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Trading Crypto Guide ™

23 мая 2024 15:00

What Are Revenue Participation Tokens?

The whole point of investing is to productively save or grow wealth over time. In the private sector, investing is predominantly cash-based, typically done with a small part of one’s savings, either in the stock market or in precious metals like gold.

Today, holding cash means constantly losing money, either through inflation, which is currently growing in both developed and emerging markets, or thanks to the negative interest rates that have been the policy for much of Europe and North America. Because cash is unlikely to appreciate in value anytime soon, investing in the stock market, or in riskier assets, is one of the only viable options for longer-term growth.

But the stock market is a guessing game, impossible to predict, and easy to play wrong. Blockchain technology has been offering savvy investors alternatives for several years now, often in the form of cryptocurrencies. But it also creates a third option for a hedge in the form of tokenization.

One such use of this technology for investing would be in the form of revenue-share tokens, where companies could tokenize the ownership rights to percentages of their future profits and sell those tokens to investors to raise immediate liquidity. But there is a problem with this.

Tokenizing the ownership of an asset (or in this case its revenue) currently lacks the proper legal framework necessary in most jurisdictions. Additionally, owning a fraction of an asset comes with certain obstacles to the rights and obligations of the token holder.

An alternative to directly tokenizing revenue, and all the potential problems it can incur, is the revenue participation model, which is a two token system based on the well-established legal model usufruct that uses one participation token and one payout token.
Companies with stable income (or at least in a stable industry) tokenize percentages of their future profits. They sell these tokens to investors who can then choose to either hold on to the token and eventually redeem it for that percentage of revenue, or sell the token on. This participation token acts a bit like a gift-card or IOU that grants the owner the right to a certain amount of value at a given company.

When the time comes for that revenue percentage to be paid out, they are dispersed in the form of a second payout token which can be redeemed for fiat or cryptocurrency, or, again, sold on an exchange. This gives both companies and investors significantly more flexibility than a traditional equity/dividends system.

By purchasing a revenue-participation token from a stable and reliable industry, say an agribusiness for example (cattle, soybeans, corn, etc), you can be relatively confident in a predictable return on your investment. While it may not be a gold mine in terms of dividends, it is an un-speculative and safe investment that can act as a hedge against inflation or negative interest rates, with multiple options to exit, all while supporting meaningful companies.