Blockchain technologies as a breakthrough opportunity for access to venture capital investment

Blockchain technologies are actively transforming the world; they are one of the most important breakthroughs of recent times.

Blockchain is a fully replicated distributed database. In other words, it is an immutable distributed ledger for storing any information. Its scope is very broad: financial transactions, user identification, digital property registers, economic transactions, statistical and personal data, elections / voting and much more.

So, public blockchains provide a place for posting various information that anyone can add, but that no one can change or delete, and which is not controlled by any individual or legal entity. In addition, some blockchains provide an environment for the use of smart contracts - algorithms that control and manipulate various data.

Blockchain technologies open up opportunities that never existed before:

For private investors — the opportunity to invest directly, bypassing “traditional” intermediaries (banks, brokers) and avoiding unnecessary bureaucracy and various checks. So, even those who do not have the status of a qualified investor in certain jurisdictions can invest in blockchain projects, because blockchain technologies blur the boundaries and make it possible to do without unnecessary intermediaries.

For startups — access to a huge amount of funds from private investors, previously unavailable for regulatory, geographic and bureaucratic reasons.

For the expert community — demonstration of their competencies to everyone who is interested in their assessment (startups, investors), and further interaction with them in various projects.

Thus, the main tasks for the successful interaction of these three groups are:

• development of various methodologies for assessing startups and methodologies for assessing various investment risks

• application of assessment methodologies for real assessment of startups, risk assessment

• creation of managing smart contracts that take into account the specifics and features of startups

• converting the shares of startup rights into digital form (tokenization) in suitable blockchains

• raising the necessary funds for the implementation of the assessed startups both through crowdfunding and with the involvement of institutional investors

• insurance of certain risks, reducing their impact on the successful implementation of projects

• correction of assessment methodologies based on the data obtained during the startup launch

• the use of the obtained and developed methodologies in other contexts: for acceleration, development, launching new startups.

For the successful solution of the assigned tasks, one of the main tools is the use of smart contracts and tokenization.

A token is a non-cryptocurrency accounting unit designed to represent a digital balance in an asset, in other words, serving as a “substitute for securities” in the digital world. Essentially, tokens are a record on the blockchain. Token management is usually implemented using a smart contract that stores the values of the balances on the accounts of token holders, the conditions for their use (for example, conditions for transfers, participation in voting and various locks), and also provides the ability to carry out various operations with tokens, for example, transfer of tokens from one account to another. You can get access to the token through special applications (electronic wallets) that use various electronic signature schemes for this. The bulk of the tokens that exist today are formed on the Ethereum blockchain in accordance with the ERC-20 standard, but over the past three years, more and more public blockchains have provided this opportunity.

A smart contract is a computer algorithm designed to create, control and provide information about the ownership of something presented in the form of a token. However, the scope of application of smart contracts is not limited to this. Thanks to them, it became possible to conduct truly honest votes with public and verifiable results, as well as to introduce the capabilities of the virtual world into the real one.

Tokenization is the process of replacing physical or legal assets with tokens managed by smart contracts on the blockchain. Almost everything can be tokenized: from the rights to a work of art or an apartment to contracts for the supply of oil.

The main benefits of tokenization are:

Security. Tokens created on the blockchain represent an entry in an immutable ledger as a unique code. Thanks to this, the token cannot be hacked or stolen.

Efficiency. The tokenization of assets allows you to conclude transactions much faster, removing the bureaucratic hell from the chain, since all the necessary information is entered into the blockchain, and only a smart contract controls the transaction.

Flexibility. Another advantage of tokens is the ability to split them. For example, when tokenizing a business, you can digitize its share for subsequent sale or exchange. This allows investors with little capital to enter the market.

Availability. If earlier the execution of transactions often required a physical presence in a bank or on an exchange, then thanks to the blockchain and smart contracts, it became possible to sell and buy assets to anyone, anywhere, anytime, having only access to the Internet.

Due to the use of blockchain technologies, even startups with very high risks have the opportunity to reduce or completely get rid of the influence of many of them by using decentralized insurance instruments, which in the long term provides additional guarantees for both startups and their investors.