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Ask the Expert: Tokenizing Equity with Brickken 💰🪙
Recorded: Aug. 29, 2023 Duration: 0:33:27Space Recording
Full Transcription
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great to have you here edwin we'll just give it another minute or two let some people join
we're right at the start time so let people filter in yes of course thank you very much
okay we can get started i'm sure some more people will join and there'll be the recording available
to listen to afterwards as well so today's ask the expert uh topic is tokenizing equity and for
that we've got brick in we have uh edwin who is ceo and co-founder of brick in um so edwin do you
just want to introduce yourself to the audience yes of course thank you very much for having me
so my name is abu matta uh i'm an mna lawyer who pivoted into technology and in 2016 i stumbled
into a tech called blockchain and basically uh seven years later and a lot of gray hair i'm still
building here uh something that has to do with tokenization so that's kind of like the digitization
of an asset and embedded it into into the blockchain so thank you very much for having me
happy to have you here and uh as you mentioned a lot of gray hair uh you're building something that
doesn't really exist right now um you're sort of on the on the frontier of building out this new
technology so maybe could you just speak a little bit about uh what tokenization is and then the exact
goals that you have at brick in uh for tokenizing equity in particular
yes of course so i mean basically tokenization is the representation of an of anything right so we
actually been using tokens for pretty much of our lives like when you go to a casino casino chip it's
a token it represents money so you can play inside and that concept got digitized so banks uh credit
cards a credit card is a representation of how much money you can spend based on the account that you
have in a bank so if we do that kind of representation then we have the possibility of actually being able
to represent everything with another uh substitute in this case with tokens so what we're trying to
accomplish here is why would you represent something is because it gathers it gathers you the possibility of
creating possibly a community it can ease you into the obtaining of a product or service and that's why we
use tokens kind of like the representation so on our side what we're trying to accomplish here is
can we represent shares into something that it's more optimized kind of like what technology can we
use to represent kind of like that equity or or that uh assets and the conclusion was not made by
breaking there's been obviously previous uh projects the first one i believe was in 2017
that said okay we can represent assets in tokens and the reason why you want to do that is because
you embedded with all the characteristics of the blockchain so the transmutability the transmutability
the transparency the optimization of fees and everything so why we do that is because we want to look for
that optimization phase as if you just tokens and digitization then one click becomes possible for
you to deploy absolutely thousands of processes so that's why we're trying to pursue the optimization phase
so everything becomes less complaint uh less bureaucratic uh more cheap because less intermediaries
less fees and that's basically what we're thriving to when you say optimization are you referring to
uh the tokenization what do you what exactly are you referring to there where you say optimization
yeah so basically for example if i get a thousand investors into my company i have to go and check that
the investor a deploy i don't know 100 euros into my back account and then this guy gave me 200 on fiat and
then that guy sent me whatever kind of like that becomes a hurdle when you're dealing with a with a lot
of people and also the payment backs hey i have to distribute interest i have to distribute earnings
or even how those things transfer in the back uh investor a wants to sell to investor b so all of the
things that we do as a company it's very bureaucratic so when i was doing m&a and there was kind of like an
acquisition it was an absolute insane you will go like hours into a data room trying to understand
and pursue that everything that the company said was true because the ledger itself was not public so
all the transmissions were never public all the trans all the transfers all the acquisitions there
was a lot of things that you have to go literally to a bank account that was in like printed by the
company you have to pursue that everything was like on point so if you push that to the public
ledger where you have all of these things already well conditioned and just like one click and
download you all the information you just become optimized so kind of like that's where we thrive
into kind of like when i say optimization it's it's all about things that we pursue when we go into
digitization phase if i send an email it's one click you don't have to go and do all these hurdles of
going to the post office deposit the card send it and everything now with like even ai like grab me the
email pursue this and all that that's what we're driving to even for like the capital uh company's
equity and whatnot okay yeah that's a really great uh i think the audience will appreciate the sort of
parallel drawn between how things used to be done and probably in most circumstances are still done
so what would things look like say you were you were doing a mergers and acquisition process uh you
know 10 years from now when when equity tokenization has become uh widespread and adopted what is it is
it as simple as a one click sort of uh acquisition of a company what does it look like in you know the
best case scenario
i mean it also has to do with balances no for example like the protest term is you there a company receives
two shares for one based on all of these actions and based how the auditor balance it after studying
their financial reports and the lawyers managing the contracts and everything so that it's doable to
be on a digitization phase nobody has pursued because it's it still seems like oh it's too complex you
need human labor but do we i mean nowadays there's a lot of things that we can already use in technology
for it to become to become better so like uh breaking might be doing now as a tokenization
but personally what i'm trying to pursue it's kind of like that feel kind of like can companies be
acquired simply by one click that's kind of like the question that i'm pursuing and what i'm building
in breaking it has to do with all of that and the reason is that even some venture capitals are we
going to be tokenizing just because they also see like how simple and efficient it can become
that if their shares are on the blockchain in a token then the movements in the back can also be
simple so if there's an acquisition can you do like a drag along where you like push all the tokens
into the buyer's wallet and the wallet deploys all the earnings to the investors is that doable in one
click the answer surprisingly is absolutely yes so that's kind of like the vision here in breaking
so what needs to be done for that uh mission to become a reality what are the major like
roadblocks that are standing in the way of that sort of seamless future that you just described
i mean it also has to do with also adoption right because uh the mechanism well it's uh simple okay
that's not simple because you have to technology develop it and better know-how and have the legal
kind of like clauses how they can automatically execute the pain point is kind of like companies
not pursuing this because there's one major ignorance factor which is is this legal is this
doable and then you have to they go ask all these lawyers and they say like oh i don't know it's
blockchain oh i don't know regulation and it's like mate we we've been using kind of like this kind
of like gray areas and all of the programs that we use on services for example uber was a super
gray area back in new york when it was funded because they didn't have a taxi license but it
was doable so here we kind of like investing ourselves against the same thing kind of like
all these companies knowing that oh that sounds very simple because i can manage all my investors and
it's easy to move and i understand how the transfer are made and i have the real-time value and real-time
analytics because blockchain is a real-time open ledger so they see the benefits but the constraint is
always kind of like is this legal so that's where we come in breaking as big educators and saying
like yes it's not only legal it's doable it can be achievable so that's kind of like right now kind of
like the big constraint us pushing kind of like this is not a cryptocurrency this is kind of like just
a technology being used which is blockchain and then you're creating a new asset class which is equity
but you're not you're not creating kind of like ethereum or utility token you have to name things
but they are but marketing right now or or the media pushes everything under the same back
and you'd hope that uh that building a platform that makes it easier to you know check the the
financials of a company have everything be as transparent as it is would earn you some uh some favor from
the regulators um so do you think that will you have companies sort of deploying these tokens these uh
equity tokens onto onto public blockchains will these all be public living on ethereum or other public
blockchains or will they be a little more uh you know private chains enterprise chains perhaps uh that
then interact with with public chains what do you think that looks like
yes uh that's a great question actually uh very technical so in in the end it's kind of like also
it has to relate with with with the fearsome level right because when you have a private blockchain
you're used to having your own private database right so you feel secure kind of like oh i don't
want anybody to know and everything but publicly traded companies doing an ipo they you already know how
many shares they have how many what is the volume and all the things so we're already used to being
publicly but not at that level kind of like the starting so bringing this technology or openness
and transparency it's kind of like a shock right so do you really need a private blockchain to pursue
tokenization the answer is no and then they will have the compliance level saying oh but you have
security you need to kyc because anti-money lander interactives yeah but you can embed into the token
into an rc20 template and deploy a uh a token that already has all these kind of like a
clauses embedded not clauses but like the coding kind of like the functions hey maybe secondary
trading is not doable unless that wallet on the other end is white listed so there's a lot of things
you can already code so to answer you it's not a matter of what blockchain you need it it ends up
becoming as what the other side of the company feels comfortable with got it yeah that makes sense and i think
uh so you mentioned you know coding in certain properties into the tokens that's essentially
defining defining new token standards is that something that brickin is working on or is that
something that you think will need to be done at a at an organization level
right now there's uh already some standards trying to pursue kind of like becoming the one standard for
tokenization on our end what we did is um actually we obviously we got audited by by certic on our
platform and it's uh about kind of like using the erc20 which is kind of like the most common standard
read by absolutely every platform you really don't have to do that much because in the end
adoption goes by the easiness of how easy it is for people to use and basically my my situation is
you really don't need a new standard you can really create a very optimizable one but then you have to
onboard all companies around the world and maybe there's a new standard so on our side what we do is
is we just gave i'm gonna make like a logic here i gave vitamins to the erc20 standard we created our
own template with our own uh established clauses and functions and it works so again it's kind of
like it's not because we want to create a new standard the the market itself is continuously evolving
from a regulatory phase then you have different countries with different jurisdictions and different
legislation so in the end we want it to be as broad as possible and then if needed we can always
specialize that's a good point yeah you do have a lot of jurisdictions a lot of uh a lot of different
regulatory regimes and we'll get a little bit more into the current um challenges that maybe the
regulatory climate is posing but i just wanted to ask so do you think that eventually i mean i guess i think
eventually there will be uh non-physical uh organizations that that don't that exist only on the
blockchain um paying out dividends doing all that sort of thing that you all you've mentioned um but
without being incorporated in any location being incorporated on ethereum you know um how do you
i mean i guess dows are sort of uh getting close to that or heading down that path today but yeah what
do you think it looks like with uh with sort of established companies versus crypto native companies
yeah actually i went down the rabbit hole uh 2021 on dows i i became a very active and in a bunch of
members because they were trying to accomplish what i thought could look like the future but on their own
perspective right kind of like we are uh borderless we don't care about identities and there was a lot of
concepts as to various governance methods and i was impressed i was like these guys are on to something so
big that how they're marketing themselves maybe not not not understandable from the other perspective
but if you bring all of that know-how into a corporate structure that companies understand then
maybe you can achieve what they were trying to do which is decentralization decentralization does not
necessarily mean lack of identity or promoting anonymous transactions i mean that's a part of it right
but decentralization also means the possibility of you to be able to engage in new kind of asset classes or to
become part of a new member of a community or for new investment club or whatever kind of like
it's the way that you open yourself and then allow you to be without restriction entering and moving in
and out well that's my perspective of course so uh jumping back to your question is um do companies still
need to be established yes i do believe that they still need to be regulated by a jurisdiction but what
you create is the digital twin so you have your own paper documents which still much likely is needed
across various jurisdictions and then you create that digital twin a new reality so you make sure
that both are symmetric kind of like what happens with real estate tokenization one does not one
shouldn't exist without the other and that's kind of like one of the biggest pain points that also
with this technology which is kind of like the trust because you have a real world asset and then you
have a digital asset and you have to make sure that both coexist and are coherent with each other
so um going back again to your question is what do i see the the future it all has to do with if
company registries understand that you can register a company on chain and they acknowledge that there's
already some jurisdiction testing it out from luxembourg in here in europe who already has a public
registry of dlt where you can incorporate a company in chain and instead of shares what you issues are
tokens and other countries especially in the amina region are trying to understand that they're
deploying testing and whatnot so i think we're going to get there it and it goes back to the same
simplicity as always instead of like 100 like 10 people reviewing registries and understanding if the
contracts happen if the transaction happened if the money got through or everything i mean literally
it can only come a review of one click yeah you'd think that uh i mean as you mentioned a few
governments are uh getting on board already but the value proposition seems pretty attractive where you
make everything transparent you make everything automatic automatically compliance sort of compliance is
baked into the technology itself um i think it becomes pretty attractive for why why a corporation would
want to simplify its operations doing that and why a regulator would look favorably um on it
so you mentioned uh you know real world assets like tokenizing real estate comes with its own set of
challenges you're not exactly tokenizing a real world asset here necessarily are you you're sort of
bridging over an existing idea onto the blockchain and enhancing it would you say that's correct um with with the
the the equity idea yes of course so in the end this is where also i believe there's kind of like a
divergence is to how it is and then what is sold especially with real estate for example like real
estate tokenization is like do you digitize the real estate no you don't because you don't create a
brick or a you don't build it into into like a whole metaverse situation in reality how real estate
tokenization happens there's two ways that you can do it and one is either you create a company that
buys the property and gets embedded and then you bring the investors through the equity deal so in the end
you end up doing equity tokenization or it's a property manager who wants to build a building or
buy or flip or whatever the case is and then what you do is you issue a debt a debt contract so again
it's not that you're talking as a real world asset itself you always go back to what is the conditions
the company can do to be able to acquire the property or exploit the property and the two funding
mechanisms that as of now more majority exist is equity or debt so that's what we saw in brick and
kind of like we don't have to push a vertical because in reality that's a marketing level real
state tokenization you don't tokenize the real estate you tokenize the company and the contract
for which you buy or explore the real estate and in the end we end up to the conclusion that all
tokenization happens at least for real world assets or all on this vertical through equity or debt
which makes sort of the your approach to tokenizing equity at one point a lot of sense um so where
where is brick and at currently what are your um you know what are some of the major milestones you've
accomplished the ones that are on the horizon close like yeah where where is this all at to give the
audience an idea yeah so um we went we are at the third year anniversary uh it was actually uh on
july we first our first year was we did an mvp for real estate and then that's where we saw that you
know kind of like if you want to tokenize real estate you always go to the company level so we decided to
do the well one of the startups we'll call like a suicide medal which is a hard pivot because our whole
technology that we were using for that specific mvp we stopped using it but we didn't learn a lot
right so we had all of that know-how uh we got funded and we were like maybe let's start from
scratch you know kind of like the vision is different we have funds and we have team why don't
we pursue it so we started developing for a year and a half our our data with centralized application
and when we launched it on on march we had a very good receptive uh from clients we're onboarding
clients on a monthly base and now we're hitting institutionals we have a venture capital coming
up on september that is getting tokenized on q4 we have probably i will hopefully say like four
just because it's starting to make sense not because we're pushing the narrative we already have
a great narrative and a know-how that it allows us to engage with these kind of players but when you
hit the news and the tokenization as a search on google or any media like these the biggest
institutions are testing it so it's kind of like it's not us already telling you what we already
knew three years ago it's also that hey you know this fund just deployed 150 million on avalanche or
hey look at this kind of like banking switzerland tokenizing their equity as a funding mechanism so
kind of like that great news is bringing us the possibility for us to amplify our message which has
always been the same is tokenization is doable at the equity level and we're just starting to see the
beginnings of what the new capital markets itself as a scene is going to look like when blockchain
technology is the ruling methodology as to how that how that works what do you hear from some of
these institutions uh that you that either approach you or you approach what what's their um what's
their take on the technology are they glad that someone has finally built it are they is it a newish
idea to them um what do they think of you know crypto well i guess blockchain technology and then
the applications like this yeah so this is this is a funny question because they come with just one
thought tokenization but they've never seen the practical level of it which happens to absolutely
all our clients it's like they know what they want but they don't know how it gets to that one right
so for us it's kind of like very captivating that what we built was built always like since that
beginning we were pursuing that scene where you know me as an m&a lawyer what do i expect in a data
room so that was the question when i was creating brick and alongside our team kind of like we should
push this but it's not because it's it's kind of like what the the not what the world market wants
right now but what the market will want in the sense that when they come to us and they say i want to
tokenize they don't know what to expect so that's very easy for us to deploy a you know i i think you
want this and the reconciliation process to be cheaper and then to have the ability to manage your
whole cap table and everything that you do is transparent which can push all of this so instead of
us suddenly answering question with we right at the back deploying answers that they didn't know
it was possible and then they were like oh my god tokenization can do all of this and it's like
dude this is my mvp get my client we're getting funded we just wait what we can build in one two
years because i'm already giving you answers you didn't know you will have so imagine what we can do
in a couple of years that's an exciting uh an exciting take i think it is one of the more
uh dynamic and like you know growing sectors of web 3 is tokenization um so you've mentioned uh
you mentioned a vc firm a bank are there any specific industries you think would benefit from
this uh financial obviously any other ones
i mean uh right now the market is really pushing real estate just because it's one of the most
illiquid assets for the most uh like with the biggest apy i mean real estate has always been
growing uh so i do believe that the first threshold is going to be with with that easy concept no kind
of like okay real estate yeah you can compartmentalize a real estate and you can get invested for like as
low as 100 euros and then you have all of this because that's easy and simple to understand
because the market is still trying to comprehend how tokenization works and what are the
the the the things that can be done behind it and whatnot but when we go more deep in the end i
i i'm still gonna go with my with my right here it's kind of like equity so when you tell me what
vertical is going to be the most of it in the end it's bringing kind of like the shopify concept
why did shopify thrive as a as a i think and it made e-commerce grow like like heck because it
didn't focus on a vertical it provided tools a set of tools and functionalities for the little
restaurant no the little like perfume in the corner or the the chair maker or the jean supplier
everything to be able to create an e-commerce so what they did was tokenization shouldn't be about
a vertical in this case the e-commerce it should be about giving them the technology layer for the
company trying to create the e-commerce to be able to deploy it in as simple as possible and
that's why internet thrive and then e-commerce thrive and all of that because it was not focused
on a vertical it was about giving them that solution for them to have an online presence
online channel of acquisition and sell
got it awesome um if anyone in the audience has any questions they'd like to ask edwin before we
wrap this up uh related to brick in related to tokenization of equity um feel free to request
as a speaker or drop your question uh in the comments of this space and we can get to that as
well um so are there any uh so this tokenized equity when it comes to integration with the sort of uh
legacy financial system how far are we away from i mean you mentioned in luxembourg uh this is already
happening but like in terms of uh integration with existing financial systems is that something
you just sort of have to wait and see do you think it's something that's being thought about in
in uh major countries or you know are these smaller countries acting as like trial grounds for for
proving the technology do you think
yeah i think a lot of the trial and testing already occur especially with offshores kind of like these
little countries that used to already work on financial instruments they saw this kind of like
the next big step because the only way to maintain their country has always been with banking or or
like um financial instruments or the offshore and whatever so we already have all those tests and
luxembourg i'm going to say is one of those tests then suddenly uh big countries for example europe
deploy a regulation for the creation of security markets that can rely on blockchain so that's kind of
like the huge innovation and we're seeing kind of like these new bills coming across different
countries where the war kind of like hey you know securities can use uh the technology of dlt which
is massive so it's not that we we haven't gotten there like if this we had this conversation a couple
years ago i would be like the first step that we need is for regulation to acknowledge that this is a
new method i'm not saying it's the only method as long as it's placed as an alternative method
then we have already gained a lot and this year we already seeing that so now that we have that
possibility and uh cross-country kind of like uh administrations lawyers other countries
i'm acknowledging the fact that securities as we know them can run on blockchain then the next couple
years it's all about kind of like okay you put that into a law now how can i execute it like what do
i need for that to be part of my system and that's what we're going to start seeing kind of like the
upgrade and overhaul of what we have come to understand and now adding that okay we have system a
that is kind of like the offline we have system b which is kind of like the digitized phase of the
of the paper format and now we have the c which is kind of like this craziness that everything is
real time transparent and whatnot and we have to come to understand it so i think right now we're
in that in between phase between digitization and full exposure
so when it comes to um something like startup equity uh a lot of people will be familiar with
the concept of uh rsu's restricted stock units um these are like you know granted to to employees
as part of a compensation package is this is that a field where uh the equity tokenization can can
improve things or is it uh is it not really applicable to this what are your thoughts on on
this uh specific application i think it makes a lot of sense so for example when you're an employee
you come to a company and then you get promised and then you sign a contract and then you have a
and all of that but the employee never gets the touch or the feel right so it's like yeah i have
equity many of them don't even understand the value of equity because you know us humans we're just
the property right whatever i hold or whatever i have access to is mine i feel like it's mine
so when you bring this customer it's like hey you know i'm gonna give you phantom shares and i have my
token a and then you're gonna have the token b and the token b is always gonna be related to token a
and now you have it in your wallet so now you understand that you are a true owner or semi-owner
of what you're trying to build here with us it's kind of like that works for them because it's like
oh look at that i have it in my wallet no perfect so that means that the phantom share it really works
like this because in the end if it's a contract a lot of people just say like oh yeah i do have
phantom share or i have access to to the shareholding but it's kind of like all paper wise so yeah maybe
we're digitizing and then you have a docu sign in the middle but still how many people review the
contracts that they sign god damn i'm a lawyer i don't even review my contracts as to the year ago
that i signed but the only thing that i know that i review are my wallets because this is kind of like
my property i have this or or my application so it's kind of like because those humans we're used
to having property and that kind of denotes what i own and what i am and what i have to become so
if you bring this technology and allow them to taste or or handle what you're giving them
then it actually empowers them for sure for sure that's a great explanation of uh of its applicability
and that was just something that came to my mind uh yeah and when you said tokenizing equity was uh
would be a good theme for this discussion that was the first thought i had so it's great to hear you
address it and uh i mean yeah overall it sounds like a really exciting sort of area that's already
seeing adoption i think you're building something that is uh you know actually a functioning product
and actually going to help a lot of people and uh and i think that value is being recognized so
uh it's great to hear that you're doing well and uh and that you were audited with surda can take
security seriously obviously as security of stuff like this is so important um so we're coming up on
time right now but are there any final words you'd like to leave the audience with
no um thank you very much for having me in this great space um obviously if anybody wants to learn
more they can follow me or brick in itself and we're open for discussions and whatever question
they may have if they don't see it suitable they have a lot of doubts trust us we already have a
solution for you because we've been encountering that for the last three years so we understand what
are the pain points but also what is the the point of perspective that can help you understand that
this is not something that we're selling you as a snake oil or whatever but actually a solution that
institutionals are trying to understand and in fact jumping in so yeah as a fact i would love to say
that even though the crypto markets are as such and we have some news security markets have been the
ones thriving over the last hundreds of years and they need an update and this is the update so
hopefully you guys get the feel on tokenization and hopefully you all jump in because this is what's
going to happen inspiring words thank you very much edwin and thank you everyone for tuning in
um check out brick in uh the link will be is tagged in the description of this space and uh look forward
to you all joining us next time for the next ask the expert thanks everybody thank you very much everybody
