Location Swap in Crypto: Changing Asset Ownership
Location Swap is a mechanism that allows you to change the requirements for tokenized assets without affecting other attributes.
What is Location Swap?
Asset-backed tokens are digital assets on blockchain that have a physical basis. These tokens are merely a claim on an actual physical commodity whose properties are described in the tokens (e.g., the qualities and dimensions of the commodity, its current storage location). If two such assets are exactly the same in all aspects except for their current storage location, then exchanging one token for another means that the owner has simply changed the physical location from which they can redeem the asset. This is called a location exchange.
The physical goods (the asset’s collateral) are not affected by the exchange-they remain in their former locations. Only the right of claim to those assets, expressed in the form of a token, changes.
The blocking of the Suez Canal in 2021 damaged world trade to the tune of $6 billion to $10 billion. This drew attention to the international dependence on global supply chains. In the token economy, it is easy to trade places for goods that are already in stock but not needed in the short term, with a premium for goods in transit. If the premium is lower than the risk of shortages, both sides of the exchange will profit.
Johannes Schweifer is the CEO of CoreLedger, a company that allows businesses of all sizes to take advantage of blockchain technology. Schweifer is the founder of several blockchain startups, including Bitcoin Suisse.