Research Unleashed
Tokenising Venture Capital
Radu State and Wazen Shbair helped design the blockchain solution that VNX Exchange relies on to store transaction records.
“Giving users easy access to many different kinds of digital assets on the blockchain and, particularly, tokens that are linked to assets in the real world, is crucial to seeing blockchain adoption reach the next level,” Ethereum creator Vitalik Buterin said soon after the launch of the first tokenised asset service. That service was an investment platform that backed each of its tokens with one gram of gold – the most concrete asset of all. Tokens (which are simply digital blockchain records) can track ownership of investments which are far more dynamic and just as real. Here in Luxembourg, the newly created VNX Exchange is giving the world a glimpse of how blockchain technology will change how we invest and trade. VNX, founded by venture capitalist Alexander Tkachenko, is an innovative deal syndication platform for investors to buy tokenised venture capital assets. Through its online platform VNX allows VC funds to automate fundrais-
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ing and deal management processes as well as attract a broader range of investors. Transactions are then recorded on a state-of-the-art blockchain. The company launched its platform in November 2019 and describes its mission as "bringing liquidity and access to the venture capital market, stimulating a global influx of capital into technology, innovation, and entrepreneurship". It is fintech that plays to Luxembourg's strengths and is bringing the Grand Duchy to the front lines of the tokenised asset revolution. Working with VNX on the technical end is SnT's Prof Radu State, who is overseeing a collaboration that will soon expand to include two new PhD students. “It is exciting to be part of such an ambitious project,” said State. “The team is really dynamic and motivated.” A spirit that is contagious. So far, State and his team have helped design the blockchain solution that VNX relies on to store transaction records, taking special consideration
for security. Blockchain stores the assets in plain sight — that’s important, because otherwise there wouldn’t be an enduring record of asset ownership. Yet storing records this way also introduces special challenges: it complicates privacy and it makes these assets an appealing target for hackers. State and his team needed to find novel ways to hide sensitive data from prying eyes, to balance both GDPR and know-your-customer (KYC) compliance, as well as implement security measures against potential hackers. Most importantly, they needed to find a way to store users’ private encryption keys, the passwords that confirm their identity on the blockchain and allow them to execute transactions, so that they are very secure. It was a challenge that required State’s team to consider not only blockchain implementation, but also cloud computing security and trusted execution environment solutions. “Working with Vladimir Khanumyan has been amazing. He gave me the best introduction to the world of venture capital. It is really valuable because with this understanding of the business side, it allows us to make better tech decisions,” said State. “The project is exciting since it’s a two-way communication channel. We develop technology but also learn new use-cases and application domains, which are not mainstream for computer scientists. The best technological solution has to be meaningful to the people who operate it and striking this balance between user acceptance and technology soundness makes it innovative and interesting ” With State and SnT, VNX is bringing the blockchain revolution to the world of venture-capital fund investing – and ensuring that their innovative new system is built on security, reliability, and trust •
