A use case for XBOM and Securities Class Trees
By: Michael Holdmann, Prasaga CEO
With the XBOM infrastructure you have a very interesting capability that is enabled, there is no need for a token to represent an asset. In XBOM, assets are objects in accounts on the blockchain. Title or ownership of any type of asset can be transferred between accounts, not just tokens. One vertical that would benefit greatly from this is regulatory bodies, such as those that oversee securities markets worldwide.
With XBOM you are transferring asset from one account to another on the blockchain. You are not creating a Smart Contract that holds the asset and a wallet for reference to that asset, but you do not have possession.
A startup company wants to offer a stock for capital raise. With XBOM, this is easily accomplished, immutable and fully transparent for all time. XBOM will have, along with other verticals, base classes established which in this case is a security class tree. The SEC, CFTC, etc. can now develop their own class trees specific to their regulatory oversight. When the company wants to list shares for sale, the first step is search a list of securities class tree(s) offered by the regulatory body in the country the company wants to list and offer in using the XBOM browser inspector.
When proper object is identified, the company does simple drag and drop of the corresponding security type it wants to offer from the proper regulatory body’s Class Tree and instantiates an object in its account. The company now has a stock object in its account. Next is to add the values that define its offering i.e. number of shares, strike price, type of offering; preferred, common, etc. round and/or any other parameters that the regulations require.
Along with the instantiated class objects comes all the compliance reqs. needed for carrying out a transaction of that type. If company already has the compliant certs instantiated in the account the object will be activated. If needed certs are not present, e.g. for US SEC, Edgar, Reg. D, Reg. S, Reg. A+ etc., the blockchain would first look up the class tree and verify if the company has rights to the object(s) necessary to participate in the transaction. If yes, the object dynamically loads, and the transaction proceeds. If no, the company will have to acquire to proper compliance certs through the proper agencies for the objects.
Once done, the object is always in company account, and if there is any updates or new versions to the object from the regulatory body and those updates are presented in a new transaction, the account scans the class tree for the new objects, instantiate the new code and proceed with the transaction.
Now the company is compliant, a sell object can be instantiated and populated. When you activate the sell object it will list the company offering in decentralized multi-sided marketplaces (DeFi) and individuals can find the offering (this is where brokers establish business as most people will not have bandwidth the scan marketplaces all day).
When a buyer submits a buy order, the blockchain will check the buyers account and as long the buyer and seller have all appropriate compliance certs in their account, the trade will happen if not, the trade will not happen.
If the company included dividends with the shares then, through ancestry and inheritance, state is updated and can be tracked up to the class issuer. There is always awareness of state of all objects instantiated from that tree.
If a shareholder sells a 25% of the company shares they purchased, when a dividend is paid from original issuer, transactions are referenced within the class objects history up to the regulatory bodies class tree. As the dividends from the company are released, it is known the shareholder sold 25% of their shares and will only remit the 75% of the dividend to original purchaser and the other 25% will be distributed to the other secondary market acquirers.
The enablement of single instance global class tree, instantiation of objects that can represent anything, not just a tokens but any type of asset, titled physical or digital, as well as identification documentation, compliance certs, etc. the list of possibilities ever extensible for the growth under this technology.
This is just one of the many vertical use cases that XBOM enables. We look forward to working with community to explore all the possibilities.
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Originally published at https://prasaga-ceo.medium.com on October 9, 2020.