShares platform is blockchain agnostic and can use most security token protocols. Currently around 95% of all STOs are carried out on Ethereum-based protocols but given the soaring Ethereum gas fees (up several 100% since January), other options such as Stellar, Tezos, EOS, etc. may suddenly become more attractive. Just these last couple of days there have been rumors of Ethereum gas fees upwards of $100.

We are also going to be integrating with Coinbase for their custody solutions. Investors’ wallets will be set up with Coinbase and through their custodian framework assets stored in Coinbase wallets will be insured. On-boarding and payment will also be carried out through Coinbase’s APIs.

The project is a co-development project where we deliver our standard multi-STO platform with investor management, corporate management, and trading, with some added functionality based on special requirements from the client. We expect to finalize the first deliverables in September such that the first real estate projects can be listed on the platform already in the second half of September.

On the business side, the client has the vision to become one of the leading platforms for real estate tokenization in the US, with already more than a hundred properties signed up to be listed on the platform.

Tokenize Your Real Estate

Many of our current projects are real estate tokenization projects, and for those of you who are specifically interested in real estate tokenization we have created a special page where you can learn about real estate tokenization and how to tokenize your project.

DigiShares Platform Extended With New Functions

DigiShares platform: We are back after the summer break and busy again, in fact we were quite busy over the summer holidays with many new exciting developments both on the technical and business side.

The DigiShares platform is being expanded all the time, mostly based on customer demands. Currently we are working on custodian integration, transparent wallet setup and integration, and atomic transfers.

Custodians and Wallet Setup

DigiShares believes that the security token ecosystem will increasingly move towards custodied wallets, rather than self-managed wallets. The standard blockchain mentality is biased towards self-managed wallets since you are then 100% in control of your tokens (“not your private keys, not your bitcoin”), but in fact a majority of crypto users do not currently hold their private keys. Rather their crypto is deposited with an exchange, a DeFi provider, or a custodian. Many leading exchanges and DeFi providers deposit their customers’ crypto with custodians. Custodians provide insured wallets and accounts such that you are protected against any loss or failure on the service provider or custodian’s side. However, increasingly custodians also give you highly flexible and user-friendly wallets such that a custodied wallet has almost the same flexibility and functionality as a self-managed wallet.

Investors in the security token ecosystem with large holdings and institutional investors will not accept self-managed wallets but will always demand custodied wallets. We believe this requirement will gradually extend to accredited and retail investors as well.

Our white-label partners will be able to offer their users custodied wallets that are transparently created and managed by the DigiShares platform, as well as self-managed wallets, that the users create and manage on their own.

Atomic Transfers

An atomic transfer is defined as a purchase or trade where all transactions either succeed or fail. It is the essential component of decentralized exchanges where users have to be 100% sure that if they purchase some crypto and provide payment, that they also receive the desired crypto. Technically an atomic transfer is implemented as a smart contract that acts as a safe or an escrow. The buyer transfers their payment to this smart contract, and the seller transfers the tokens to be sold. Once both parties have transferred, the smart contract will release the payment to the seller and the purchased tokens to the buyer. If the contract fails for some reason, the payment will revert to the buyer and the tokens to be sold will revert to the seller.

The atomic transfer removes any counter-party risk and is unique for blockchain applications in that it can happen in a peer-to-peer fashion. Without blockchain, a trusted central party would be required to facilitate the transactions, such as a lawyer providing an escrow account at a high price.

DigiShares is now implementing atomic transfers to support both the purchasing and trading functions on the platform, such that for instance when a number of tokenized shares in a real estate project are purchased, and the payment is made in crypto or stablecoins.

Next week we will be back with a newsletter describing a new white-label client in the real estate industry.