October 14, 2022
This is a question we receive from prospective clients and investors from time to time. And it’s a great question. Because it allows us to speak directly to our thesis and value proposition.
So, why do private markets need blockchain?
Well, private markets don’t really need blockchain.
Just like lots of people didn’t think we really needed the internet.
YouTube: Bill Gates Explains the Internet to Dave (1995) | Letterman
But the world moved in this direction for reasons that are obvious today. We think the same will happen with public blockchains.
And private markets happen to be ripe for disruption. After all, we’re talking about an asset class worth hundreds of trillions of dollars that didn’t get the memo that it’s no longer 1980.
This begs the question: How are public blockchains going to help fix this?
It starts with data.
Looking back at history, the development of the public markets is instructive. In 1995 the SEC introduced the EDGAR database. This is where investors access company disclosures and financial statements. This access to informationallows market participants to converge on price discovery.
We need something similar for private markets. But it’s unlikely to be a centralized database.
Rather, it will be decentralized. We refer to this as “data on the edge.” Asset owners and managers will control these databases, providing permissioned access to the market as needed.
But how do we trust the data?
We need 3rd parties to attest to the data. Therefore, Inveniam works with trusted valuation partners such as Cushman & Wakefield, JLL, CBRE, Houlihan Lokey, ValuStrat, and Mercer.
We also need to anchor the data to blockchains via a cryptographic hash. This provides an immutable audit trail. We can think of the cryptographic hash as a time stamp or notary. The documents themselves remain off-chain.
With trusted data held in a “distributed EDGAR database” serving as the foundation, we can then fractionalize, or tokenize the legal entity holding private market investments. These “tokens” can be tied to the distributed data rooms, with click through access to underlying source documents and 3rd party fair value marks — all cryptographically hashed for data provenance and trust.
SEC-registered digital ATSs (alternative trading systems) such as Oasis Pro Markets and peer-to-peer marketplaces for financial institutions such as Ownera will provide liquidity for secondary trading and an interface for collateralized lending on tokenized private assets.
Inveniam’s distributed data rooms are connecting to these marketplaces via smart contracts and APIs.
With the investment instrument now represented on-chain, we can access all the benefits of blockchains for finance and capital markets: superior asset settlement, custody, efficiency, transparency, accounting, democratization of investor base, etc.
Do private markets need blockchains?
Only if they want to graduate from the 1980s.
Inveniam uses blockchains to instill trust in data and to help our clients prepare for the digitization of the private markets.
If you’re interested, check out our Global Head of Capital Markets and Corporate Development, Todd Stevens, as he shares his thoughts at Singapore’s Global Digital Assets Investment Summit.
Bringing Global Distribution to Private Markets
Inveniam and Ownera are working together alongside companies like Apex, Cushman & Wakefield, Tokeny, and Oasis Pro Markets to deliver the future of international private market asset management today.
Today on Sound DeFi, we’re highlighting our very own Todd Stevens and Ownera’s Anthony Woolley in an 18 minute talk they gave at Digital Assets Week Singapore.