How will tokenisation alter the approach to investment?

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A trend is emerging as a result of the blockchain industry, in which companies are selling tokens in their networks (utility tokens, protocol tokens), yet without selling their own shares. In the most extreme cases, there’s no actual company at all (for example, Bitcoin) – although early buyers in these networks can make money off the rise in the token value. Lurking behind the information hype of an ICO, we see businesses manoeuvring to set up conditions in which there’s a split between investing in the company itself, and investing it its business model. There’s a clear example we can give of this. Let’s say an investor is buying land in Florida in the hope its price will rise – and is selling licences to use the land. Licence-buyers could build a business-centre there, or a golf club – both could be profitable. Further investors, in turn, could invest in the golf club’s shares, or in any other limited resource which is set up – for example, annual golf-club memberships. In this scenario, memberships can be thought of as an investment contract, that’s sold in advance of the service as such being provided. If the number of golf fans rises, then the price of the memberships will rise too. Technically the price of the land will also rise, and that would prompt an increase in rent values. In a digital view, the whole thing becomes more interesting, since all these interrelationships could be programmed in advance – for example, limits on the numbers of memberships sold, a secondary market in them, the dependence of rental costs on the success of the golf club, and so on. The most interesting point is that this digital ‘golf club’ could move to a different location if the players wanted to – if, for example, the club owner failed to fix holes in the fences, or if crocodiles began crawling onto the links? In a sober overview, tokenisation enables flexible management of a business’s monetisation by separating ownership and income from the way they are used. #tokenD

Illustration by Katerina Krashtapuk
Pavel KravchenkoCryptographer, founder of Distributed Lab