James Belding, co-founder and CEO of Tokenized, a technological firm specializing in tokenization and smart contracts that digitally transforms legal and financial agreements, speaks about the benefits of this digital transformation on a recent BlockTalks podcast. The Tokenized CEO explains that most contracts have been neglected to be digitized and exist in analogue, non-structured and non-standardized formats that lead to a lot of misinterpretations, wasted time and effort and costly legal and financial proceedings.
In digitally transforming these contracts, they become machine readable and forcible, which means that a software that integrates the most useful features of both Ricardian and smart contract works to standardize and codify it, use clear and appropriate language, and make them obey a set of predetermined rules or conditions that otherwise would all have to be done manually.
“The idea is that it codifies and structures contracts and the associate instruments such that all of the legal pros, the machine readable, machine forcible, as well as the human readable and human forcible components of the agreement are all combined together and stored digitally. So, it’s like a digital transformation of contracts,” Belding said.
“One part of our thinking that led us to believe it was important to have the entire contract on chain and as part of the structure protocol rather than say, having a pdf agreement with a timestamp hash or storing that hash agreement on chain, whereas you can do some interesting features in terms of the automation, basically, software enforcing things and codify terms of conditions that can essentially just remove the need for humans to be involved,” Belding added.
Tokenization simply means creating digital financial and legal instruments that act as proof of ownership. And when these tokens are made both machine and human readable and forcible and then stored immutably on the blockchain, they complete an agreement in less than half the time it would normally take with lawyers and accountants drafting them. This also makes it a lot more cost-effective and efficient for private firms handling these types of agreements, such as securities, loans, bonds and other forms of investments.
“Even in a very raw dollar-saving, time-saving perspective doesn’t tell the full story. Because if you can free up the smartest people in your company from having to worry about that stuff and they can spend that time on more productive endeavors, developing bigger visions, building better connections with people and dealing in more agreements per year for more business, that’s going to have a real step change in the pace of business globally in a real material way,” Belding pointed out.
On top of these benefits, digitally transforming contracts in this way also allows for more transparency when monitoring investments. Instead of relying on third parties to analyze and prepare documents that would show how an investment is doing and make recommendations on what to do with it—whether to keep it, sell it or buy more—that would usually take weeks, tokenized assets and smart contracts on the blockchain allows for real-time insight on investments. This is something that Tokenized is hoping to add to their commercial services in the future.
“The original Bitcoin can do everything that anyone attributes a distributed ledger to, but it can do it better, faster and cheaper. And it can do it at scales well beyond most people’s imaginations, like in the millions of per transaction per second. That’s our thesis, that’s our belief. We feel like we’re confident in that thesis and as such, it allows for us to do things no other business can do,” Belding revealed.
Although a challenge in this business that Belding readily admits is educating prospective clients and making them understand the real value of tokenizing assets and applying Ricardian and smart contract features on agreements, finding a blockchain that Tokenized can confidently build on is something crucial to realizing their vision of improving economic freedom on a global scale.