Michael Noel

Jan 8, 2019

8 min read

The Tokenization Of Everything

Everyone Wants Better, No One Wants Change — Jonathan Fields

Everywhere on social media people are talking about how they want “change”. People want better education in America, but nobody wants to offend the Department of Education, the school boards, teachers, or parents most of which are failing at an increasing rate. The US education system was once ranked number one globally, now we are not even in the top 10 according to many international polls.

People want better health care at a lower cost, but nobody wants to endure the changes to medicine, law, and bureaucracy it’ll take to get it. Meanwhile, the U.S. lags far behind similarly wealthy countries (those that are similarly large and wealthy based on GDP and GDP per capita). In some cases, such as the rates of all-cause mortality, premature death, death amenable to healthcare, and disease burden, the U.S. is also not improving as quickly as other countries, which means the gap is growing. And while available data is limited to select services and drugs, researchers repeatedly find that higher prices — more so than utilization — explain the United States’ high health spending relative to other high-income countries.

People want lower insurance, but nobody wants to adopt the changes in lifestyle and behavior that’ll drive it.

People want to be thinner, healthier and happier, but nobody wants to own actions it takes to get there.

People want homeless brothers and sisters off the street, as long as it’s N.I.M.B.Y.

Everyone wants to own the result, nobody wants to own the process.

Especially when it involves change or disruption to the patterns around which they’ve grown accustomed. Today a leader is someone who is willing to own not just the result, but the process.

Enter DLT and the Unexpected Killer APP

It may be hard to believe now, but the securitization of raw materials, agricultural products, manufactured components, non-liquid assets, real estate, precious metals, currency, art, sports teams, exotic cars — is likely to be one of the biggest stories of 2019 and beyond. In fact, it’s likely to reshape how organizations and investors track and trade assets. How they think about assets and going forward fundamentally change the way business is conducted when these assets are employed, tracked, held or traded.

The driving force behind this market upheaval is the rise of cryptocurrency and Blockchain. To date, both technologies have been the providence of early adopters and speculators, but they are about to move from the perimeter of our financial lives to permanent fixtures on Main Street.

Why now?

Because cryptocurrency and blockchain make it cost-effective to securitize common assets — to turn anything of real value into marketable security by creating a digital unit of ownership known as a security token. And how to automate the trade and use these tokenized assets.

Instead of owning Fine Art outright, for example, tokenization means the owner could offer digital shares of ownership in a masterwork painting. The fractional owners would benefit from buying or selling their digital shares to take advantage of rising or falling prices. As digital security, it can be quickly and easily traded online peer to peer or in an exchange. Think price transparency every day, instead of a Christie’s auction every blue moon.

The tokenization of everything will bring to common assets the benefits Wall Street long ago engineered for other asset types, such as Commercial Mortgage Backed Securities (CMBS), syndicated loans, student loans, auto loans, and countless other assets.

So, when do you adopt?

No one wants to be first in Line, but once something has been proven, everyone wants to be second in line.

Wall Street is going to want to understand that it has been completely de-risked. That the legal framework has been completely established, that securities laws are being applied, that the technology is proven, and that adoption in the marketplace is starting. That others have been the canary in the cage and survived. That others have been at the edge testing the waters, one has jumped in, two have jumped in, and not drown.

This signals the all clear with Wall Street, but still not enough for them to put the foot on the gas pedal and move forward, for that we will need a competitive threat to reach a tipping point, signaled by Competitors and Key institutions expressing interest and actual customers moving investments out of wall street and into a competitive environment.

If I am a Wall Street financial Advisor, I am going to be concerned about token assets and crypto being held outside my firm because as those capital flows begin to move into crypto and my firm doesn’t include crypto, I will begin to see an erosion of assets under management. At some point, when the erosion becomes substantial enough, I will need to change my model so that my customers who are now engaging in crypto, can hold crypto assets with my firm.

The aggregate market capitalization of the NASDAQ and the New York Stock exchange is over 30 trillion dollars, the crypto aggregate market capitalization is at around 125 billion. The tsunami is where some portion of that 30 trillion is assets in public markets starts to come in and become ultimately tokenized.

The real revolution is when some of that money can get down to smaller innovative growth companies that drive development and job formation and into smaller earlier stage companies where the real economic foundational growth occurs. The availability of capital for worthy ideas that in turn have a profound social impact.

Conclusion:

So if no one wants to be first in Line, but once something has been proven, everyone wants to be second in line. Right now there seems to be a surge of players getting into the queue.

So, when and where do you adopt? What was the last thing you complained about on social media, or what thing do you complain about on social media most often?

Everyone wants to own the result, nobody wants to own the process. Especially when it involves change or disruption to the patterns around which they’ve grown accustomed.

Today a leader is someone who is willing to own not just the result, but the process.

Are you a leader? If so, I would really like to hear from you.

Michael Noel — https://www.linkedin.com/in/michaelnoel/

Post Scriptum;

A few Ways Tokenizing Traditional Assets Will Launch Security Tokens To Main Street In 2019

Venture capital funds:

This asset class has been notoriously illiquid. Investors typically have long investment horizons and must typically wait for 5 to 10 years before earning a return. Projects like Blockchain Capital (BCAP), EQUI, and Spice VC, want to lower the barrier to entry for investors and provide them opportunities to purchase pieces of investment portfolios and sell them faster. This increased liquidity would allow more people to participate in the asset class. Venture capitalists would enjoy access to larger pools of investors.

Real estate:

Several Blockchain startups, most notably Alt. Estate, Atlant, Block square, and Deedcoin, have been working on ways to tokenize commercial and residential real estate.

In October, a luxury Manhattan condo development offered tokenized shares on the Ethereum Blockchain worth $30 million. Users can buy fractions of properties, earn income on those properties, then, as with traditional real estate investments, sell their fractions at higher prices depending on the appreciated values of the underlying property. The platform reduces entry and transactions costs, easier access to investment opportunities around the world, and a means to diversify investment portfolios. Real estate owners will find increased liquidity from fiat and cryptocurrency investors. Tokenization of real estate assets provides liquidity to owners of traditional illiquid assets with fairly long capital lock-ins.

Rare art and luxury cars:

Wealthy individuals have exclusively owned these assets. But Blockchain projects hope to change that. The Maecenas project, for example, wants to “democratize access to a fine art by creating a decentralized art gallery.” Such a platform would provide investors exposure to art without the cost of physically preserving the piece. More importantly, the technology could allow buyers and sellers to directly transact without the need for traditional auction houses like Christie’s and Sotheby’s, which control a combined 80 percent of secondary market value.

BitCar aims to enable fractional ownership for both car enthusiasts and investors looking to diversify their portfolios. Users can buy and trade pieces of ownership in exotic cars without an intermediary like dealers. Verified agents source, acquire, store, and display these vehicles. After holding periods of 5 to 15 years, the vehicles are sold and proceeds distributed to token holders. These and related applications increase access to an asset category which was traditionally limited to a smaller group of investors.

Commodities:

Binkabi wants to reduce geopolitical inefficiencies which add costs to the supply chain and lowers prices paid to commodity producers. The current system to trade commodities suffers from a number of problems, which adds cost: a lack of trust that requires middlemen who often charge high fees; requirement of USD/EUR settlement in emerging markets; paper-based record-keeping in emerging markets, which increases the chances of errors and fraud; and the lack of affordable access to supply chain financing for commodity producers. Binkabi’s proposed solution consists of Barter Block, which will facilitate the development and use of Binkabi’s end-to-end cross-border commodity trading platform. Second, the tokenization of commodities will enable commodity hedging and financing. While most other applications want to provide benefits to investors and owners, Blockchain-based tokenization of commodities would benefit participants at almost every level of the supply chain.

Sources

David Weild former Vice Chairman of the NASDAQ and CEO Weild & Co. Former Nasdaq Vice Chairman Addresses Wall Street’s Perspective on Security Tokens — https://www.youtube.com/watch?v=3dl05ISSGtY

Jonathan Fields Awake at the Wheel — Exploring the intersection between work, play, and the creative process. https://www.psychologytoday.com/us/blog/awake-the-wheel/201108/everyone-wants-better-no-one-wants-change

Top 40 education systems in the world — https://www.master-and-more.eu/en/top-40-education-systems-in-the-world/

How does the quality of the U.S. healthcare system compare to other countries — the Kaiser Family Foundation — https://www.healthsystemtracker.org/chart-collection/quality-u-s-healthcare-system-compare-countries/#item-start

https://coinmarketcap.com/ Crypto Aggregate Market Capitalization — Total Market Cap: $125,293,663,836 — Dec 19, 2018 4:56 PM UTC

Rohit Kulkarni — https://www.forbes.com/sites/rkulkarni/2018/11/01/seven-ways-tokenizing-traditional-assets-will-launch-security-tokens-to-main-street-in-2019/#5abbc10f4b07

#Blockchain #DLT #Crypto #KillerAPP