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Super opportunity

It is a big pleasure to share excellent news from our clients, because we see they hard working that makes 1inch > $UNI

The 1INCH decentralized exchange on Ethereum has launched its token, which has a capitalization potential of $ 4bn, showing excellent investment opportunities.

1INCH thanked everyone who used its services by distributing $1INCH tokens. The situation echoes the success of UniSwap. The token was already listed on Binance and Okex, which shows a lot of trust from the crypto community. This DeFi project meets the existing needs of investors and traders, which qualitatively distinguishes it from other DeFi projects today!

Experts are confident that the price of the 1INCH token will grow for fundamental reasons that drive demand. $UNI and $SUSHI are still number one and two in the ranking of the most used decentralized exchanges (in terms of turnover and liquidity).

The ability to mine $1INCH is launched, providing liquidity on the exchange. In this plan, 1INCH will use the SushiSwap strategy, temporarily artificially increasing rewards in order to poach liquidity from UniSwap and SushiSwap.

More details about 1INCH token:

https://1inch-exchange.medium.com/1inch-token-is-released-e69ad69cf3ee

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What do we already have today?

Additive manufacturing is a class of promising technologies for the customized production of complex-shaped parts from a 3D computer model by sequential application of material (usually layer-by-layer) – as opposed to the so-called subtractive production (for example, traditional machining). As follows from the above definitions, additive technologies make it possible to manufacture a part or product directly from a computer 3D model, which is virtually cut into thin layers; the file with this model is transferred to the system, which carries out the layer-by-layer formation of the final product. The development of additive technologies began in the early 1980s. from rapid prototyping – creating a prototype of a product in order to check calculations, refinement and approval of a prototype before starting serial production. The cost of manufacturing a single prototype was many times higher than the cost of manufacturing a unit of product in mass production, while manufacturing a sample took several weeks. The ability to quickly create a prototype and quickly check its parameters has become a technological breakthrough for manufacturing and design companies and has served as an impetus for the development of the market. Industrial companies drew attention to the new technology and began to use it for the development of tooling, which significantly reduced the preparatory production cycle and cost.

The main technological processes and types of materials used today:

• photopolymerization in a bath (Vat Photopolymerization, VP) – photopolymers;

• material jetting (MJ) – photopolymers, wax, organic materials;

• Binder Jetting (BJ) – metals, polymers, ceramics;

• synthesis on a substrate (Powder Bed Fusion, PBF) – metals, polymers, ceramics;

• material extrusion (ME) – polymers, ceramics / composite materials, organic materials;

• direct supply of energy and material (Directed Energy Deposition, DED) – metals in the form of powder and wire;

• sheet lamination (SL) – metals, polymers, ceramics.

Main modern technologies:

• CJP (ColorJet Printing) – technology of full color 3D printing by gluing a special powder based on gypsum.

• MJP (MultiJet Printing) – multi-jet modeling using photopolymer or wax.

• SLA / DLP (Stereolithography Apparatus / Digital Light Processing) – laser stereolithography, based on layer-by-layer solidification of a liquid material under the action of laser radiation.

• SLS (Selective Laser Sintering) – selective laser sintering under a laser beam of particles of a powdery material to form a physical object according to a given CAD model.

• SLM / DMP (Selective Laser Melting / Direct Metal Printing) – selective laser melting of metal powder according to mathematical CAD models using an ytterbium laser.

Main modern materials of additive manufacturing:

• wax;

• gypsum powder;

• polystyrene;

• polyamides in the form of powder – glass-filled, carbon-filled and metal-filled;

• UV and photo curable liquid photopolymers;

• ceramic-filled liquid photopolymers;

• Metal alloys – stainless, tool, nickel, non-ferrous metals, cobalt-chromium, aluminum, titanium, etc.

• thermoplastic polymer materials, thermosetting polymer materials, elastomers, hydrogels, functional polymers, polymer mixtures, composite materials

The obvious benefits of additive manufacturing today are:

• Flexibility to begin production of complex customized products and parts that either cannot be manufactured using traditional manufacturing or are required in small quantities.

• Manufacturing of parts of complex configuration (for example, containing internal cooling channels) that cannot be manufactured by the subtractive method.

• The ability to transfer a computer 3D model to any place in the world where a suitable printer is installed, which allows organizing local production on a global scale.

• The proximity of the resulting product shape to the specified one, which significantly reduces material costs and production waste.

• Short duration of development stages and quick launch of the product into production.

• Possibility of prompt tooling production

• Printing designs of any complexity without increasing the price (the principle of “complexity for free” – when the production of one part costs the same as a large batch).

• The economic feasibility of small-scale production and the release of customized products.

• Ability to make changes to the project already at the production stage.

• Topological optimization for special requirements

• Decentralization of production, simplification of logistics, reduction of delivery times, reduction of stocks.

• Ability to combine multiple components into one part, which simplifies assembly and speeds up production

• Ability to develop product designs that were previously unattainable or too expensive to manufacture using traditional methods

• Printing of spare parts for repairs in the field.

• Print on demand when the need arises.

• Effective use of robotics; robotic 3D printing machines are able to automate the post-processing of printed parts

Limitations of additive technologies at the current stage of development

Despite the undeniable advantages of 3D printing, there are fundamental limitations that hinder the expansion of the scope of the technology:

• scale of production (large-scale production is too expensive);

• the size of the part (limitation in the size of the product);

• manufacturing accuracy (determined by the minimum achievable layer thickness);

• speed (relatively low productivity compared, for example, with the forming method);

• cost (high cost of some materials used for printing);

• energy consumption (high energy intensity of production);

• materials (relatively narrow choice of materials);

• finishing of complex surfaces;

• low stability of product quality – there is not yet a single industry standard, there is also no factory standard for industrial users

• The problem of preserving intellectual property and capitalizing its value

Financial perspectives of additive technology

According to Frost & Sullivan, the global market for additive technologies is growing at an annual rate of 15%. If the CAGR (compound annual growth rate) remains at this level, the market size is projected to increase from $ 5.31 billion in 2018 to $ 21.5 billion in 2025. According to experts, by that time, up to 51% of the AP market will be accounted for by the aviation industry, healthcare and the automotive industry. And the experts from J’son & Partners Consulting showed that:

 The 3D printing market is at the very beginning of an upsurge, printing experiments in different industries, various product ranges, product redesign; software, materials, equipment, processes are being intensively improved.

 3D printing confidently takes its place in almost all sectors of the real sector of the economy, has been put into commercial operation, companies continue to expand the range of printed products.

 The use of additive technologies in production, marketing, design, visualization for customers and company management is expanding every year:

 By 2030, 2/3 of all manufactured products in the world will be manufactured with printed components.

 By 2030–2050 in a number of manufacturing industries, 3D printing will allow printing completely finished products.

And yet, how serious are the chances to be hype?

Despite the continued growth of the market, experts admit that their expectations for additive technology were “a little overheated.” And this is due, in my opinion, to the fact that these technologies were going through a phase when the main drivers of market promotion were technology developers. For quite a long time they positioned additive technology separately from other methods of creating products, trying to present their results not as part of the value chain, but as a separate opportunity, sometimes as a service, sometimes as products, but always separately. This was the stopper. And now further development associated with the organization of business goes in two directions: integration into the overall value chain at the enterprise and deepening the system of division of labor within the additive industry itself. It became clear that at this stage of development, additive manufacturing occupies the most important place in the philosophy of Industry 4.0, being the embodiment of the effective connection between the digital and physical world. Compared to traditional manufacturing, the most important advantages of additive manufacturing are manifested in the additional capabilities at the stage of product design and development. Despite its limitations, companies are increasingly using it to take advantage of this key advantage, which allows them to increase design complexity without proportionally increasing the complexity-for-free cost of the part, which is not possible in traditional manufacturing.

Another advantage manifests itself in the analysis of economic models of production. A production chain is the process of converting raw materials into goods. Converting available resources into products requires a number of steps: design, planning, manufacturing, and selling. In recent years, it seems that the traditional value chain is undergoing transformation through the use of 3D printing technologies. Custom products with complex geometries can be designed and manufactured using additive manufacturing. In this way, markets can be supplied with the required products on time, without creating large stocks at companies, which usually entail high costs. In fact, in some cases, 3D printing creates the possibility of localizing production at the point of use, which reduces (or eliminates) transport costs, making additive technologies a competitor not only to other production processes, but also to transport. As the 3D printing “universe” continues to expand, it is important for both hobbyists and entrepreneurs to understand the quantitative and qualitative effects of new products entering the market. These developments are constantly pushing the boundaries of the additive approach, both in terms of design and cost effectiveness. Turning to the “economic” block, I can say that additive technologies are developing completely in line with global trends, becoming part of system platform solutions for the production and sale of goods. Three types of market players are developing their platforms and “ecosystems” that include an additive component:

• highly specialized manufacturers of equipment for the additive industry

• companies that provide their customers with various types of equipment for processing materials and creating products

• leaders of the PLM systems sector

Summarizing the economic effects, it must be said that additive technologies “interfere” with the product life cycle at different stages – design, supply chain, sales process, labor resources, and marketing and, as a result, affect the final consumer. Moreover, all these elements are interconnected, and an improvement in one of them develops the entire business system:

• product design changes, which become possible due to the use of additive manufacturing, lead to the possibility of changing (cheaper) the material of the part;

• by regrouping production centers, it is possible to reduce delivery times and change the supply chain;

• the possibilities mentioned above are implemented with the aim of solving specific problems of the consumer, and with such “customization” much closer work with him is required, already at the stage of forming requirements, which was previously characteristic only of specific industries

• Additive manufacturing forces the “manufacturing industry” to seriously engage in marketing, since the market for the manufacture of complex products, which was previously quite narrow in terms of performers, is democratized due to this technology

• changes in the workforce are perhaps the most critical

Entrepreneurial initiative plays a key role in the “effective use” of additive technologies: the formation of proposals for new and traditional markets with a deep understanding of the problems and opportunities of modern high-tech industries and additive manufacturing, allow us to count on market growth and an increase in the number of successful companies in this area.

An additive revolution on the doorstep?

Additive manufacturing is changing the world. It transforms the way products are designed and manufactured. These are completely new possibilities for the production of products that were discussed above. Additive manufacturing is a revolutionary technology. It changes the characteristics of products: weight, quality parameters and distribution methods. It's not that you can now quickly print a toy, unique gift, or replacement parts for your lawn mower. More importantly, these technologies are revolutionizing the design, manufacture and supply of products. They affect the entire product lifecycle that business leaders care about. The need to print parts on demand is a significant factor driving the adoption of additive technologies, especially in the production of spare parts. If you urgently need to replace a failed part, but at the same time you do not have the opportunity to keep a whole warehouse of expensive spare parts, then an additive technological process becomes the best option. Parts are printed as needed – anytime, anywhere. This is the revolutionary nature of the process – in localization. This approach allows us to take into account the unique needs of the consumer and ensures fast delivery of spare parts at any time during the operation of the product. The new technology simplifies manufacturing processes and also enables parts to be manufactured in-house rather than third-party suppliers, which guarantees strict quality control and eliminates the need to keep stock.

The need for alternative methods of manufacturing parts is obvious. Businesses strive to improve quality and reduce costs, and ensure that parts can be manufactured at the right time in the right place. Reducing the cost of manufacturing and supplying products plays a colossal role for the future of manufacturing companies. Additive technologies are opening up new possibilities for shortening delivery times and securing inventory levels. The new revolutionary production technology makes it possible to produce products that previously could only be dreamed of. Additive manufacturing is completely transforming the engineering industry and allows for the most daring innovations that take products to a fundamentally new level. Additive manufacturing doesn't work wonders by itself. Its support requires special software applications and functions. Additive technologies have enormous innovative potential. They can help you produce great products faster and cheaper, innovate and provide a competitive edge.

It is true that the time has not yet come when smart 3D printers will produce products with real performance and surface quality at the speed of existing injection machines, milling and turning centers and other modern production equipment. But technology is advancing and the revolution has begun! Cutting-edge developments are moving towards this cherished goal. Now hundreds of projects and start-ups have turned their attention to additive technologies and have begun the stage of exploring and diversifying opportunities. The revolutionary stage is a time of trial and error, but right now, when placing an order from industry for a specific functionality of machines and materials, progress is real. The main result in this revolution is the production of highly detailed solid products from liquid polymers and the emergence of a wider range of materials with specified physical and mechanical properties. Today, the additive revolution is already taking place in a number of sectors of the economy, such as:

• jewelry production, where the technology has reduced the preparation time for a prototype and a series of products, reduced the cost, expanded the range, removed technological limitations in modeling.

• Dentistry, for dental prosthetics, digital modeling of oral hygiene, and modeling of surgical templates.

• Prototyping and small-scale production (souvenirs, toys, household items, etc.).

• The market of polymers and 3D printers for medicine. Again, the creation of prostheses, traumatology.

• Automotive, aviation and rocket and space production.

The introduction of additive technologies in other critical industries, in connection with the increased requirements for the quality of products, is recommended for the success of implementation in a certain sequence:

- preliminary selection of the range of manufactured and promising products;

- preliminary selection of equipment (type, manufacturer, model) and materials;

- production of laboratory and full-scale samples at related enterprises or from a prospective supplier, carrying out a complex of preliminary studies and tests;

- technical and economic analysis of the organization of additive manufacturing;

- coordination of issues of equipment certification and product certification;

- purchase of equipment and materials, installation, commissioning, production of samples in our own production;

- re-testing and updated feasibility study;

- conclusion on the possibility of producing an experimental batch of products.

The above-mentioned industries have found an economic justification for the introduction of additive manufacturing precisely according to this algorithm.

Modern Business Models of the Additive Manufacturing Revolution

When assessing the potential business benefits of additive manufacturing, it is important to understand three basic principles related to complexity, scale of production, and product size:

1. Additive technologies make complex mold production both possible and economical. This means that the more complex a product or component is, the more appropriate it seems to use additive manufacturing instead of traditional methods.

2. The next basic principle is related to lot size. In general, the larger the batch of products produced, the less appropriate additive manufacturing will be. In classical economics, the larger the batch, the lower the unit cost. In the case of additive manufacturing, the unit cost is independent of lot size. This allows you to produce small batches of products or parts with less risk, for example, when customization is important.

3. Finally, additive manufacturing as it stands is best suited for small parts or products. This means that in the production of large parts, enterprises should still turn to traditional technologies.

Concrete results already obtained based on the principles mentioned above are best classified according to the criterion of adding value to processes and products. The more this value plays in solving the problems of the end user, the more opportunities for the emergence of competitive advantages, new business models and proposals. Business benefits for processes:

• Time to market for new parts and products is significantly reduced. This greatly improves the rate of product update.

• Simplifies equipment maintenance and repair: spare parts and specialized equipment are always available on demand.

• Reduced assembly time and tooling costs when you can 3D print a product or part in one go, without the need for additional assembly units.

• Since the minimum number of products is one unit, customization, including mass customization, is a real solution. As a result, it becomes possible to open, at low risk and cost, new verticals and regional markets with special needs.

• Rapid prototyping and testing can effectively optimize design and incorporate consumer feedback into product development.

Как итог упомянутых выше преимуществ, сегодня сложились такие бизнес модели:

 Platforms for co-creation of products based on additive manufacturing

Additive manufacturing opens up opportunities for collaborative product creation with consumers. Collaboration can be carried out at almost all stages of the product life cycle. During the conceptual phase of a new product, consumer feedback can be easily taken into account by testing small batches. You can also customize your existing design or add value to your product throughout its life by releasing customized add-ons. In situations where

 Maximum customization

By using additive manufacturing in combination with tools such as 3D scanners, companies can now mass produce customized products with high levels of cost-effectiveness. Since the performance of such products is generally much better, their consumer value increases significantly. This form of customization creates many new business models in a wide variety of areas (from prostheses and glasses to headphones). It is important to note here that despite the growing market for affordable scanning instruments, it is necessary to use sophisticated professional 3D scanners to create medical devices (prostheses, hearing aids, etc.) in order to ensure the required high level of accuracy.

 Product lifecycle management

Product lifecycle management is currently one of the main applications of additive manufacturing in industry. Life cycle extension begins with the product or part development phase. Leveraging the design capabilities of additive manufacturing eliminates the need for assembly, which increases product lifecycle and reduces malfunctions. During the after-sales service phase, the lifespan of the equipment in use can be extended through the use of custom tooling and scarce, expensive custom made parts. In general, this process involves improving the supply chain (reducing the number of manufacturing operations, reducing tooling costs and simplifying maintenance procedures). As a result, this leads to a significant reduction in total costs in the supply chain, as well as an increase in the level of customer service.

 Provision of additive manufacturing services

Additive manufacturing requires a large number of new resources that are just beginning to form in enterprises, so there is a promising niche for service providers. Understanding design capabilities and potential product benefits, design considerations for additive manufacturing, 3D printing materials and techniques, 3D printer and post-processing skills, and quality improvement actions all require skilled and experienced employees. Enterprises of all sizes are increasingly pondering what role they could play in the provision of additive manufacturing services.

Future business models

With the development of additive technologies, the possibilities of their application also expand, both from a technological and economic point of view. As the productivity of the equipment increases, the level of depreciation and costs for each printed part will correspondingly decrease. This means that a much larger range of products or parts will become economically 3D-printable. Increasing the maximum printable area will also have a positive impact on the business model. The ability to print larger parts will also allow larger batches to be produced in a single print session. This will result in shorter lead times and a corresponding reduction in total cost of ownership.

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Sergey Golubev (Сергей Голубев)

Crynet Marketing Solutions, vtorov.tech, EU structural funds, ICO/STO/IEO projects, NGO & investment projects, project management

How tokenization will destroy the conservative world of finance

Blockchain can become the main feature not only of financial markets, but also of many other sectors of the economy. In theory, any asset can be tokenized, and the rights to it are represented in a distributed ledger. But it is most likely that in the coming years, this process will affect the following industries – Infrastructure, real estate, intellectual property, music and culture, stocks and trade, gold and rare precious metals, foundations and their assets, art and collectibles, foreign exchange transactions and insurance. But at the same time, it should be understood that the tokenization of these industries will seriously change them, and will actually hit finance.

A blow to financial markets

The potential proliferation of asset tokenization in financial markets could hit liquidity, but could also affect trading, price, clearing and settlement of securities, and even monetary policy. When considering the potential consequences of such a phenomenon, a distinction must be made between the following two types of tokenization:

• tokenization of securities that also exist outside the blockchain network;

• the issue of securities in tokenized form directly within the blockchain.

Trade blow

DLT allows securities transactions to be carried out in a mode in which trust is distributed among the nodes participating in the blockchain network, where the participation of a central institution or intermediary is not required to settle the relationship between the parties to the transaction. Investors can act as broker-dealers for themselves, and transactions are confirmed by participants in the decentralized network in exchange for some commission.

A blow to market makers

Market makers provide two-way quotes to investors who want to buy or sell a security. The role of market makers is more prominent in markets with a small investor base and the need to provide liquidity, especially during times of market stress when market makers take the other side of a trade order in the absence of balance between supply and demand. In theory, the search for buyers and sellers in the decentralized securities market is automatic and no mediation is required. At least in the context of securities, the increase in efficiency from tokenization can be associated with the exclusion of the broker from the logic of the process, which is already done today by decentralized finance and the uniswap tool. In practice, however, asset tokenisation system operators offer market maker services to clients even in blockchain-based markets. This does not necessarily mean that broker intermediation cannot be replaced by the technology behind the distributed ledger, but rather means that DLT network-based tokenization may not have sufficient liquidity or that the owner of the trading platform may have economic incentives that help maintain the broker model in a tokenized environment. For now, most of the secondary token trading takes place on centralized crypto trading platforms. This is due to the fact that abandoning the traditional model of a market maker of the market can affect the normal functioning of some markets and the redistribution of risks between them. The stability of markets can be influenced by the consequences of sales that can occur in the absence of market makers, who usually take traded assets to their balance sheets and act as “shock absorbers” of the market. At the same time, the presence of an intermediary is not always guaranteed, and it is believed that market makers may not work in markets that are under stress. In the case of tokenized assets, the complete absence of an intermediary capable and willing to take tokens on the balance sheet and provide liquidity in the event of a fall in markets can have an indirect effect on market liquidity.

REPO under threat

The development of asset tokenization may also have an impact on repo transactions to fund positions, as well as on securities lending used as a component of trading strategies. Moving the aforementioned activities to blockchain could potentially lead to faster and less costly securities lending as fewer steps are involved in the process and collateral is sold instantly. This could mean that the overnight repo market is becoming almost instantaneous. The market can benefit from increased liquidity as collateral will be released and mobilized between pools of securities that are held in different accounts around the globe and participate in the same blockchain network. When assets and transactions with such assets are conducted in a distributed ledger, the network knows where the assets are at a particular point in time, and collateral can be tracked and moved seamlessly across the various accounts in the system. The downside to the aforementioned advantages is that netting will not be possible and each trade will likely need to be fully funded and settled. This could result in more collateral being moved instead of the traditional net collateral.

Blow on Liquidity

In a tokenization spread scenario, the number and variety of assets that will be traded on public markets and receive liquidity may grow, especially given that, in theory, any asset can be tokenized. DLT infrastructure providers already offer white different types of tangible and intangible assets using the same market infrastructure and protocols. Asset tokenization can be a double-edged sword, with both positive and negative consequences for liquidity. On the one hand, tokenization of illiquid assets such as securities of small and medium-sized enterprises (SMEs) or private equity / venture capital funds can provide sufficient liquidity for illiquid asset classes. Likewise, the tokenization of assets with limited liquidity, such as private placements of unlisted securities, equity participation in private limited companies and small bond issues can also improve liquidity in these asset classes. Trading such assets in secondary markets is vital to liquidity, as well as helping in price disclosure and furthering capital accumulation. An indirect benefit from improved liquidity in the asset classes mentioned above could be an increase in the investment flow needed to finance the real economy. As such, wider adoption of asset tokenization on a large scale could be more easily implemented for private placements of securities not listed on the exchange, small bond issues or private equity / venture capital funds. Conversely, public stock markets in developed countries benefit from highly automated and efficient processes, where the potential for efficiency gains from DLT is very limited. It is important to note that such markets enjoy a high level of trust from their participants. Thus, the net efficiency gains achieved by a possible transition to a tokenized form of the market may be more limited.

The tokenization of a fraction of the free float that also continues to trade off-chain could lead to a shift in liquidity from traditional markets to blockchain, leading to depletion of liquidity in off-chain markets. The above scenario is not a risk if securities (and assets in general) are issued directly on the blockchain and do not have an underlying asset in the real world. Parallel trading of tokenized assets, both within the blockchain network and in regular traditional markets, risks creating bifurcation of markets for the same asset, with negative consequences for liquidity and a potentially high risk of arbitrage. The rise in the use of tokenized assets and the trading of such assets on the blockchain network risks robbing the traditional market of liquidity, with potentially costly consequences for market participants and impairing the smooth operation of markets. The level of interoperability and connectivity between internal (blockchain) and external (traditional) tokenized asset markets can determine the magnitude of this liquidity impact. Arbitrage risks will naturally arise only in the markets within the blockchain network, since incompatible DLT networks and exchanges give rise to such an arbitrage risk.

Blow on pricing

Trading in a tokenized environment will benefit from the increased transparency provided on DLT-based networks. An important benefit of increased transparency is the reduction of information asymmetries, which in turn can improve the pricing mechanism by providing investors with incentives to increase their participation and provide additional liquidity in the market, as well as improve the conditions for competition in the market. However, it should be noted that the increased level of transparency inherent in blockchain trading might not appeal to market participants where anonymity matters. For example, large purchases or sales of market participants (large institutional investors who do not want to influence the markets with a large trade order) will not be possible on a DLT-based network. The relationship between domestic (tokens) and foreign markets (traditional instruments) may have other implications for instrument pricing. Trading in tokenized assets in a decentralized world takes place around the clock on multiple networks. In the absence of communication between domestic and foreign markets, trading in tokenized assets can become fragmented. This fragmentation, in turn, will almost certainly create arbitrage opportunities. Conversely, the potential interoperability of markets could allow for a kind of “double listing” of assets inside and outside the blockchain, similar to the case when companies list common securities on several exchanges at the same time. Arbitrage can occur even on tokenized assets issued only on the blockchain if they are traded on different exchanges with limited or no connectivity. This can lead to a mismatch in how assets are priced against the market if there are discrepancies in pricing across different platforms, creating exchange arbitrage opportunities. In a scenario dominated by tokenization, even if price discrepancies occur for a short time, they can affect market stability.

Blow on clearing

In some traditional financial markets, central settlement institutions act as central counterparties to both parties to a transaction, ensuring that the transaction is matched and settled even if one of the parties defaults, thereby reducing counterparty risk. Clearing centers confirm these trades and use CSDs to maintain transaction records. Custodians (client depositories) holding an investor's assets work to ensure the safe delivery / receipt of assets and funds to each of the parties involved in transactions and to settle transactions. The use of blockchain in post-trading allows maintaining a single common immutable register of information about transactions, which is updated at every stage of the process and can be instantly accessible to all parties to the transaction. Systems with DLT support and the use of smart contracts for clearing and settlement of tokenized assets have the ability to check the availability of assets, confirm the compliance of transactions and register transactions in an automatic, immutable, transparent form almost instantly. A distributed ledger can act as a decentralized ledger of transaction data and as a counterparty to all parties that transact. Using DLT can reduce back office costs by minimizing discrepancies in transaction data, which will facilitate faster reconciliation of transaction data. Efficiency gains can also be driven by the fact that legal and beneficial ownership in DLT clearing and settlement systems is not shared between investors and system participants. Using DLT for clearing and settlement reduces the number of intermediaries and streamlines the process of payment or delivery of securities to the ultimate beneficial owners. If the tokenization of assets begins, the potential “destruction” of the market structure could lead to a substitution for a distributed ledger as a decentralized version of the central depository. Likewise, clearing houses could theoretically be ultimately downsized by using the blockchain platform as a clearing entity, acting as a common counterparty to complete settlements. Proof-of-concept projects and DLT computational use cases have produced mixed results when it comes to evaluating effectiveness. For example, the Bundesbank / Deutsche Borse joint blockchain project for securities settlement proved to be mostly suitable for mainstream use, but did not perform better than the currently used clearing and settlement systems: settlement sometimes took longer and caused relatively high computational costs. This suggests that obstacles to the development of the technology must be overcome in order for its application to reach the stage where it can provide higher performance than traditional systems currently in use.

Blow on custody

Despite the potential to exclude intermediaries at many levels, asset tokenization will ultimately depend on having a reliable and trustworthy central institution to ensure that real assets are backed by tokens and to store such assets. This could imply a central role for a third party trusted institution, such as custodians, who can be invited to act as a trusted party, and which will ensure that the world outside the blockchain network is connected to the distributed ledger. When distributed ledgers interact with the real world, a trusted third party is usually required to establish such communication. The data on the characteristics and ownership of the asset to be tokenized must be verified by a trusted institution that can confirm the accuracy of the asset's characteristics information (including ownership) before it is placed on the blockchain. Given the above, a potential application might be reasonable in a token system where clearing houses and central depositories have been liquidated, while custodians play a key role in the structure of the markets by acting as a centralized trusted institution that seamlessly connects the blockchain platform and the external environment. The role and responsibilities of custodians may be revised to include responsibility for providing tokens with real assets in addition to protecting such assets. Appropriate regulation and supervision of blockchain-related custodians will protect investors from risk. The role of the central institution may also include ensuring the transfer of the real asset to the blockchain and ensuring the accuracy of the information regarding the asset to be tokenized.

Blow on central bank currencies

For securities to be settled in near real time and delivery versus payment (DvP) to be guaranteed, the securities and cash must change ownership at the same time. In order for the exchange to take place quickly or without the cost of intermediaries, it is necessary to ensure that a tokenized form of money is available on the blockchain. Since tokenized securities are already on the blockchain, the presence of a tokenized form of money allows for certainty about the delivery of securities and allows settlements in near real time. In the absence of tokens of currencies supported by Central Banks, stablecoins (stablecoins) are used for settlements in DLT to provide the monetary component of settlements. Stablecoins are also used by cash settlement platforms when it comes to servicing securities and corporate actions throughout the life of a security (such as paying dividends). This raises the question of whether central banks will facilitate the tokenization of central bank money for use in tokenized markets, or whether stablecoins (or central bank digital currencies, if available) will play this role.

Conclusion

Asset tokenization can improve asset liquidity and tradability as they can benefit from increased efficiency. Tokenization can lower barriers to investment by giving investors access to previously illiquid, unavailable, or disputed assets. This can facilitate and simplify the inflow of capital to start-ups by issuing debt and equity in private companies where there is no trading infrastructure. Asset tokenization can be meaningful in markets where there are clear advantages in efficiency, in terms of cost, speed, complexity of processes and intermediation, or in markets with a lack of trust. Therefore, wider adoption of asset tokenization on a large scale would be easier to envision in markets with limited liquidity and multiple levels of intermediation, such as private placement of unlisted securities, small bond issues, or tokenization of private equity and venture funds. The efficiency gains that can be achieved through the introduction of tokenization of public shares in developed countries will require a careful assessment of costs and benefits, since such markets already enjoy a high level of trust from their participants and are supported by fast, safe and efficient processes. In such markets, it will be difficult to tokenize processes. In such markets, only small efficiency gains are possible as a result of the move to tokenization. It can be argued that some of the potential benefits of asset tokenization can only be achieved if the blockchain network reaches a sufficient scale. The scale will help ensure that benefits such as increased liquidity are fully realized.

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Sergey Golubev (Сергей Голубев)

Crynet Marketing Solutions, EU structural funds, ICO/STO/IEO projects, NGO & investment projects, project management, comprehensive support for business

Tokenization: the engine of the new economy?

‘’Tokenization is a new era of global investment. Nobody wants to take risks''

Where is it from and what for?

In general terms, tokenization is the replacement of real values with conditional ones. Tokens were used in the British Empire from the 17th to the 19th century due to a lack of fiat. These were tokens that either replaced coins or were intended to buy something specific. In fact, money itself is just universal tokens with no intrinsic value. However, they are a necessary vehicle for the exchange of values, goods and services. About ten years ago, and more, this term began to be used in online commerce. Payment for services online today is reliably protected by modern security protocols. Online shops and payment services protect users' payments and bank card data from fraud intruders. EasyPay, for example, annually confirms PCI DSS certification and protects user data according to the latest international standards. One of the most modern types of data protection is tokenization. Therefore, in online commerce, this is a technology that allows you to secure electronic payments using a data encryption system. Tokenization in this case allows payments to be made without disclosing the user's card data. Unique digital identifiers – tokens, replace information about the card (card number/cvv-code, etc.) Tokens protect primarily personal information and financial transactions by transferring card data in encrypted form. Tokens are created through mathematical formulas or random alphanumeric generators and cannot be used by hackers, since they do not carry any value. Here, during tokenization, confidential data is not sent, but remains in the application on the cardholder's device and on the bank's servers. One way or another, the bank knows which card corresponds to which code and can confirm the transaction. Tokenization does not negate the benefit of encryption, it is necessary when storing confidential data, however, tokenization avoids the direct transfer of personal data where possible, and using both approaches makes the transaction process even more secure. Now, this logic of tokenization has been widely implemented for a couple of years in many sectors of the economy, where the logic of data tokenization guarantees the growth of the added value of a product or service.

By the beginning of 2018, the development of blockchain formed a completely new approach to the valuation of businesses, assets and their financing. So, if earlier only a fairly large enterprise could count on entering the market of serious borrowings through the placement of securities, now, thanks to a new phenomenon – the tokenization of assets – this is available to almost everyone. Therefore, from the standpoint of the blockchain, asset tokenization is a secure process of transferring rights to a property or financial asset to a digital asset. Due to the fact that all transactions are encrypted in blocks of information, and their movement can be monitored in the blockchain network, tokenization is a progressive, secure and transparent way to evaluate and manage any asset that is of value! In fact, this is the stage of modern digitalization of the economy. It may sound distant, but tokenization has a profound impact on our lives and can transform entire industries. Although people are already using tokens on a daily basis (most are unaware of it), the true potential of tokenization is only unfolding thanks to the influence of the blockchain. Blockchain allows you to safely and efficiently tokenize a wide range of real assets and businesses, where the logic of the processes justifies such an application, providing new advantages and applications for a wide variety of industries, such as art or healthcare.

The main principle of the blockchain is decentralization. Excessive centralization of government, from states and corporations to large Internet services, leads to bureaucracy, cumbersome systems, manipulation, uneven distribution of benefits and unequal decision-making. Decentralization is capable of optimizing the system of any process and leveling the chain of intermediaries or fixing their income at an economically justified level. One of the key principles in the development of Internet services is the struggle for the place of an intermediary. Most successful businesses simply took over the markets that existed before. Amazon is replacing shopping, YouTube and Netflix are replacing TV and video rentals, and Uber takes a large share of the taxi market. And so on.

During the 2017 cryptocurrency boom, almost every crypto startup had its own ICO (initial coin offering). The projects promised investors huge profits, and in most cases, in fact, they were just emitting tokens for internal use, not backed by anything other than the price of bitcoin and the hopes of entrepreneurs for success with its endless growth. Since then, in relation to serious investment projects, the concept of a security token has been increasingly revised, that is, tokens as securities. Such an initial offer is called STO (security token offering), that is, tokens that either contain signs of securities, or are their digital counterpart, or are tokenized assets – that is, rights or part of rights to other assets, for example, precious metals, real estate, paintings and other property. The advantage of tokens is obvious, since any property or investment can be divided into a huge number of tokens. This opens up new opportunities for the investment market, especially for small investors (called ‘’unaccredited’’). This allows them to participate in this process without entering investment funds, as well as to trade assets on the secondary market using a simplified scheme, which is also convenient for large investors (called ’accredited’’).

Tokenization can significantly simplify the investor registration procedure and lower the financial threshold for participation, it becomes possible to create a securities market without a stock exchange. It also simplifies the process of registration, registration of ownership and other aspects of the transactions. There are projects to tokenize health-related information such as personal health records and drug supplies. And many more examples from financial payments, real estate, risk hedging, asset management, antiques and collectibles, art, healthcare debt, data management and insurance. In a broad sense, in soon future, an individual's assets are also his money, professional skills and even social connections. Any tangible and intangible asset can be tokenized. For example, a token can be created for a gram of gold and act as its digital counterpart. Accordingly, the one who will own it is equal to the owner of a gram of gold. In addition, tokenization can be applied in future to intangible assets such as an idea, ability, or time. Previously, such assets were practically not involved, since they are difficult to measure, impossible to transfer or sell, but tokens can become their digital reflection and allow transactions even with them. The tokenization of physical assets is changing the paradigm for managing them. Whereas previously they were managed through the custody or by actual transfer, now the token holder can manage them directly without the need for physical transfer.

All this can be digitized – that is, tokenized. The process today does not stand in the aforementioned industries; by the end of 2019, tokenization projects worth at least $ 1.1 billion are already being implemented. Experts expect significant shifts in solving some regulatory problems, when companies and service providers will establish proven methods and simplify participation for institutions. If the authorities, conducting settlements with traditionally illiquid assets, accelerate the process of introducing new technologies, trading in tokenized assets will become as accessible as trading in shares. However, the challenges of this new technology should not be downplayed, and breakthrough will only be achieved with the coordinated efforts of all major players and stakeholders. This all takes time and patience. The digital asset market affects not so much the economies of individual countries as the global economy in general. Digital assets, by their very nature, do not have to fit into one or another jurisdiction, and regardless of the further fate of the legalization of crypto assets, citizens and enterprises of any country must find legal ways to participate in this market, whether they are entrepreneurs, investors, contractors or clients. But there are also barriers to the transition of the economy (that is, real assets) to the digital space. First, unrestricted access to assets and the simplicity of registering and closing accounts can lead to chaos. Secondly, there is still no single approach to tokenization, affecting many other nuances, such as asset management and distribution of roles, security, integration with traditional payment systems, etc. So in many aspects, government regulation will be necessary, and in a few years it is quite possible to expect the arrival of some kind of general consensus both among blockchain projects and in terms of their interaction with existing government institutions.

Pros and cons

Little practice to analyze decision-making

Tokenization as a transfer of rights to a real object on the blockchain quickly attracted the attention of the financial market. This is not surprising, since cryptocurrency can be classified as an alternative financial instrument. In addition, participants in the financial industry consider blockchain as a possible way to solve a number of problems: simplifying the accounting of rights to an asset, increasing transparency and security of operations, reducing costs, and the possibility of creating funds. Intermediaries – exchanges, depositories, clearing – become unnecessary. When securities are tokenized, the creator becomes the holder of the token collateral. He also guarantees the execution of rights on the basis of, for example, an offer. Supporters of a new kind of derivatives talk about democratizing the market and argue for tokenization. Unlike the classic stock market, in the world of cryptocurrencies, non-professional investors with any start-up capital can become indirect shareholders, bypassing infrastructure barriers and costs. This principle can only be violated if clear rules for regulating the industry are introduced. From a technical point of view, such transactions can be transparent and therefore conditionally safe, and the cost of entering the market is really close to zero. But this raises a question: how likely is the scenario of a speculative growth in the value of the underlying asset, for which the crypto derivative was issued? There is no material for comparison yet.

Trust issue

Also, questions and problems of trust constantly arise. We can say that in the case of asset tokenization, we are talking about a kind of quasi-securitization. The creator of the token will not be a regulated financial institution, the security of the asset may not have documentary evidence, and the court practice may be very limited. As a result, business models are based solely on trust and authority, but these are the patterns that are often encountered in the formation of a bubble. In financial markets, the investor is played by the regulator, which builds a system of accounting and supervision to minimize fraud. Regulatory authorities may be powerless whith tokenizing shares, since sellers of secured tokens often avoid recognition of their product as a security token in various ways – this status imposes certain obligations on the seller.

No regulation, weak infrastructure

Unlike securities, low-liquid assets can be a suitable area for tokenization – in particular, real estate and works of art. Tokenization in this area has a positive economic effect: the asset is transformed into a liquid form with the splitting of rights to it. In addition, the asset can be used as collateral. However, by analogy with securitization, the provision of low-liquid assets with tokens can become both an engine of progress and another “bubble”. So far, such initiatives are met with skepticism, since there is no intelligible regulation, and business models run into the documentary nature of the underlying asset. To date, there is no working system for tokenizing real assets or financial instruments on the market. The idea of tokenizing assets also has technological limitations – the modern IT infrastructure of financial markets is not adapted to the logic of smart contracts. It is worth noting that there are no fundamental obstacles – theoretically, a completely autonomous software architecture for tokenization could already exist. This requires adapting the financial industry and legislation.

Blowing bubbles again

The tokenization process has functions similar to securitization – transferring an asset into a more liquid and simple form, as well as splitting the rights to it. But it has a serious difference – it is an unregulated process. We can talk about the excessive conservatism of the financial authorities, but this attitude is due to the lack of clear regulation and appropriate infrastructure. As a financial derivative model, all other things being equal, a token outperforms a security or derivative in terms of security, which is achieved through its decentralized nature. In addition, the public ledger of transactions makes the usual intermediaries unnecessary: registrars, depositories, centralized exchanges. Unsurprisingly, many large market participants are paying attention to the benefits of blockchain. Tokenization can replace securitization as a more efficient market instrument, because token has a number of advantages over securities. However, today the development of tokenization is hampered by many obstacles: the legal framework, infrastructure restrictions, and distrust of market participants.

Asset tokenization problems

You can hear in various media that soon a digital asset will be launched for every sector of the economy, and the blockchain will turn out to be the most important component of the economy, without which it will be impossible to complete any transactions. But the reality is that global tokenization is far from being implemented. First of all, this is due to the fact that for tokenization of assets, software systems are needed possibilities that allow transferring assets to digital media. At the moment, there are not many software solutions that can tokenize assets, and most of them are still at the concept stage or exist in the form of prototypes. For tokenization of assets, a clear concept is needed, which must necessarily address a number of important issues as:

• provide all participants of the decentralized system with interaction algorithms;

• have a clear mechanism for managing tokens, control over the issue and their burning;

• provide users with a mechanism for withdrawing, entering and exchanging assets, as well as appropriate software for this;

• be consistent with legal and tax aspects.

Tokenization opens up almost limitless possibilities, but first it needs to be improved. The token itself is not legally binding, so investors have to rely only on the honesty of its developers. In the worst case, the funds invested in the token can be spent for other purposes, and the investor irretrievably loses his money. Now there are several platforms that allow tokenize any asset based on smart contracts. Anyone can issue tokens, which should transfer the right to own an asset. But taking into account the current possibilities, this will be nothing more than a verbal agreement that the owner of the asset (who sold the token), at the request of the investor (who bought the token), will transfer the asset to him as ownership. Ideally, all transactions within the digital system should have legal force, similar to changes in the real estate register when the owner changes. This is not the case yet, which is a problem. In reality, crypto enthusiasts are still only fantasizing when they talk about how blockchain technology and decentralized tokenization can change the world where we live in. Decentralized asset management systems don't work without software. While the project is at the development stage, this is still a conventional centralized asset management system with blockchain elements. And very often, it remains so. Crypto enthusiasts also prefer to keep silent about this.

Benefits of asset tokenization

The main advantage of tokenization is that tokens are useful only within the system where they operate. This method is ideal for protecting sensitive data. Unlike the encryption used, where anyone who has a key to solving the cipher can calculate the initial data, the token cipher may not contain any personal data at all, so it cannot be stolen and used for harm. When tokenizing assets, the function of dividing the token into parts is useful. Thus, a share of a token can transfer a part of the asset assigned to it, without physically dividing the asset into parts. In addition, the transition to digital form allows to increase the speed and safety of transactions, as well as to make them as simple and convenient as possible, and eliminates the need to cooperate with intermediaries. For stock market traders, tokenization of assets will eliminate the paperwork that is the main difficulty in trading, and provide an easier way to sell and buy assets, and therefore eliminate the need to hire asset management companies. All this should significantly increase the liquidity of assets.

Business tokenization will allow you to save on payment processing, as well as make accounting easier. In particular, modern encryption algorithms that protect payments require the implementation of PCI DSS protocols in applications and platforms. Tokenization, on the other hand, will allow you to store and manage data, operating only with a token, without putting the data of the company and customers at risk. Of course, the main advantages of tokenization remain the decentralization, transparency and security of transactions characteristic of the blockchain. Settlements in the DLT network can lead to a decrease in counterparty risk and operational risks if transactions are carried out on blockchain networks with access permission. However, uncertainty about the finality of settlements in non-authoritative blockchain networks precludes such a benefit. At the same time, the ability to carry out instant transfers, that is, a direct exchange of digital assets between two “wallets” (accounts) through different blockchain networks without the participation of a centralized intermediary, can significantly reduce, if not completely eliminate the counterparty risk. Interestingly, some experts argue that issuing securities in a tokenized environment will help create new products and asset classes.

Investors can benefit from the wider use of asset tokenization by being able to own stakes in underlying assets (or stakes in funds). Asset tokenization will allow assets to be fragmented into smaller fractions than is commonly seen in stocks and bonds, similar to structured products and securitizations. Investors, especially retail investors, will therefore be able to access asset classes and risks that might otherwise be beyond their ability (participation in private equity funds) and participate in capital markets with smaller portfolio sizes.

What is required for successful asset tokenization?

For successful tokenization of assets, you need to develop a clear concept, business model, and solve a number of other issues:

• work out and implement algorithms for the interaction of all participants in the decentralized system;

• determine the mechanism for issuing tokens, their life cycle and ways of managing the distribution of tokens;

• define the procedure for registering system users and managing keys;

• work out mechanisms for deposits and withdrawals of funds, internal exchanges, management of limits and write-offs of transactions;

• develop trading and payment systems, mobile and web wallets;

• think over and solve legal issues and mechanisms of interaction with tax systems;

Asset tokenization opens up new, almost limitless prospects, but first you need to do a lot of work. Hundreds of asset tokenization systems are currently being developed in the world, but there are still only a few finished work products.

Main conclusions

• Tokens are the next step in the development of blockchain technologies, allowing us to move from speculation on highly volatile cryptocurrencies, created several years ago, to ensuring the accelerated development of the real sector of the economy due to new cryptocurrencies.

• Tokenization of real assets – is becoming an increasingly popular area of investment activity.

• Asia has actually become a leader in the development of blockchain technologies.

• Tokenization is already spreading to many industries

• Lack of regulatory mechanisms and legislative framework is still hindering development

• The low level of knowledge in the field of blockchain technologies and cryptocurrencies among the mass investor (non accredited) – while seriously hinders the processes of adaptation and mass distribution

• Development of cooperation between traditional banks, fintech and blockchain companies will help to promote the topic of tokenization in fintech faster

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Sergey Golubev (Сергей Голубев)

Crynet Marketing Solutions, EU structural funds, ICO/STO/IEO projects, NGO & investment projects, project management, comprehensive support for business