Tokenization of Illiquid Assets is already happening — this is how it will shape the lives of the Millennials
From real-estate to fine arts, and liquor collections to land, welcome to the age of token economy
We, the millennials. The narcissistic, the netflix-and-chill, the snowflakes generation. The misunderstood, the US$40,000-student-loan-debt-on-the-shoulders class, and the first generation to earn less than their parents. We work, we play, we share our avocado toasts on social media, and happily pay more for our monthly dose of caffeine than previous generations could ever understand.
At least this is what is said of us.
Agree or not, the truth is, we are very much the in-between generation. The middle sibling of the family. The generation that has lived both offline and online, making us equally native at coding Solidity as manually rewinding cassette tapes with a pen.Remember this bad boy? Photo: Namroud Gorguis
Proven recipes of a ‘successful life’ by previous generations simply do not apply to this day and age anymore. Falling in-between the traditional career trajectory (education-higher education-great job guaranteed) and today’s more agile lifelong-learning-mentality, this generation speaks the language of hybrid-everything.
We are so stuck between the traditional and the new that we’re clinging on higher education without the ability to pay for it. So what do we do? We end up selling stakes of ourselves to those who can.
This is a new kind of arrangement, where instead of taking out loans, students agree to handover up to 4.5% of their future earnings for the following 10 years to Wall Street.
In other words, you’re trading your own future earning potential to the knowledge you learn today, that will probably become irrelevant within the next decade anyways. This means you’re locking your future-self up in a fixed percentage, regardless of what happens in your future. Say what now? There has got to be a smarter way.
The Burnout Generation
Today, Millennials are considered the generation that spends most time on work. With a staggering 84% of Millennials reporting to feel burnout in their current jobs, and nearly half of the +10,000 surveyed Millennials planning to leave their current jobs within the next two years, we are called the burnout generation, and this should be a wake-up call for both employers and employees.
Interestingly, this is the same generation that regards startup ecosystem and entrepreneurship as the most important factor empowering them. Just a quick sweep around the space does confirm many Millennials are about this [ ] close to quitting their jobs, starting something new, something more meaningful, something of their own.
We live in an age where the software insider our smartphones is more sophisticated than that used in the Apollo Mission. Yet our deeply rooted perceptions of one’s career really hasn’t changed that much. Instead of inventing new ways of doing things, we are paralyzed in trying to maximize and endlessly optimize in the existing system.
Is this constant attempt to optimize holding our generation back then?
While reasons come with multitude, here’s one we are very aware of and see everyday: finances. Nothing pulls you back to reality as fast as stone-cold cash. Whatevery your idea, business plan and dreams, if you don’t have enough liquidity to invest in figures, commitment and time, this will certainly hold you back.
What if there was a way to start something new without cash?
What if there was a way to invest in a frictionless way with minimum requirements?
What if value could be created in entirely new ways?
When credit cards money surfaced, it transformed our entire payment systems and made cash money less relevant. When mobile payments emerged, they made transactions even easier and made plastic money irrelevant.
While previous developments have made the transfer of money easier, the next wave is entering in previously unchartered territory: unlocking the world of illiquid assets.
Of all the smart systems that are being developed today, blockchain is already transforming the way we understand digital currency, liquidity and value. Silently moving as the underlying technology, and to those who pay attention, the potential of the world’s illiquid assets is very, very real.
Welcome to the era of Tokenized Economies
Here’s how it works.
Simply put, tokenization means digitalizing the representation of a real-world tradable asset. This is made possible by issuing a blockchain token (security token) that digitally represents an asset with real value. To take this one step further, companies’ corporate shares can also be tokenized, which means that this digital representation of company ownership may now be translated into something that was previously illiquid, such as real estate, arts or participation in an investment fund.
There are countless advantages to tokenizing illiquid assets. In a regulated environment, this means nothing less than your ability to trade previously illiquid and intangible assets with real-world value.
What has been Impossible before, the doors have been opened by enabling traditional company setups on Ethereum with full legal compliance, tokenizing all corporate shares into unique 4-letter symbol created by Korporatio. Technically speaking, these are ERC-20 Tokens modified for security laws, with the same limitations and advantages of regulations guarding securities. And just like that, now you don’t only have yourself a Smart Company, but a smart way of running your business.
Unlocking the potential of Hundreds of Trillions
The potential in unlocking illiquid assets is not to be undermined. With global real estate value totaling at US$228 trillion, this is a far more valuable asset than the whole world’s ‘broad money’ in circulation, including all coins, banknotes, money market accounts, savings, checkings and deposits in our global market. And this is only real estate.
What does this mean in practice?
1. Liquidity where previously impossible
Okay — that student loan. First down payments for your office rent, investments for your new business. Whatever your game, tokenizing illiquid assets means you can liquidate your art collection, liquors, land and real estate, just to mention a few. Forget locking yourself up with a fixed percentage on your future earning potential just to get a degree today, these are alternatives.
Just to throw some examples here. For those not familiar with the potential of liquor as an investment, single malt whiskey that is regularly traded in UK auctions have been calculated with a nearly 21% annual rate return over the past decade. Japanese malt whiskey tops the yearly appreciation up to nearly 28% ROI. Just to give you some comparisons, most hedge funds today don’t even come close to these figures in annual returns.
So next time you’re holding that bottle — you may want to bank it instead of drink it ;)
2. Fractional ownership
Our conventional model of ownership is becoming increasingly more outdated. As each token represents a portion of the asset’s greater value, you are now able to slice up your physical assets such as office building with other startups, residentials, maybe even a cafe roastery downstairs? Invest in the music of that emerging artist you can’t stop listening to, and it’s spring — why not share ownership in your friends new sailboat?
This ability to fractionize ownership alone has the potential to wipe out existing business models and invent entirely new industries. This will lead to new ways of raising funds, building projects and engaging stakeholders in a more distributed, shared system.
3. Frictionless transaction
Since the governing system of token transactions is based on smart contracts on the blockchain, many parts of this chain can be automated. In other words, real-time execution, 24/7 access and radically lower transaction fees. No hassles, no middlemen.
4. Transparency in the value chain
From KYC (Know Your Client) to rights and responsibilities, this information can be embedded directly in each token. Blockchain as technology brings transparency and immutability to all records.
If the asset is a value-driven by its past ownership, such as the way paintings’ value is typically linked to their past collectors or premium watches to their previous service layers, transparency of each chain can certainly bring added value with access to the asset’s ownership history.
5. Greater Access
Considering all these characteristics, it doesn’t take a genius to see that the ability to slice up ownership, streamline transactions in real-time with virtually zero costs, and full transparency in the chain, this will make the world of trading radically easier. Opening the doors for smaller investments, the pool for both investments and investors is that just much bigger. Higher liquidity of assets in general could reduce minimum investment periods, making the whole economy more agile for new ways of global trade.
The emergence of new economic models
We are on a trajectory shifting from one full-day job per lifetime towards multiple simultaneous jobs at the same time, all up to the equivalent of full-time hours. Optimization in our currently existing model, something we Millennials are so good at, will no longer be sufficient.
Future of work will undoubtedly technology-driven and will enable us to balance different aspects of our lives remotely and virtually. The nature of work will change. Just like how we define and understand value in our economies.
Tokenizing previously impossible assets opens up the ability to program money tied to real-world value. Not so far in the future, we will co-own physical assets with people we’ve never met before, divide our risks by investing in slices of multiple industries and projects, and most excitingly, redefine and reimagine how value is created.
So, if you ever catch yourself considering to trade 5% of your future earning potential for the next 10 consecutive years for a degree in English major, you may want to spend a few minutes to learn more about your options.
We at Korporatio enable real-world companies on the blockchain. All corporate shares are readily tokens, governed by smart contracts and the whole corporate governance automated through our digital dashboard.
From entrepreneurs to entrepreneurs, so you, as an entrepreneur, can focus on what really matters.
Ask us anything here.
Tokenization of Illiquid Assets is already happening — this is how it will shape the lives of the… was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.