There is a boom in unicorn investments where the returns are potentially supercharged for investors who get in early. In parallel, many attempts are underway to connect crypto-native investors with opportunities in the private capital space, which comes amid a broader appetite for real-world asset exposure.
The benefits of investing in unicorns – valued at $1 billion or more – seem obvious to most.
Backing a successful unicorn can achieve an impressive ROI that you won’t find anywhere else as you buy shares of a tiny unlisted venture when they are worth a few cents and exit later when the valuation skyrockets.
For some backers, investing in unicorns makes sense in terms of supporting innovation and entrepreneurship.
Furthermore, early-stage private ventures and their investors benefit from a range of tax incentives. That is no guarantee of success, but allocating investments to emerging ventures helps at least in portfolio diversification and risk management.
Today’s unicorns are no longer as rare as they had been a few years ago, but they can be just as hard to approach as they remain privately owned for longer.
Specifically, becoming an angel investor in unicorns comes with a paradox. The availability of private capital – an umbrella term for venture capital, private equity and private credit – makes unicorns less likely to go public.
As such, the emerging trend of incorporating real-world assets in DeFi is a major step in bringing the billions of dollars worth of unicorns into the open finance ecosystem.
With the assistance of service providers such as Convergence, one has the flexibility to tokenize every asset to access DeFi liquidity pools. Even illiquid assets, such as unicorns or other early-stage ventures could be locked in DeFi protocols.
Now, even people not familiar with crypto have the chance to take part in private-equity investments where the returns are potentially supercharged.
The new model revolves around a decentralized interchangeable asset protocol dedicated to bringing real-world assets and investment-grade NFTs into the DeFi space through tokenization and fractionalizing assets.
Convergence bridges the gap through WSTs
Convergence operates an automated market maker (AMM) protocol that makes real-world asset exposure interchangeable in the DeFi space by connecting novel Wrapped Security Tokens (WSTs) with utility tokens on a single interface.
A wrapped token is an asset hosted on the Ethereum blockchain with a price that is the same as another underlying asset (traditional or crypto). This allows for the representation of assets held in reserve to move across different blockchains by acting as a type of bridge.
Via a two-layer process, Convergence allows tokenized securities issued by partner projects to be “wrapped” and then traded on the AMM by investors and fund managers. This enables 24/7 decentralized counterparty-less trading and real asset price discovery.
In the coming months, the service expects to wrap a significant number of additional tokens, with many fast-growing unicorn companies already under consideration.
As mentioned above, unicorn stakes will be traded in the form of wrapped security on the Convergence platform to allow free asset transfer while ensuring compliance with applicable requirements.
Meanwhile, Convergence has turned to fractionalization – a trend that is getting traction and may transform the emerging industry. The company has taken this step to ensure more liquidity and give investors the opportunity to get exposure to different asset classes.
Addressing the secondary market
The market is maturing, and new protocols appear on a daily basis addressing some aspects associated with the DeFi phenomenon. Interestingly, however, there has been little attention paid to the rise of tokenization of lucrative traditional assets like unicorns.
Demand on investment vehicles like those offered by Convergence has clearly exceeded expectations and can point to growth figures of staggering proportions. Even after a short breather earlier this year, the last few months have once again shown that this development is only just beginning.
Dozens of projects compete in various segments as the relationship between conventional finance and DeFi is getting closer. However, bringing real-world assets into DeFi in a secure way requires more than simply minting a crypto token and claiming it has some value.
That’s why Convergence opted to enable the issuance of WSTs backed by real-world assets, with automated liquidity provision for investors to trade amongst pools of utility and wrapped tokens.
The good news is that Convergence not only solves the tricks of finding the best investments and gaining access but also offers a secondary market for unicorn equity.
Addressing the secondary market is a substantial issue of unicorn investments. Convergence and, generally, the DeFi could be the solution to confirm the future growth and practical utility.
