Revenue Participation Tokens
Understanding Revenue Participation Tokens
Revenue Participation Tokens (RPTs) are a unique investment option that allows individuals to save and grow their wealth over time. In the private sector, investing typically involves using cash, such as savings, to invest in assets like stocks or precious metals like gold.
However, holding onto cash can lead to a loss of value due to factors like inflation or negative interest rates. This is why many individuals turn to riskier assets, such as the stock market, for long-term growth.
Fortunately, blockchain technology has introduced alternative investment options, including cryptocurrencies. Tokenization is one such option that enables diversification and hedging.
One specific application of tokenization is revenue-share tokens. In this model, companies tokenize ownership rights to a portion of their future profits and offer these tokens to investors for immediate liquidity. However, there are various legal and practical challenges associated with tokenizing revenue.
An alternative approach to revenue tokenization is the revenue participation model, which utilizes a two-token system based on the legal concept of usufruct. This model involves the use of a participation token and a payout token.
Companies with stable income tokenize a percentage of their future profits and sell participation tokens to investors. These tokens can be held by investors and redeemed for the corresponding percentage of revenue or sold on the market. Essentially, the participation token functions like a gift card or IOU, providing the owner with a specific value within the company.
When it’s time for the revenue percentage to be paid out, it is distributed in the form of a payout token. This token can be redeemed for fiat currency or cryptocurrency, or it can be sold on an exchange. This system offers flexibility for both companies and investors, unlike traditional equity and dividend models.
Investing in a revenue participation token from a stable industry, such as agribusiness, can provide investors with a predictable return on their investment. While it may not offer high dividends, it serves as a secure investment against inflation or negative interest rates. Additionally, it offers multiple exit options while supporting meaningful companies.
Author: Johannes Schweifer is the CEO of CoreLedger, a company that enables businesses of all sizes to leverage blockchain technology. Schweifer has co-founded several blockchain start-ups, including Bitcoin Suisse. With a background in chemistry and distributed computing, he is a passionate problem solver.