Becoming a co-owner of a Ferrari, a Picasso, or a special stock of bourbon; who doesn’t want this? So-called “tokenization” assets using blockchain technology is currently revolutionizing the investment world, and my World Economic Forum colleagues even expect 10% of global GDP to be stored on the blockchain in seven years from now. Why are assets so massively placed on the blockchain, and what does this “tokenize” entail?
If you “tokenize” something, it means converting something physical into digital tokens, which are then added to the blockchain. The latter guarantees secure transfer and transparency. If you want to buy or sell a house, you usually go through a cumbersome process with different parties such as a broker, notary, and bank and some parts of this process are not transparent. This is precisely because not the whole process is transparent. According to several studies, this is one of the main causes of the credit crisis 10 years ago. In addition, because several parties are involved, each with their own outdated systems and of course a certain urge to make money, these processes are expensive and slow.
That’s why there are currently many companies and governments, working to “tokenize” their assets on the blockchain. Every day, billions of assets are tokenized worldwide, from Japan to Luxembourg and South Africa, and institutions such as MIT, Oxford, and the Dutch Central Bank endorse the great benefits. Advantages such as transparency, but also the ability to act quickly 24/7 worldwide, without all those intermediaries, ensure the great interest. Also, because assets can be partially traded and assets that were previously illiquid, which are now and are therefore easy to trade, bring a whole wave of new trading opportunities to the global financial market.
Tokenizing
It is, therefore, not only real estate objects, cars, or art, but also things like copyrights, shares, metals, grains, and for example, music licenses that are tokenized. Tokenizing all of this not only facilitates fast transfers, but also global trade in them, and the use of blockchain technology means transactions cannot be erased or modified, ensuring security and confidence. Because you can also trade certain assets fractionally, the trade suddenly becomes available to small investors and people like you and me. For example, you can only buy a fraction of an Amazon stock of $2,000. The Amsterdam startup Bloqhouse has developed a platform with which you can buy fractional real estate and the Amsterdam startup The Share Council has a solution to simplify co-ownership.
Something that doesn’t keeps the amateur busy? Actually, many Dutch people already benefit from “tokenization.” Apple Pay, which was introduced by ING bank in the Netherlands, works through “tokenization” and payment provider Payvision, even expects that by 2023, more than half of all e-commerce transactions in the Netherlands will run through this technology.
Although you can create your own token on the blockchain with platforms like Fabix in 5 minutes, there are still many challenges for “tokenization.” The underlying blockchain technology is still in full development and that is why it is still far from mature in various areas. One of the biggest challenges at the moment are laws and regulations. Many countries are lagging behind, as a result of which there is not yet a clear definition of a token, good standardization is lacking, and all rights and obligations around it are still often unclear. How about, for example, if you want to transfer ownership of your holiday home in Spain to a Frenchman from a legal point of view? And fiscally?
Challenges
What if you share a real estate object or painting with 10 other owners, and 1 of the owners wants to sell his share? Or should maintenance be carried out? One of the biggest challenges currently still lies in education. While training and talking about blockchain with Bloqon, I notice that the knowledge about the technology is still very much in its infancy. In addition to the basics of operation, understanding the global impact and future applications for most people is still far from clear.
Tokenization
It is clear with all presented plans, that cool future applications are lurking. From tokenizing basketball teams, so that fans can also participate, to tokenizing a trip, so that you no longer have to show your passport, ticket, etc. while flying. Of course, there are also wonderful opportunities in the field of, for example, the ‘gig workers’; How nice would it be if you, as an Uber driver or Deliveroo deliverer, get a share in the company by means of tokenization and thus also a profit distribution? There are already startups such as Fairride and Lazooz that offer such solutions, but just like the underlying blockchain technology, it is still in its infancy. With the many amazing plans and rapid technological developments, we are on the eve of a special revolution in the field of ownership!
Jan Scheele is active in the web3 (blockchain, crypto, NFTs, DeFi) industry since 2013. Besides (former) CEO of a web3 scaleup and founder of an advisory boutique (working for governments, family offices and several multinationals), he is Digital Leader at the World Economic Forum and Board Member at the Blockchain Netherlands Foundation (BCNL). He is writing, consulting, speaking and training regularly about everything web3, all over the world. Furthermore, he is currently finalizing his book about the rise and global impact of blockchain technology.
