Here are some things a tokenized security could do:
- Keep track of the owner (and by extension, the whole cap table)
- Eliminate paper certificates
- Facilitate transfers
- Provide a history of transfers
- Drastically reduce cost of transfer agent services
- Provide for distributions with the click of a button
- Make capital calls with the click of a button
- Allow conversions (e.g., Convertible Note to equity) with the click of a button
- Provide reinvestment options
- Provide the K-1 or 1099
- Allow digital voting
- Carry up-to-date and historical information about the company, including financial statements and SEC filings
- Track the tax basis of the security
- Carry relevant documents, like an up-to-date Operating Agreement
- Provide an automatic listing on an exchange
- Integrate with all of the owner’s other securities, private and public, to provide a personal portfolio
- Provide a communication channel, including video conference calls and chat rooms, with management and other investors
- Provide information about the market and/or industry generally
- Provide instant analytics on standard metrics like ROI, IRR, and P/E ratio, and allow exports to Excel and other tools
- Compare returns to existing or new indices
- Provide links to other issuers with similar characteristics, with the opportunity to trade, buy, or sell
- Provide information about trading in the security by other owners, with alerts about trading by insiders
The way capitalism works, I suspect the first tokenized securities will include just a few features – those with the most sizzle and/or the easiest to implement – with more to come later.
Questions? Let me know.