The OpenFinance Network is a US based venture fund. It is a trading platform and ecosystem for security tokens. The OpenFinance Network is designed for both traditional alternative assets and crypto/token securities. It allows for a streamlined compliant process from issuance to secondary market trading.
OFN works directly with the investors who hold assets in the $7.7T alternative asset market. This includes hedge funds, private equity, limited partnerships, business development companies (BDCs), Regulation D, Regulation A+, Regulation CF and other crowdfunded assets.
The primary benefit of the OpenFinance Network is that it has the capability to leverage the strengths of blockchain technology in a compliant fashion that is in-line with the regulatory framework of financial markets. The platform is currently working with Harbor’s R-token, Securitize’s DS protocol, Polymath’s ST20, and our own Smart Security Standard.
The main features that make OFN stand out from the rest are:
The global registry and decentralized securities depository allow for the creation of an Investor Passport. This is done to verify an investor’s AML, KYC, suitability and accreditation verification once with a system Validator. You can then utilize that passport with other service providers in the ecosystem. This in turn creates an enhanced, secure, and global compliance process which improves investor protections and security, along with increased privacy of sensitive investor data.
Global Asset Registry
The OFN system contains a public registry of qualified entities and assets on the distributed ledger. Qualified entities generally include broker-dealers, transfer agents, custodians, escrow agents, fund administrators and registered funding portals. Asset may also be registered with the SEC/EDGAR and that data can be referenced from the OFN as a subset of the Asset data object. Sensitive data is stored on a Secure Federated Sidechain (SFS). Shared asset and transactional data is provided in a standardized protocol format to provide the interoperability amongst market participants.
Decentralized Securities Depository
The global registry of qualified entities and securities creates a mechanism for a decentralized securities depository that provides a public governance model to ensure maximum transparency and protection for investors. The distributed ledger acts as the “golden source” to synchronize (and protect) data across multiple stakeholders in standard securities transactions. This provides a a trustless clearing & settlement process that is instantly available to all market participants and removes the single points of failure/fraud.
Zero Knowledge Proving System
To ensure compliance with regulatory guidelines and investor privacy laws, all sensitive private data is stored on a secure federated sidechain (SFS). The data is then hashed back to the public chain to provide immutability to the SFS. To maintain data privacy a zero knowledge proving system is used. Ths system allows for full transparency of auditable data to the public without compromising data privacy. A zero-knowledge proof is a mechanism by which one party (the “Prover”) can prove to another party (the “Verifier”) that a given statement is true. Without conveying any information about the underlying statement apart from the fact that the statement is indeed true.
Security tokens bring with them a lot of financial instruments including the regulations. The common regulations generally taken into account are Regulation D (506c), Regulation A+, and even Regulation CF. But things are not so simple with these regulations. The actual issuance and transfer of these securities currently suffers from a lack of a defined process. Many of the securities must adhere to SEC Rule 144 when transferring, which apply to selling restricted and control securities. For investors seeking to sell or buy their security tokens there is a lot of uncertainty around transfer of ownership.
However, many of these concerns are resolved for security tokens within the OFN system. The Global Asset Registry maintains a distributed source of data around the specific assets and exemption types. It ensures that transfer restrictions are properly adhered to when attempting a change of ownership.
OpenFinance Network has the potential to fundamentally disrupt existing Capital Markets. It will allow any public or private company to trade their own tokenized security. Meanwhile, the tokenized securities seem to have a bright future. If OFN can place itself reputably in the industry it can become one of the main players in the coming years. However, we also have to note that the current market is quite is very immature about tokenizing securities from technological and regulatory standpoint.
There is quite a tough competition at the moment where big players like tZERO, Gibraltor Blockchain Exchange etc. are working to become the market leaders. We are still at a nascent stage and it will be interesting to see who becomes the industry favorite but OFN is surely one of the candidates.