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How KLDX uses blockchain technology to make private market investing accessible

29 Nov 2022

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Contents: 

Key takeaways:

  • Cryptocurrencies are just one of the possible applications of blockchain technology
  • Tokenisation is a process of representing any asset in a digital format which can then be used, owned, and transferred by the holder through a blockchain.
  • Blockchain technology helps to unlock value for investors in many ways besides enabling fractional ownership.

One of the most common misunderstandings is that the concept of blockchain was developed and implemented to support the global cryptocurrency ecosystem.

While it is true that cryptocurrencies accelerated the global awareness and adoption of the technology, many are unaware that the concept of blockchain – a technology that maintains trustworthy information through a peer-to-peer network – was first introduced in 1982 by David Chaum, an American computer scientist and cryptographer, with cryptocurrencies being just one of its possible applications.

Blockchain technology can, in fact, be used and configured for many other applications. Case in point us, KLDX.

We use blockchain and smart contract technology to make private market investing accessible to the retail investor.

Before we get into the how though, let us first understand what blockchain is.

Think of blockchain as a database or a spreadsheet. But a really special spreadsheet. There is no centralised master copy. Instead, it is shared on many computers. It is special because you can only add to it. There is no editing of history.

The database is divided into chronological sub-sheets. These are the blocks. The last line of any block summarises all of the data in the block, and — and this is pretty important — appears as the first line of the next block.

If anyone tries to edit a block, the last line will change and will not match the first line of the next block. The network sees this corrupted block and immediately replaces it. This ingenious trick makes it futile to rewrite history and guarantees an unprecedented degree of security.

Now that we know what blockchain is, let us get into how it can make private market investing possible for you, primarily through tokenisation.

For any asset to be recorded, maintained, and traded on the blockchain, it must be converted into a blockchain-compatible form through a process called “tokenisation”.

Tokenisation is a process of representing any asset in a digital format which can then be used, owned, and transferred by the holder through a blockchain.

Although this process sounds simple, it delivers many key benefits to the asset. One of them is fractionalisation. In simple terms, this means splitting up the asset into portions such that they are smaller than the whole share.

Fractionalisation is precisely what makes the ownership of an asset in the private markets possible.

Take for example, private equity. What normally would cost from hundreds of thousands to millions of dollars to buy into under legacy systems can now be owned with just a minimum investment of RM1,000 here at KLDX.

Besides fractionalisation, blockchain technology also helps to unlock value for investors in the following ways:

Enhanced liquidity

The greater access made possible by asset tokenisation welcomes more market participants and ensures better liquidity of the investment.

Disintermediation of third parties

With blockchain technology, all relevant data can be centrally recorded in a single trustworthy database. This helps to remove the need for third parties, or intermediaries, such as banks, brokers, and registrars, to record, maintain, and reconcile information.

Running on top of blockchain technology are smart contracts*. They help to remove the need for intermediaries to handle transactions and, by extension, their associated time delays and fees. The result is low investment fees for you, the investor.

See here for what we charge our investors.

* Smart contracts are simply programs stored on a blockchain that run when predetermined conditions are met. They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss.

Instant trade settlement

Due to the disintermediation of intermediaries using blockchain technology, settlement time can be reduced to near instantaneous as opposed to the usual T+2 (i.e. two business days). This gives you, the investor, immediate access to your assets and funds.

How to start investing in the private markets with KLDX?

KLDX brings private market investing opportunities to you with the click of a button.

What you decide to invest in is up to you, but here are among private market investment opportunities you will find on KLDX:

Private Equity:

Provide capital to a private company in exchange for a piece of ownership in the company or what is referred to as equity.

Learn more here

Private Debt:

Lend money to the private company with the expectation that the company will pay back the investment with interest. This is referred to as private debt.

Learn more here

Private Funds:

Invest in private funds that exist outside the public markets and gain access to investment management techniques not available in the public markets. Examples of private funds include private equity funds, venture capital funds, and hedge funds.

Learn more here

ESG and Sustainability Investing:

Invest towards influencing positive changes for a sustainable future.

More specifically, financial assets that have an environmental, social, and governance focus that is verifiable by a standard setting body.

Learn more here

To start investing in KLDX, sign up here.

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