Tokenizing Value

Digital Citizenship
March 10, 2020

Tokenizing Value

Asset tokenization allows businesses to reduce the friction associated with buying and selling securities to a greater network of investors.

Key Insight

In the context of blockchain technology, tokenization refers to the representation of a real-world asset or value with a digital token. These digital tokens carry the unique property of “digital scarcity,” meaning that tokens cannot be counterfeited or duplicated.

Why It Matters

In theory, asset tokenization allows businesses to reduce the friction associated with buying and selling securities to a greater network of investors.

Examples

Buzz around this trend started during the initial coin offering (ICO) boom of 2017, when startups raised millions of dollars in capital by tokenizing equity of their company or utility of their networks. While many of those ICOs proved unsuccessful, the underlying theory of using digital tokens to represent real-world assets is gaining traction. Louis Vuitton and DeBeers launched blockchain platforms to combat counterfeiting of luxury goods, and Nike has a patent for tokenizing sneakers.

The National Basketball Association rejected Brooklyn Nets player Spencer Dinwiddie’s attempt to tokenize his contract to investors and fans. Companies are exploring ways to use their own tokens to capitalize on different business models and incentivize user behavior.

The Brave Browser allows users to earn tokens—called BAT, or Basic Attention Token—based on the ads they watch. Althea is a startup using mesh networks to bring internet to rural and underserved communities using a system in which routers pay one another for bandwidth using, you guessed it, digital tokens. Helium pays customers in tokens to run internet hotspots and provide wireless coverage for smart scooters, bikes, and other IoT devices.

What’s Next

Asset tokenization and token economies are based on mostly theoretical models. During the next five years, these networks will pilot and test different approaches to find the best product-market fit.

The Impact

Eventually asset tokenization could shift how we represent real-world assets in everyday transactions.

Watchlist

Althea, Blockstack, Brave, Debeers, Helium, Louis Vitton, Nike, NBA.