Tokenization Is Happening Just As Expected

For much of the last few years, discussion centered around the possibilities associated with cryptocurrency. The flexibility they offer opens up avenues that were not considered before.

We are still very early in the game and we are only starting to see the creativity applied to this realm. Over the next few years, we will most likely see even more advancement from an innovation standpoint. This is going to provide many different avenues for people to pursue.

One of the biggest advantages of cryptocurrency is the reduction of friction associated with transactions. The financial world is littered with companies that operate as nothing more than "middlemen", slowing down the process while increasing prices. Tokens reduce the friction by eliminating many of these entities while reducing costs.

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I was always intrigued by the opportunities tokenization presented when it came to athletes. Imagine being able to own part of Lebron James' future earnings.

While King James did not pursue this path as of yet, there is another NBA player who is. Spencer Dinwiddie of the Brooklyn Nets is converting his $34M contract to a digital investment.

Dinwiddie, according to multiple sources, is starting his own company to securitize his NBA contract in the form of a digital token as he begins a three-year, $34.36 million extension with the Nets. It’s unclear how much of the contract amount he wants to raise upfront, but it would likely be less than the total amount, according to sources.

https://bitcoinist.com/nba-star-to-convert-his-34m-contract-into-a-digital-investment/

So far, this is the first athlete from one of the major sports to announce a move of this nature. This is not likely to be the last.

We also saw the first transaction where a player was acquired via cryptocurrency.

For example, a soccer team bought a player using a digital asset. In effect, in 2018, one of the first transactions using cryptocurrencies in soccer, occurred when the Turkish team Harunustaspor bought a 22-year old footballer named Omer Faruk Kıroglu. Harunustaspor completed this transaction using Bitcoin.

https://bitcoinist.com/nba-star-to-convert-his-34m-contract-into-a-digital-investment/

The real estate market is also primed for disruption due to blockchain and cryptocurrency. One start up, Harbor. is already converting $100M in real estate to tokens.

Using the Ethereum blockchain, the move is being done to make it easier for the investors. Instead of using tokens for speculation, it is a shift to where they are used for investment purposes.

Josh Stein, CEO of Harbor, had this to say:

“The overlap between investors demanding tokens and investors interested in security tokens was zero. People were buying tokens but they weren’t buying it to invest, they were buying it to speculate.”

https://www.coindesk.com/harbor-tokenizes-real-estate-funds-worth-100-million-on-ethereum

None of this is coming as a surprise. Many wrote about this in the past as a potential use case going forward.

Also not unexpected, Wall Street has its hands all over this. While the second example is using Ethereum, it is still being done in a traditional manner. Thus, we are seeing a hybrid where Wall Street and the SEC maintain the control while the shift to tokenization takes place.

What this means is KYC and AML laws apply. It also pushed the idea that people need to be accredited investors, thus shutting out the average person.

This is a situation I feel will continue for some time. A hybrid system is going to be in place until we see decentralized exchanges expand their capabilities and grow in popularity. This is one of the areas that can still be controlled. As long as an exchange is centralized, what is offered can be controlled by entities such as the SEC.

It is only when some of these projects appear on decentralized exchanges that we will see the paradigm shift really kick into high gear. That will put the assets that are tokenized outside the control of the regulators (and Wall Street).

I firmly believe it will happen over time. Just like it is no surprise that tokenization is happening, the shift away from the present control system will take place. An institution like the SEC does not serve the average person. Instead, it protects the present system i.e. Wall Street. It is not a big secret that, in the United States, the regulators are controlled by those they regulate.

What is truly exciting is that tokenized assets can be bought for tokens. This might seem obvious but it is really revolutionary. The real estate tokens on Ethereum, as an example, can be purchased, in theory, using any token issued on Ethereum. Naturally, the exchange might limit things yet this is where decentralized exchanges come into play.

If something was offered on a DEX, any token could be swapped out for this even if it required going through a base token like ETH first.

As we see more of these project introduced, we will likely see the use case for other tokens increasing.

Things are starting to shape up as expected.

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