Unicorn investments have been on the rise as more investors look for exposure in this upcoming investment niche. This market is now valued at over $1 billion and considered a lucrative niche in modern-day finance. To put it simply, unicorn investments have great potential returns for early investors that back successful projects.
Unlike listed companies, unicorns are mostly startups which means that only private investors can allocate funds to these projects. Currently, a good chunk of unicorn investments comes from Venture Capitalists (VCs) and private equity firms with access to unicorn stakeholders. While they continue to rip the benefits of Unicorn investing, retail investors are yet to get a seat at the table.
A Decentralized Finance (DeFi) protocol dubbed Convergence is now attempting to create an open-source ecosystem for Unicorn investing. The project seeks to revolutionize Unicorn investing by making real-world assets available on blockchain ecosystems, including Ethereum and Binance Smart Chain (BSC).
So, how will this change the future of Unicorn investing? A DeFi unicorn market means that users will be able to buy and sell tokenized unicorn shares. This is a significant improvement from the existing market structure where investors have to participate in a funding round to acquire a stake in a unicorn. Convergence protocol creates a bridge between unicorns and the larger crypto ecosystem.
A Link Between Unicorn Investment and DeFi
The DeFi market has grown exponentially in the past year following the launch of governance tokens and yield farms. DeFi enjoys a total value locked (TVL) of $58 billion with various decentralized applications, including exchanges, lending and borrowing protocols, and derivative instruments.
Notably, most of the projects in DeFi are crypto-native and derive their value from underlying fundamentals and speculation narratives. Convergence protocol has been designed to integrate real-world assets such as real estate and unicorn shares with the DeFi ecosystem. In doing so, the project taps on real-world liquidity while exposing more people to decentralized investment opportunities.
Built on a decentralized architecture, Convergence protocol leverages tokenization to introduce Wrapped Security Tokens (WSTs). These digital tokens represent real-world assets on Convergence and can be bought or sold via the platform’s Automated Market Maker (AMM), ConvX. The AMM is built on Ethereum and compatible with EVM, although it is set to migrate to Moonbeam.
Convergence WST tokens allow users to wrap real-world assets onto the DeFi protocol. In the case of unicorn investments, the platform provides the necessary infrastructure for users to wrap unicorn shares and trade them in decentralized markets. Just like ordinary shares, these tokens represent the underlying economic value of a particular unicorn share. The value can be transferred from one token holder to another.
To complement its decentralized infrastructure, the Convergence ecosystem features liquidity pools’ ConvPools’. These liquidity pools allow token holders to manage their tokenized assets through marketing incentives such as offerings and rewards for liquidity providers. The Convergence DAO is further governed by the platform’s native token, CONV, which gives holders the right to vote on future developments.
The Future of Decentralized Unicorn Investing
Unicorn investing is gradually shaping the future of market ecosystems, with more capital trickling into early-stage companies. Going by the statistics, it is apparent that investors are willing to take more risks in return for potentially higher returns and other incentives such as tax exemptions extended to private equity investors.
While most investors are still new to the nuances of Unicorn investing, DeFi is one of the futuristic markets where unicorns can attract more numbers. A decentralized market allows all investors to participate instead of whitelisted stakeholders, which is the norm in traditional Unicorn investing. Convergence protocol creates just the perfect ecosystem for unicorns and private investors to transact.
Furthermore, the project is also introducing fractionalization of the tokenized real-world assets. This initiative will allow WST owners on Convergence to buy or sell a smaller portion of the token as opposed to purchasing the whole unit. For instance, a Unicorn WST represents 10% ownership of a startup; this token can be sold in fractions to retailers who are unable to buy a whole unit.
Unicorn investing and DeFi markets have a great potential in integrating to build a decentralized ecosystem for the former. This may take a while but will eventually come into action through solutions offered by the likes of Convergence protocol.
With crypto now in the picture, Unicorn investing is on its way to being integrated with digital markets – a move that will expose more people to unicorn investments. Ultimately, the Unicorn investments space will also grow as a result of increased liquidity from DeFi markets. This will be a step forward in creating decentralized markets where entrepreneurs and investors interact seamlessly through smart contract infrastructure.