Swarm Fund is the blockchain for private equity. It’s a fully decentralized capital market place that democratizes investing by using the power of the blockchain to open up high-return, alternative investment classes to smaller investors through asset-backed funds using cryptocurrency tokens. It makes traditionally exclusive investment opportunities, such as private equity and hedge funds, inclusive for the Swarm by pooling together smaller investments into larger, institutional-sized blocks.
The Swarm blockchain allows real world objects to be “tokenized” using the SRC20 protocol, a cryptographic standard for security tokens, and a world first. Tokenized objects become “assets” that can be easily managed, governed and traded. Swarm is built on TokenD and the Stellar blockchain.
“Swarm Intelligence” is a scientific field that arose from the study of self-organizing biological systems. Many species make heavy usage of multi-track systems to incentivize socially positive behavior. This allows complex life to develop and evolve in a dynamic fashion. In many ways, this is similar to the mathematics behind fractals. This formalization of rules happens at the level of harmonic principles, rather than at the specific structural level, as often happens with hierarchical organizations.
Swarm Fund applies this concept (formally known as “stigmergy”) to finance through blockchain technology. In particular, reputation plays a key role as different system behavior is tracked and positive behavior is incentivized. Consequently, the greater the trust and transparency and effectiveness of the underlying system, the less formal command and control methods are needed and the more finance can be fully automated.
Tokenization is the process by which any asset is “converted” into tokens which can then be purchased, traded or simply held. Tokenization of assets happens on the Swarm blockchain. Tokens essentially represent traditional ownership and grant rights to the token holder (owner) which are protected by the immutability of the distributed ledger, a revolutionary technology.
Objects or “assets” such as buildings, farms, businesses, hedge funds, and development projects can be tokenized, meaning that their ownership can be split into any number of pieces called tokens. Tokens that represent an investment in an asset are called “security tokens”. In addition, assets such as football teams, concerts, highways, schools and banks can be purchased, tokenized and governed by groups of hundreds or thousands of token holders from all over the world. Investors can pool funds and then, by vote, decide on the assets they would like to invest in or purchase.
SRC20 security tokens:
– represent ownership of part of an object or “asset”,
– allow holders to manage that asset through voting,
– secure a right to any revenue streams from the asset, and
– are tradable in a regulatory compliant manner.
SRC20 defines a common set of rules that a security token must follow, and gives developers the ability to build applications that utilize the properties of tokenized assets. Applications built in the Swarm ecosystem can communicate with each other and pay for transactions using SWM, an ERC20 compliant utility token. Investment platforms, asset management suites, and crypto exchanges are examples of the types of applications that can be built using the SRC20 protocol.
Tokens issued using the SRC20 protocol are an extension of Ethereum ERC20 tokens in that they carry additional properties that describe real world assets, such as their location, purpose, legal rights and obligations, and transfer restrictions.
Swarm Invest, launched in January 2018, is the first application to interface with the Swarm blockchain. It allows tokenized assets to be offered as investment opportunities. Individuals can invest cryptocurrency such as SWM, BTC, and ETH (and soon, fiat) into real world assets and receive SRC20 tokens in return, granting them ownership and governance rights, a legally enforceable right to any revenue the asset generates, and the ability to trade the tokens in a regulatory compliant manner.
1. SWM tokens can be used to directly invest in opportunities offered on the Swarm Invest platform.
2. SWM is used to establish stake-weighted voting rights on issues regarding the activities and regulations of the Swarm Foundation, a non-profit organisation which administers the SWM token.
3. SWM token holders can earn SWM for participating in votes.
4. SWM is the currency of the Swarm blockchain, and is used as “gas” to pay for transactions and operations involving SRC20 tokens.
5. Application developers can earn SWM in return for providing services and operations to the Swarm blockchain.
Token holders “govern” the underlying asset using Swarm’s Liquid Democracy Voting Module, built by SecureVote, a pioneer in eVoting. Simply put, owning SRC20 tokens proves your ownership of part of an asset, and allows you to vote on issues affecting that asset.
It is, after all, partly yours.
Real estate, renewables, agriculture, tech companies, crypto hedge funds, impact investments (development projects and post-disaster rebuilding), infrastructure, and any asset or project that the community of SWM token holders approves.
We open doors for fund managers to receive capital from a whole new class of investors, that may have previously been limited by minimums, exclusivity, and regulations – such as the cryptocurrency and retail classes.
It’s empowering for fund managers to be free from a brand organization but have the same access to cutting-edge deal flow, data and manageability.
This streamlined method of raising capital appeals to investors as well, providing a uniquely efficient experience and direct access to liquid assets.
This ownership, governance and 3-tiered token structure are designed so that Swarm Fund can pass several aspects of the Howey Test, the applicable legal benchmark for security regulation in the U.S., while operating within the guidelines issued by the SEC on July 25, 2017 for ICO compliance.
In the near future, we envisage many investment opportunities being tokenized on the Swarm blockchain via Swarm Invest and other applications. At some point it will become increasingly difficult for individuals to continually determine the mix of tokenized assets they should invest in to meet their ever-changing risk/return profile. We are already building Artificial Intelligence which will enable faster and more accurate investing, customized to a predefined set of goals.
The Swarm Core Team is a diverse set of professionals who bring deep experience from the finance, technology, and blockchain worlds. Our Swarm partners have engineering backgrounds, and include an investor and Board Member of the BankerBay deal origination platform & VC (Timo), and a former technology startup founder & CEO with private equity experience from Deutsche Bank and Allianz (Philipp). Other team members bring experience from Microsoft, Facebook, UBS, and several technology and community focused startups. Our advisors include Ethereum Co-founder and Jaxx Founder Anthony Di’Iorio and Sequoia Heritage Fund Co-founder Mark Oei.
Swarm Fund sold nearly 8.2 million tokens, an equivalent of $5.5 million, during the Presale and Token Sale combined.
The foundation’s operational and product development expenses are budgeted as follows: