HighCastle uses blockchain to secure issuing tokens, trading tokens, keeping track of investors (cap table management) and clearing the trades. So the blockchain carries many roles that in traditional stock markets are provided by many intermediaries. It is the trust that intermediaries should represent and the trust is now built in technology – blockchain.
HighCastle uses Bitcoin blockchain, utilizing a technology called colored coins. Colored coins are pieces of Bitcoin, where metadata is embedded on top of that and is recorded in the blockchain. We call them tokens. Each token represent real world assets. On HighCastle’s platform, colored coins represent digital rights to an investment agreement between an investor and the High Castle Nominee. For example, if an investor places 100 EUR in a project, they’ll receive 100 tokens (colored coins) in return; each coin representing a portion of the rights to the investment agreement. As this data is recorded and verified by the blockchain, these colored coins can be traded on a liquid secondary market. When a company makes a successful exit, the holders of the colored coins (tokens) associated with that company are entitled to a payout proportional to the number of tokens they hold. As transactions are all verified, the token holders at the time of the exit won’t necessarily be the original backers. And that’s the beauty of HighCastle secondary market – you can sell your startup investment any time and not wait for 5+ years to the exit event.
HighCastle does not use cryptocurrency as this is too volatile and regulation risky in many countries. So we only secure trades & ownership on blockchain. In the future we will start using cryptocurrencies, and this makes our market very efficient – investing; trading; and clearing & settlement, across borders and within hundreds of the time it would usually take.