Tokenization is the next big thing on the cryptosphere. Tokens are more reliable than ICO’s, and more useful—deriving more use value when coupled with blockchain.
Cryptographic tokens represent a unique asset or good altogether on the blockchain. For example, blockchains have the power to allow gamers to buy and trade interoperable digital collectibles like skins, dancers, guns, and other items, and this digital market is huge, at $50 billion-plus annual market for virtual goods.
We’ve already written in a great length about tokens and tokenization:
In general, there are two types of tokens: Utility tokens and security tokens.
Utility tokens are meant to be used for something, and that’s more than often to give their owners access to products and services. Security tokens represent an investment, like maybe a share in a company or a voting right in how the company operates, or maybe a unit of value or some combination of the three. These tokens can also represent real-world assets, like gold or real estate. Security tokens must comply with the existing regulations governing traditional securities, such as stocks.
Here are five companies involved in tokenization.
The Gemini Trust Company
Gemini Trust Company acquired Nifty Gateway, a platform for non-fungible tokens or “Nifties,” which are used in the emerging economy of digital collectibles and virtual goods.
The Nifty Gateway will benefit from the secure, institutional-grade infrastructure offered by Gemini while helping propel the latter company’s cryptocurrency reach into new use cases.
“Non-fungible tokens and the digital goods (and collectibles) they enable will play a major role in the next era of the digital economy. They are the perfect form factor for crypto-collectibles, crypto-art, and much more – laying the foundation for entirely new multi-billion dollar industries to emerge,” said Tyler Winklevoss, CEO of Gemini.
Nifty Gateway was founded in 2018 by brothers Duncan and Griffin Cock Foster as a platform for some of today’s most crypto-games and applications, including OpenSea, Gods Unchained and CryptoKitties. Nifty can be used to purchase NFTs directly with fiat currency via a credit card like a normal online purchase, which makes these tokens available to anyone.
Both of these companies are private, but represent significant opportunity for anyone looking to get involved in cryptocurrency or trading in tokens.
CoinList
CoinList’s newly proposed CoinList Trade exchange will include dispensations for tokens and tokenization.
Coinlist itself is a token-offering platform launched in 2017 that helps companies navigate the often murky regulatory waters surrounding initial coin offerings. They have helped projects such as Algorand, Filecoin and Dfinity with their token offerings and distributions.
“In the past couple years, we’ve been focused on powering the top token sales in crypto and helping token projects build their developer communities with online hackathons. But we always knew we wanted to go further down the financial services stack and build an exchange. After a year-plus of work, here we are! We’ll be launching in most US states and many non-US jurisdictions with BTC, ETH, ALGO, and USDC all tradeable — plus, we support fiat on- and off-ramps, so you can trade directly from your bank account. And we will soon be expanding both the assets offered and the jurisdictions supported,” said Andy Bromberg, founder of CoinList.
The company has drawn some big name interest in the likes of Twitter (TWTR.NYSE) CEO Jack Dorsey.
CoinList is a private company, but offers access to retail investor to emerging markets in tokenization and cryptocurrency through their portal.
TokenFunder and TokenGX
TokenFunder is a digital investing platform that facilitates both ICOs and ITO’s by working to connect businesses with investors looking to get into a company early. This particular model isn’t really anything new or different—Coinlist above is doing much the same—but the core difference between the two services is that this company has received the regulatory nod from the Ontario Securities Commission to perform this function.
“In October 2017, the OSC gave the startup relief from a dealer registration requirement and approved TokenFunder’s initial token offering, which cleared the way for the offering of its FNDR tokens.”
Now TokenGX, an affiliate of TokenFunder, has been given the green light to pilot the project to gather data on secondary-market trading, according to an OSC filing.”
TokenGX became an exempt market dealer in Alberta, British Columbia, Ontario and Québec so it could operate its primary distribution platform, which distributes the tokens. TokenGX is working to seek approval in other jurisdictions to run the secondary market, according to the filing.
The secondary trading will take place on a platform developed by TokenGX called FreedomX and will be limited to sellers and purchasers who are residents of Ontario and have been whitelisted as investors who have gone through TokenGX’s know-your-customer processes.
Payment for trades is through “settlement balance tokens” instead of fiat currency. TokenGX buys and sells these tokens at a fixed price of one Canadian dollar, and the tokens can be acquired by transferring funds to the user’s trust account, but cannot be shared with wallets outside of the system.
Both TokenGX and TokenFunder run on the public ethereum blockchain, so initial token offerings, as well as secondary market trading transactions, are visible to anyone.
Microsoft’s Blockchain Azure Token
It’s little surprise that a gigantic company like Microsoft (MSFT.Q) would get involved with tokenization. They’ve generally been involved in most of the innovative technologies, either directly through R&D or indirectly through funding, since their inception.
Their program is called Azure Blockchain Tokens, and it’s a crypto-assets mint that allows users and enterprises alike to issue and manage a wide range of assets.
The companies using the technology are relying on a permissioned version of the ethereum blockchain that uses Microsoft Azure’s cloud computing to reach consensus on transactions for right now. In the future, developers will have the ability to migrate Azure Blockchain Tokens to the public ethereum blockchain or even to distributed ledgers created by Microsoft’s competitors.
One of Microsoft’s earliest partners serves as a perfect example of the technology’s use-value:
Mythical Games is using blockchain to reimagine video game economies. For example, they’re using blockchain to assist game developers in proving that their game currency is scarce, should they so desire, and that digital objects like special weapons, a magical power, or a character’s virtual wardrobe aren’t just carbon copies of earlier products. By limiting supply, Mythical’s founders can make it easier for digital objects to be traded in virtual worlds for real world value.
UPRETS and tokenized real estate
Finally, one of the principle use-value cases that adequately shows the reach of the new technology. The Chinese-based tokenization platform, UPRETS intends on tokenizing several condos in New York owned by the XIN Group.
Normally, condominiums aren’t divisible. You either buy the whole condo or you buy no condos, but with tokenization, it’s eminently possible to divide a condo (or many condos) into infinitely divisible units, which can then be sold at any price the sellers wish.
These luxury condos are in Williamsburg, Brooklyn. They have a modern floor plan with 2-3 bedrooms per unit, and their value is considerable. Brooklyn is not a cheap place to live. But recognizing this, XIN intends to fractionalize the ownership of these units, which would lessen the cost for any (or many) prospective owners.
One of the key benefits of tokenization is that it eliminates most of the boundaries preventing people from investing in real estate. The paperwork is far less, and investors can make micro-investments to diversify their holdings. In this instance, each token will represent a $1 share in the properties. This way, anyone can get started in real estate investment, while providing much needed liquidity to the real estate markets.
—Joseph Morton