Tokenization

Various digital currencies are based on blockchain technology. It enables transparent and unchangeable accounting (engl.=ledger) of property and transfer of tokens or crypto currencies.

These tokens can also be used to represent ownership of objects and possessions in the real world. For example, they can represent an existing FIAT currency such as the US-Dollar (see also Stablecoin) or assets such as gold, real estate art, etc. For this purpose, a central office (e.g. an institution in the form of a trustee or auditor) can connect the tokens of the block chain with the objects in the real world. After careful examination of the origin, the condition and other important elements such as insurance, an independent evaluation of the object is carried out. As soon as everything turns out to be satisfactory, the values can be represented on the blockchain via the tokens. On trading platforms, these tokens can be traded and thus access to a fractional ownership of the tokenized object is guaranteed.

Tokenization has the potential to revolutionize the real economy.

Thus, the blockchain can improve the liquidity and transparency of large value properties, such as first-class real estate or famous works of art. The owner of these properties can raise funds by partially tokenizing their assets.

Tokenization democratizes access to investment opportunities traditionally reserved for wealthy investors. In this way, token owners can own a fraction of an asset.

The possibilities are practically unlimited. In addition to securities, illiquid assets can also be tokenized. In many places there are still no clear legal requirements to bring traditional financial instruments to the blockchain. The “crowdsales” of tokens (ICO’s), with which risk capital was raised, are currently being replaced by security token offerings in Switzerland and Germany. A solution that already takes investor protection, prospectus requirements and other regulatory requirements into account.

Example tokenization of future professional sports income

A recent Forbes report shows the almost unlimited possibilities of tokenization.
The NBA player Spencer Dinwiddie of the Brooklyn Nets has tokenized 40% of his three-year NBA contract, which is endowed with 34.4 million USD.

The ERC20 investment token “$SD8” (its initials and shirt number) is issued by Spencer’s company DREAM Fan Shares. But his future plans are much bigger than just tokenizing his contract. His vision is to create a platform on which other professional athletes can tokenize their contracts.

The ERC20 token will be issued under Reg D, which means that it will only be available to accredited investors. The minimum investment is USD 150,000. This is a reasonable step as it does not raise any regulatory issues. The ERC20 contract is designed to give investors a certain interest rate on their investment. In addition, you have a call option for every success achieved in Spencer’s career. For example, if his team makes it into the playoffs and earns additional money or other contractual bonuses, this revenue will be included in the ERC20 valuation. But the really big profits that investors are speculating on would come in the second or third year when Spencer receives an offer from another team with a higher contract value.

On the other hand, it is in Spencer’s interest to receive part of his salary in advance. It is probably more advantageous for him to offer investors a low interest rate compared to the interest rate he would have to pay for a loan or mortgage.

For the time being, the association, the NBA, has vetoed it. But it has already been shown what is possible with tokenisation.

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