The "crypto" fever - The tokenization era

Recently we have all been witnesses of a huge wave of news, posts and people in our networks talking about Cryptocurrencies, Blockchain and a few about ICOs, and in this article we will focus in the impact that these subjects in different traditional markets around the world, and how exponentially it has become a more and more common topic in the tech startup ecosystem.

Now, to start understanding the causes of this phenomenon it is necessary to touch back on the history of cryptocurrencies (yes, because it is the most common topic), in a little timeline… or at least that’s what I hope, where you, if are not familiar with what I’m talking about, you will be able to have a better perspective and continue enjoying this article (If you already know about the blockchain history, just skip it, your time is valuable):

• Everything starts in 2008, when someone or a group of people called Satoshi Nakamoto published a White Paper describing Bitcoin as the first implementation of Blockchain.
• In June 12 2009 the first successful Bitcoin (BTC) transaction was performed between Hal Finley and Satoshi Nakamoto, proving that the blockchain works!.
• In November 2010, the Bitcoin (BTC) market transaction volume starts increasing until reaching the $1MM USD.
• February 2011, 1 single Bitcoin (BTC) is worth $1USD, making the cryptocurrency worth the same as the USA official currency.
• March 2013, the Bitcoin market cap reaches $1BB USD.
• 9 Months later (on December), a White Paper by Vitalik Buterin describes the “Ethereum Project”, introducing the concept of Smart Contracts, receiving funding to build the product in July 2014.
• In 2015, NASDAQ starts showing some interest on cryptocurrencies by starting some trials on Blockchain and specially when Blythe Masters, previous CFO in JP Morgan’s Investment Bank, joins Digital Asset Holdings (Basically the Wall Street of digital currencies)
• Things are looking great for cryptocurrencies, 7 European banks announce the Digital Trade Chain, a platform for Financial Exchange using Blockchain. This was something major for the crypto world, also, Japan recognizes digital currency as something official.
• In 2018, Switzerland allows Taxes payment using Cryptocurrencies, which surprised the world, because making crypto another oficial payment method shows how cryptocurrencies are transforming the global economy.

Wow, this was a fun time remembering all the world have been through in the last 10 years, and we traveled through the history of both Blockchain and Cryptocurrencies, now we are going to be able to understand how this new tech is already transforming several aspects of our lives and how we understand economic systems.

As we saw in the small timeline this tech is relatively new (if we compare it with the Web age), and its effects are incredible because in almost 10 years went from a simple idea in a White Paper written by a anonymous author to an unstoppable force that is completely changing the economy and how we understand the power of money.

Cryptocurrencies and Blockchain have not only affected the economic system, it is also affecting some other aspects of the world, for example the United Nations is working on an implementation of Blockchain to deliver funds directly to the Syrian Refugees avoiding a huge infrastructure, corruption and attacking directly the pressing problems of hunger and malnutrition. In Switzerland, the government is implementing an efficient Land Property system where the land property information is clear, trustful, and easily transferable between sellers and buyers, and the last one and the one I find more amazing is an implementation of Blockchain for the Judicial System, allowing criminal records to be incorruptible and worldwide accessible.

Initial Public Offering
One of the aspects that have changed the way it has always been done, and currently my main interest, is the way tech companies raise seed capital, and to understand the concept we have to introduce another acronym (yes, I know, yet another one!), it is IPO or Initial Public Offering:

“An initial public offering is when a private company or corporation raises investment capital by offering its stock to the public for the first time. Growing companies seeking capital to expand are those that generally use initial public offerings, but large, privately owned companies or corporations looking to become publicly traded can also do them.” - [Investopedia] (https://www.investopedia.com/terms/i/ipo.asp#ixzz5IR3BQvYL)

As we can see in the definition above, every time a company needs financing to expand operations, grow their teams, buy more machines or any other strategy to become more profitable, issues a portion of their Stocks for sale (and delivering profits in the same ratio); this kind of public offerings are only accessible to a small portion of the population, basically, only accredited investors receive the exclusive information about those investment opportunities.

Now, to become an accredited investor, you have to refer to the Rule 501 of Regulation D of the Securities Act of 1933 (Reg. D) which provides the definition for an accredited investor. Simply put, the SEC defines an accredited investor through the confines of income and net worth two ways:

• “A natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year;
• “A natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person.”

As we can see for this terms, becoming an accredited investor is not for everyone, and this is what separates the 1% of the population from the rest; this people is considerably wealthy, and they have the right to invest in companies which issue IPOs more frequently than we can imagine.

Due to this, big names in tech like Google, Facebook and Uber now share their profits with just a few people, because they could invest in an early stage of the company due to their “right to invest” and obviously their willingness to invest, but, if you had the chance wouldn’t you invest in Google? If you could talk to the creators of Uber about their model of a “cab company” without owning any cab, wouldn’t you be intrigued?

I bet you and many of us would invest our life savings in an idea like this, because we can see the innovation and disruption of their business models.

Now, the blockchain technology has also transformed this concept, transforming it from IPo to ICO (Initial Coin Offering), where basically it takes the best of the previous concept and instead of shares of the company (Which may have a sit on the board and decision power) the company generates their own Coin, which will be sold to collect enough funding to Start and impulse those amazing ideas.

Due to the mentioned above, the ICOs have transformed the way Tech Startups get funding for their projects, allowing people like you and me invest in the next Google without having to be an unicorn with fire breath to get the right to invest, and also, allows small teams with huge life changing projects to access funding capital with a higher chance of success.

Just picture this, if for the last 15 years tech companies have changed the way we live day to day in conditions where only a few can invest, amazing projects die for lack of funding and talents from a couple countries have an “easy” way to see their projects thrive, what would happen if it was easier to access capital and reach enough people to boost the first stages of your company? ICO is the way our world can generate better and more advanced technologies, and, allowing most of the population invest will inject an even bigger budget to easily finance those amazing ideas.

Obviously, there are pros and cons, because our nature as humans inspire most to do amazing things, but there are always a few rotten apples to do harm and take advantage of good people, but worry no more, I’ll be sharing some tips and tricks about how to sail the new Wild West and not die in the process.

This article is born from my own experience and by working with a very talented team of professionals that share the same vision, this vision is called GeoEstate.co, the first Crypto Real Estate Investment Trust which allows anyone in the world become an investor in multiple Real Estate assets around the world. If you want to know more about it, follow me and if you have further questions please do not hesitate to write to [email protected], we love having conversations and meeting new people around the world!