Here is a question of uncertainty – is this a good time to invest in shares when the stock market prices are dropping down? As Warren Buffett (business magnate, investor and philanthropist) would say; be fearful when others are greedy, be greedy when others are fearful.
Following Buffett’s advice, many would consider plummeting airlines prices to be a great opportunity, Buffett however, has a different idea, selling almost $400m of airlines shares [1].
Is this a coincidence, a carefully calculated decision or a long-term strategy?
Does Chinese investment of $900bn in rebuilding the New Silk Road accounting for both road and maritime routes , with air corridors not mentioned, play part in Buffett’s thinking? Or are there other subtle influences rising on the horizon [2][3]?
We will not know Buffett’s motivation but we do know there is a new financial trend on the horizon – Tokenisation based on blockchain [4][5].
Imagine you could buy a painting of your most cherished artist like Picasso, Matisse, etc., a vineyard or your favourite coffee shop.
“I couldn’t afford it”- you say… Well, what if you could buy a piece of it then?
The answer to these dreams, may be Tokenisation – which fractions property rights and enables registration of multiple owners, tracking trades through Distributed Ledger Technology (DLT) [6].
You may think this trend is long way away, yet Manhattan [7] real estate property (worth $30m) was tokenized in 2018 and Berlin’s [8] (worth $12m) earlier this month. In the meantime tZERO [9] (Tokenisation platform) announced tokenisation of $300m worth of real estate assets and Alliance Investments revealed their plans to tokenise approximately $640m assets across the UK [10].
It is not only tokenisation of real estate but also digital securities ($200m) with giants like Apple, Facebook or Tesla offering their stocks on blockchain too [11][12].
Also, the world’s largest car manufacturers (e.g.: BMW, Ford, GM, Groupe Renault, Honda, etc.) have partnered with MOBI (Mobile Open Blockchain Initiative – technology and ledger agnostic) to improve the economy of automobiles [13].
Improve what?
In simple terms – create a trusted blockchain payment network to track various transactions , e.g.: vehicle-to-vehicle (V2V), vehicle-to-infrastructure (V2I), vehicle-to-human (V2H), vehicle-to-everything (V2X), electric vehicle to grid integration, usage-based services, fleet operations, congestion pricing, carbon footprint management and more [14].
This is not all. As COVID-19 revealed deficiency in our supply chain (unable to deploy resources where most required and make rapid decisions) blockchain adaptation has accelerated and the World Economic Forum with partners are stepping in with Blockchain Deployment Toolkit – a guide to build more resilient supply chains on distributed ledgers [15][16][17]. News around the world is full of announcements about global governmental organizations, such as the World Health Organization (WHO) , etc. partnering with IBM, Oracle, Microsoft, Apple, Google to build blockchain-based open data platforms, to quickly and precisely detect infection hotspots. Are these out yet?
You may be getting an idea where this trend is going and how fast it is growing.
The new system undoubtedly will impact our personal lives, financial services, real estate market and much more. The traditional market infrastructure is adapting to the token economy with many protagonists of this technology forming strategic alliances with tokenisation platforms [18][19][20].
DLT technology continues attracting attention of many regulators with blockchain bills and regulatory frameworks discussed or already available in New York [21], Malta [22], Switzerland [23], Luxembourg [24], Germany [25], etc.
Whilst examples of strategic alliances continue to multiply, the world’s first digital bank Sygnum , has been transforming financial industry onboarding digital investors since 2018 [26].
What makes this new model of digital investment so popular [27]?
It is a combination of factors: greater liquidity (assets previously considered illiquid e.g. fine art will be out for grabs) accessibility to wider population due to reduced minimum investment required, transparency of transactions with an immutable record of ownership and finally improved scalability, speed and cost of automated transactions (reduced administrative activities, taxation and other fees) [28].
More importantly the power of blockchain is attributed to its ability to share data without revealing personal information, should they be designed to do that [29].
However, there are few reservations that require addressing for tokenisation to become functional on an international stage.
Currently tokenisation falls under decentralised regulations where activities like: token creation, sale and trading on secondary market vary from jurisdiction to jurisdiction. These regulatory inconsistencies prevent the free and international exchange of security tokens.
There are other concerns – how will tokens remain linked to the real asset? Who bears the cost associated with an asset (e.g. maintenance, etc) split between thousands of owners? How is the risk of hacking and cybersecurity addressed? How do we deal with stability of hyper-liquid market and volatile cryptocurrency?
Whilst there are still some challenges to address, tokenisation has made a rapid and incredible progress over the last a couple of months.
Only a couple days ago, on 29th April 2020 The Nasdaq Stock Exchange offered a blockchain platform to support the issuance, trading, settlement and custody of digital assets [30].
Knowing our aspiration for satisfying stakeholders’ growing appetites, it is only a matter of time before the mass market for tokenisation will open to you and I.
Regardless when this will happen and what it is going to look like, our investments and other decisions we make using tokens and digital platforms will require as much due diligence as today’s Buffett’s choices.
At the end of the day: “Price is what you pay. Value is what you get.”
WARREN BUFFETT
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