Proof-of-Asset Protocol: Opening Doors from Securitization to Tokenization

Every asset sold through a smart contract issues goes through a Proof-of-Asset protocol in order to be able to issue security tokens. These tokens are sold during the funding period of an asset that represents the economic benefit of owning a fractional share of the asset. This means token holders are entitled to asset appreciation and that of the digital security token. For example, a building is sold for 15,000 ETH.  The smart contract issues a "Proof of Asset” passed token to investors to purchase which can then be traded.

The "Proof of Asset” Protocol is based on an Ethereum Blockchain smart contract. The Blockchain Service Architecture can be structured with a sequential chain of smart contracts and supplemented with oracles. Which financial asset needs to be tokenized depends upon the number of steps and the type of project requiring financing. The "Proof of Asset' Protocol can be used by traditional financial institutions for issuing asset backed security tokens. The protocol tends to maximize the liquidity of real-world assets while delivering constant updates to investors and owners at the same time.

Red Matter’s Proof of Asset Protocol

The Proof of Asset protocol lets a business issue asset-backed security tokens. Investors shield crypto or fiat against real-world assets to get better capital appreciation. Red Matter issues digital securities, publicly listed equities, ETFs, and commodities for Pre-IPO companies. Each asset is given a token symbol on the blockchain and underlying smart contract. Investors purchase securities without prefunding a brokerage account. When the order is completed, shares are held with brokers, banks, and companies looking to raise private capital. In return for the assets you purchased, you receive digital security token in your wallet. These securities can be transferred and traded easily with other investors of Red Matter as a BSC synthetic token.

How can you list securities on RedMatter?

Buy stocks and commodities- You can purchase as many financial assets you want here (unless the account holder is domiciled in an OFAC country). However, you need to add extra information about your personal details, including ID, proof of residency, and address on orders greater than USD 5,000.

Place an order- After buying the commodity or stock, you will receive a booking confirmation on your purchase and the status of your order. When the field is replaced with "Filled," the order gets processed and accepted on our end.

Trade digital security tokens- After the order is "Filled," digital securities are issued on a Blockchain smart contract. This is strongly backed by the stock that was purchased. The securities are pegged against purchased assets that allow investors in the crypto community to trade on decentralized exchanges easily.

Pay for financial securities- Red Matter accepts only LTC coin as instant booking unless the investor funds their account in advance with fiat.

LTC support- Crypto transactions on smart contracts can be done in seconds. Alternatively, it can take a few days before it is received, rendering a limit order price invalid that the buyer set. So when we receive an LTC transfer, it directly converts to fiat. The funds are transferred to our broker account and executed within 1-2 hours.

Fiat Funding- Investors can fund their trading accounts with fiat. Send the amount you wish to fund your account based on expected trades in USD or Euro. When the amount is received, the user can see their dashboard and book an order to receive trade confirmation.

Cashing out of your security tokens- At the end, you'll find your financial securities represented as tokens on the Red Matter Primary Market Exchange. Place the cash-out request as a Sell Order (terms and conditions apply).

To sum up

Blockchain and DeFi has changed the way people invest in securities and companies. People are free from barriers that currently prevent them from investing into a portfolio of assets that provides opportunities for stable growth in a regulated environment.

How Asset-Backed Securities Improves Cash Flow and Liquidity for Business

Cash flow is the ultimate measure of how your business is doing; it is a vital metric for investors when making an investment decision. In their life cycle, businesses often experience cash flow issues. Solid revenues, and a positive operational cash flow are key to business success and this is where Red Matter can provide a solution that leverages your assets into improved cash flow.

Drilling Down Into Your Cashflow & Finances

Your operating cash flow data is of primary interest to investors and lenders. There are other elements of your financial reporting that they drill down to get a solid view of your overall financial health. These areas include:

Working Capital- Working capital is the major difference between a company’s current assets (cash, accounts receivable, and inventory items) and liabilities (accounts payable and owned money). High WC provides the funds needed to continue trading, growing, and meeting the business's goals.

Depreciation- Your company's tangible assets will lose value over time, and depreciation gradually reduces that value. All this gives you a realistic view of their worth.

Amortization- The intangible assets like loans require regular repayments over time, which also factors your financial overview. Investors will generally hire a finance professional to review your accounts, business plan, and cash flow statement. For attracting the right investment, you need to learn and manage the cash flow. It is the foundational building block for managing your company's finances. Asset-backed securities are the solution!

Fundamental asset-backed securities. Typically, these assets are small groups of loans that cannot individually be sold to an investor. However, since these assets are packaged as a single financial instrument and diversified, investors have less risk exposure. Read on to learn more about how asset-based securities are a suitable investment for your asset mix.

Asset-Backed Securities (ABS)

Now assume that Company ABC makes automobile loans. If a person wants to borrow money, ABC gives a person the cash, and that person is obligated to repay the money with a certain amount of interest. At a certain point, company ABC may run out of cash. They can then package the current loans, sell them to Investment Firm XYZ and receive the cash to make more loans.

This is how individual investors purchase securities and receive the cash flow from underlying auto loans. Like bonds, each ABS has a rating that shows the degree of risk. In addition, each tranche has a collection of assets with data, such as maturity, interest rates, or delinquency rates. Once the institution has grouped loans, it will issue asset-backed securities.

Types of Asset-Backed Securities

Asset-based security (ABS) can be created from anything that generates income, from mobile home loans to utility bills. The most typical categories are:

Collateralized Debt Obligation- CDO is issued by a special purpose vehicle (SPV), a business entity created to give asset-backed securities. Collateralized loans and debt obligations comprise back loans. Finance-backed CDOs are underlying assets of ABS, real estate investment trust (REIT) debt, or residential mortgages. Collateralized mortgage obligations (CMOs) are composed of mortgage-backed securities. CDO is structured essentially, but some consider it a different type of investment. In fact, they own wider and more diverse assets, including asset-based security tokens.

Home Equity- Who doesn't know about them? Home equity loans are the largest category of ABS. Unfortunately, borrowers usually take out home equity loans with less stellar credit scores. This is one of the major reasons they don't qualify for a mortgage. An amortizing loan is a payment that satisfies a specific sum and comprises interest, principal, and prepayments.

And then there are Auto Loan ABS, Credit Card Receivables, and many more!!

What Are Asset-Backed Security Tokens?

While utility tokens can face issues with regulators, asset-backed security tokens are compliant. Increasingly we see that utility tokens are not suitable for rasing capital. However, regulated tokens backed by real world assets provide the means for businesses to access capital from not only crypto investors but traditional ones as well

Talking about the basic concept of an asset backed security token, they are backed by an asset with an existing economic value. However, utility tokens rely on the traditional “promise to pay” model, but asset-backed tokens hold the intrinsic value of that asset. For example, the US Dollar was once backed by gold through the Gold Standard. Similarly, a token can back several assets. The smart contract technology allows properties to be given to tokens and the creation of various token groups.

How Does Asset-Backed Security Token Works?

The assets are transferred and verified by a custodian who safeguards them. After that, the custodian codes these assets' ownership into security tokens. The token holders are considered the legal owners of the underlying asset, and they can exchange or divide them accordingly. On top of that, smart contract capabilities can be embedded by transforming the asset into an asset-backed security token. As a result, a token holder can automatically receive cash flow related to this asset.

Attributes of Asset-Backed Tokens

  • Security- Using asset-backed security tokens to exchange assets is safer. The blockchain technology used in the trading of tokens settles the risk. This instant settlement and verification of transactions facilitate an easy investment process.
  • Liquidity- Another big benefit of security assets is improving liquidity in any market. Having an asset-backed token means easy trading. This process lowers the barriers and penetrates markets, such as private equity investment. The increased trust in transactions will also increase cash flow along with liquidity.
  • Divisibility- Ownership of an asset is traditionally very difficult to split. One cannot cut a company’s share, but they can split a security token backed by this share. This will help diminish costs associated with slicing assets.
  • Low Cost- Can you get the same results with ETFs without having Security Token Offering (STO)? This is where asset back security tokens show their real potential. The securitization of any asset is easy and inexpensive. In addition, blockchain technology reduces the clearing and verification fees as well.


Investing in asset-backed securities are a good alternative to corporate bonds, costly venture capital or banks loans. From an investor's point of view, it’s a great way to diversify an investment portfolio and access new investment opportunities. Asset-backed security tokens definitely represent be a major disruption in finance.