A 10 trillion dollar security token market is unfolding, combining the power
of blockchain technology with standardized securities. Unlike utility tokens, security tokens are fully compliant representations of ownership in traditional asset classes such as real estate, equities and art. With these coins set to take the stage in 2019, it is important to understand what industries stand to benefit the most from this technological breakthrough.
1. Betting & Prediction Markets
Every year gambling companies rake in billions of dollars globally. Yet for all the money they make, their margins are smaller than most may think. In fact, many casinos make on average just 7–12% a year. This is because while many lose money at a casino, there are also instances of whales coming in and winning multi-million dollar bets. By using decentralized blockchain technology, companies can offer security tokens to secure their profits, dramatically reduce fees and protect against fraud.
2. Real Estate
Real estate is widely known as a fundamental asset in any successful investor’s portfolio because of the security, consistent returns and value appreciation it offers. Unfortunately, many potential investors are turned away from real estate and are forced into other investment types due to its inefficiencies and barriers to entry such as high capital requirements, management fees, etc. Real estate is perfect for tokenization because it provides all the upsides of fractional ownership while minimizing the downsides. As part of this initiative, Jibrel has become an approved Emaar Properties Broker (Approval: SR#22100), allowing Jibrel to sell Emaar owned properties on-chain.
3. Commodities
Commodities are typically difficult to trade and transfer because they require security and careful inspection to ensure that fake or subpar good are not introduced somewhere in the supply chain. Commodity exchanges have largely done away with physical paper by substituting electronic transactions and standardized agreements, but the overhead of these systems is enormous. By leveraging blockchain technology, JCOM (Jibrel Commodities) will bring about huge benefits to the industry in the form of cost savings, instant settlement, increased transparency and currency risk protection. Furthermore, JCOM will unlock this asset class to an entirely new category of investors by algorithmically facilitating Sharia compliance of Islamic products. In doing so, Jibrel would be taking the next logical step to position itself as a leader in the evolution of commodity markets. This will also provide an easy way to subdivide high value commodities (such as gold) and sell fractional pieces to a variety of people.
4. Fundraising for Charity
Despite well intentions, charities struggle to gain the public’s trust to allocate their capital. Today, even some of the most reputable charities may allocate as little as 30% of donations to the cause that they were intended for. Blockchain’s transparency and ability to accurately track funds will allow charities to operate more openly. Charities are that are able to offer security tokens could guarantee honest distribution of their member’s donations. Token holders can also be constantly updated with how their funds are being used at the project level.
5. Art
Most people don’t have the money to invest in Picassos or Warhols. They also cannot dedicate the time and resources to finding new artists and evaluating which works would make good investments. Tokenized art platforms would offer fractional ownership, expanding the access to these assets. Once people own shares in a work of art, they can treat them like any other investment — holding, selling, or trading depending on fluctuations in the value of the artwork.
6. Intangible Assets
Many assets exist only due to the operation of law with no physical object. Examples of intangible assets include patents, carbon credits, brand names, copyrights, etc. Intangible assets, lacking a physical form, may be easier to combine with digital blockchain based systems. The challenge with intangible assets is ensuring that the blockchain system’s model of asset transfer lines up with the real-world legal model of transfer. There may also be jurisdictional differences that can make transfers difficult (although similar, copyright laws differ around the world). That said, intangible assets are often easier to tokenize than physical objects because there are fewer concerns regarding storage and shipment.
7. The Music Industry
The music industry is dominated by giant record labels that control the majority of the market. Even though platforms such as YouTube and SoundCloud managed to democratize the industry from an artist awareness perspective, the concentration of financial power is still a major disadvantage to smaller artists. Security tokens would grant such artists the ability to fund their projects by becoming their own labels. Token holders would be rewarded with royalties and rights to music while providing the artist access to capital they couldn’t otherwise get.
While launching a security token offering is a highly complex process, such offerings represent a promising new method of capital creation and raising funds for blockchain startups. They are providing a path to fractional ownership by enabling the tokenization of real world assets and we are excited to see what 2019 will bring.
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