Fractional Ownership Using HyperLedger
Fractional ownership is something I stumbled upon accidentally. I mean it was always staring at me in the face, with respect to the fractional ownership of private jets, yachts and expensive vacation homes, but the general use of fractional ownership for a common man… I had not seen or read much.
My accidental stumble was a very nascent start-up called Hyperledger. Hyperledger is a startup partly based out of China and US (the two co-founders are: Dan O’Prey and Daniel Feichtinger).
What excited me about Hyperledger and then the possibility of fractional ownership, was the fact, here I could download this code and install and suddenly I have a ledger (the same can be done with Bitcoin and others as well). So where does the fractional ownership comes from?
Well think about it. I physically invest in 1KG of Gold, and lets assume 10grams of gold is US$ 500, this would mean that 1KG of Gold would be:
1,000grams/10grams = 100
100 x $500 = $50,000
So, for $50,000 I am now the proud owner of Gold.
Based on the current formula, 1Gram = US$ 50
What if I were to break it down further? What happens next? Well, just to get out of this grams and sub-grams, lets just call it coins.
1KG Gold = 1,000 Coins.
What if I were to issue 100,000 coins. Then 1 coin of Gold that you hold is 1/100th of a gram and will be worth US$ 0.50 (at the rate above). So, I go to my ledger, and announce that I am willing to sell 100,000 coins of Gold at $0.50 Now 50 cents is so damn affordable, that anyone could buy it. Granted I would have to do marketing, etc. but it is possible.
So I ask my brother to buy $500 worth of coins. I ask my friends to buy $50 worth of coins. So on and so forth. Because they are getting a fractional amount, they don’t even mind much. Over the course of say 1 month, the entire gold is sold off. i.e. $50,000 worth of Gold, [physically weighing 1 KG is sold off. The money (investment) that I had to put up initially, is back.
Now I have 100s of clients, who own varying quantities of gold coins. Gold is a pretty big deal in the Islamic world. In Pakistan for example, as soon as a daughter is born, family then start work on accumulating gold for their daughter, that when time comes for her to get married, there would be enough gold to make her a jewelry set or two. However, this is no easy feat. the minimum denomination sold in the market is perhaps 1gram, which is $50 and that is the minimum sold, questionable quality, storage of it is an issue, calculation of Zakat on this gold every year is an issue, etc.
What is even more important is the ability to buy Gold for say $18 you might have lying around. Or $102 worth of gold the next month. A hyperledger type platform would allow you to buy such denominations.
One would setup an exchange and the limited supply (100,000 coins) would be traded. If there is demand, then the price per coin would go up and people might be willing to sell you some coins. If the demand is too strong, there might be no buyers. If the demand is low, the price would be below the issuing price. The fact remains, you not have a medium from where you can buy fractional gold, in varying quantities and keep them. Because the ledger is open, the ownership cannot be questioned.
You can keep buying small fractions till such time you either want to cash out, or request the owner of the exchange to cash you out in gold (physical gold). Because over the years, you have accumulated enough gold to request a physical delivery.
The potential is enormous! Think investment in property, or stocks (that otherwise are too expensive to purchase), think crowd-undef investment, where enough money is collected via the diversified crowd so that investments can be made.
Transparency and accountability is provided by the ledger and audits. If I claim I have 1KG of Gold, I should be able to provide not only a certificate for it, but also the ability for you to visit the vaulted services where the gold is kept. I wouldn’t do this on a local basis, but on an international basis, for example, take Johnson Matthey and ask them to be the custodian of the precious metal.
People who are interested in exploring this line of business, should definitely look at fractional ownership and how bitcoins or alt-coins can make that happen.
This page was last updated on October 19, 2014.