Moving beyond tangible thinking in tokens
The operational efficiencies that tokenisation brings have done wonders for back office simplification, for better real-time risk pricing, for cyber security, and have smoothed out the customer experience. Yet we still have to fully explore how they can fundamentally change business models for asset management; and they will, oh, they will.
Tokenisation is transformative. It’s already proved its mettle in financial services: from payment authentication tokens, to security tokens that sit on mobile devices for an on-the-glass financial services experience, to facilitating direct bank-to-bank transactions. They’ve even transformed the world of trade finance, enabling us to relay real-time information on supply chain activities so we can better price risk at each step of the journey as goods change hands, and make their way around the globe.
These operational efficiencies that tokenisation brings have done wonders for back office simplification, for better real-time risk pricing, for cyber security, and have smoothed out the customer experience. Yet we still have to fully explore how they can fundamentally change business models for asset management; and they will, oh, they will.
Representation of the tangible and the intangible
Tokens allow us to redefine what can be securitised. They allow us to trade beyond goods, beyond the perceived value of companies, solutions, and their market value. Tokens allow us to move value creation into the esoteric realm, where ideas, concepts, and thoughts can be traded – where these seemingly existential things are translated into real monetary value without needing to be tangible. Asset value, and therefore wealth, is no longer tied to temporal things: we now have a placeholder, a token, that represents the snap and sizzle of synaptic motion and intellectual vigor. Intellectual property can now be traded before it bears physical proof or manifests itself in a recognised physical form.
Data can move beyond being fuel for business decisions or market positioning to being a market in and of itself. Intelligence, insight, ideas – all of these things in token form can now be considered an asset with an inherent market value that can stand alone. And these ideas can be managed, and will have a market, just like any traditional asset.
Beyond identity management
Consider identity, and the privacy around an individual’s or corporate’s or asset’s identity. Identity is fundamental to being part of the financial system. It is dynamic and contextual, and now – under GDPR – is so considered to be some of the most critical and crucial data that it has its own special regulatory protection. Divulging personal identifiable information without permission comes at an onerously costly price. Yet identity isn’t a tangible thing – it is a concept, a principle, an idea. The privacy that surrounds identity is even more valuable, and yet it is just as esoteric as identity. These concepts have value, monetary value at that, and both of these concepts already exist as tokens.
And markets exist in which these concepts are traded: for access and permission to other goods and services. Currently, we do not manage these assets in a way that reflects their market value; yet we could and should.
Video gaming, may not seem relevant to asset management – unless it’s a video gaming company’s stock listing. But it gives us a model to consider as a template for creating new assets. Identity in video games is linked to powers, abilities, additional weapons, and power structures inside the game. These games are not siloed to individual players, but are expansive networksof thousands or millions of players linked together around the world. Identities, and their characteristics that have value, are often traded across these networks for other powers, tools, permissions, and team access. Identity in gaming is a market unto itself, one that is conceptual not temporal. And these identity assets are managed, traded, and speculated upon just like any other traditional financial asset in the gaming market.
Tokens give value to data and concept
Tokens permit these conceptual markets to exist in the larger financial world. They let those markets generate, trade, and leverage value. Tokens enable a myriad of data-centric or data-based concepts to be securitised. Tokens allow us to move beyond a 3-dimensional tangible marketplace, letting us package, price, and exchange in new dimensions.
For asset management, this means an opportunity to build new secondary asset classes of things we can only imagine (literally). Tokens facilitate a hyper fragmentation of markets, where even a market of two actors can securitise an idea and trade on its value. Even the distribution patterns on those traded tokenised ideas have value, and the insights on how a concept goes viral – and which markets it goes viral in – have value that can be securitised, How ideas travel, where they become embedded, who buys (literally) into the idea: all of these insights can be tokenised as well. Insight markets will become an asset class. This new business model replicates itself easily, and begs for a proliferation of secondary asset classes to satisfy the demand for data. Data is an asset, and tokens allow it to move across markets.
The vision of the future of asset management will be just that: made of visions, dreams, ideas, and thoughts.
What can be conceived can be tokenised, and what can be tokenised can be securitised. What can be securitised can be traded.
It all has a value in a market, and that market can be managed. The future of asset management is the stuff of which dreams are made. Literally.
Founder / Head of Fintech & Regtech Partnerships