Tokenization is simply a secure process of storing economic value in a digital record, or token. Tokenizing a physical asset, such as a property, allows it to be made divisible and subsequently issued as digital tokens. These tokens are then recorded and transacted over a blockchain while still being represented by the underlying property.
Blockchain is a powerful and revolutionary technology that allows digital records (data) to be made in a decentralized manner across a network (distributed ledger) and verified through consensus by multiple sources on the network. This prevents independent data warehouses from storing, manipulating, and creating monopolies over data for economic benefit. A very common type of data is a financial transaction, and on a blockchain this can be made using a digital token or a cryptocurrency. By using blockchain technology, Vesta Equity’s marketplace ensures that all transactions are fully auditable, immutable, and much quicker compared to traditional methods of transferring funds.
A cryptocurrency is a digital currency with its own economic value that can be used for transactions over a blockchain or traded over exchanges. There are many different cryptocurrencies with a wide range of applications, and the most well-known examples are Bitcoin and Ethereum. Vesta Equity’s marketplace makes use of USD Coin (USDC), a type of cryptocurrency called a stablecoin which is pegged one to one (1:1) with the United States dollar. This means that one USD Coin will always be equivalent to one US dollar, making it an ideal currency to transact in. When money is moved into your wallet it is converted into USDC, and likewise, when money is moved out of your wallet it can be converted into US dollars or a fiat currency equivalent based on exchange rates. You do not need to sign up for USDC and your wallet enables you to transact in it automatically. In your user settings, you can express the currency you see on the platform as either US dollars or USDC. By using a stablecoin we ensure zero speculation or volatility.
Equity assets purchased on Vesta Equity cannot be transacted outside of the marketplace. To convert equity, a liquidity event must occur which means that you must sell the equity proactively to other investors or it could be purchased through a property owner buyback term associated with the equity. Alternatively, the property itself could be sold in its entirety. In these scenarios you would receive the equivalent cash value and could reinvest in other properties or exit some of the proceeds from the sale event.