The growing popularity of the cryptocurrency space and the undeniable move towards more digital investment methods means that digital assets are becoming topics of daily discussion. Recently NFTs have gained mainstream traction with the $69.3 million sale by Christie’s of a digital photo collage by South Carolina-based graphic designer Mike Winkelmann, more commonly known as Beeple. This is only one example of headlines blazoning the NFT boom — but what about their tokenisation? Not everyone has $69.3million (well, except for Beeple), so how can we get a piece of the pie when it comes to something non-fungible? This is where the concept of fractionalisation comes into play.
Fractionalisation refers to the process of dividing ownership of an asset of financial value into units. These individual units can be sold to investors as tokens, each one representing an equal stake in the asset. This can unlock liquidity for the owner in previously illiquid assets such as real estate or an artwork, while making investment available to an untapped pool of normal everyday investors, as well as experienced and professional ones.
A non-fungible token (NFT) is a unit of data stored on a digital ledger, otherwise known as the blockchain, which represents an asset of certain financial value. Because of this, NFTs are being implemented as proofs of ownership for digital artworks. Utilising the blockchain’s advantages of transparency, immutability, security, and decentralisation, NFTs behave as Pseudo-Certificates of Authenticity as the transaction data is undeletable and time stamped. This proof of ownership means that for the first time there is a secure paperless record of the provenance of artwork.
Given their rise in popularity, there is now a growing interest in the fractionalisation of NFTs, which makes one wonder: why fractionalise something that is supposed to be unique, where the tokens are not interchangeable, by their very nature? Essentially, why would we make non-fungible tokens… Fungible?
A Fungible-Non-Fungible Token (or Fun-NFT in our office here at Tokenise) would unlock liquidity within the NFT-sphere and allow retail investors to participate in fractional ownership of an NFT. Tokenisation not only disrupts traditional investment models — but the token economy also allows for inclusivity in a world created in large-part for high-net-worth investors. Fractionalising the NFT to make it an FNFT securitises the asset and means one unique token can be made into many interchangeable, affordable tokens. However, the risk remains the same.
Although FNFTs are an alternative investment to cryptocurrencies in the sense that they are digital, they would be classified as securities which means they are subject to regulatory compliance. It is a form of investment, so the value of the token would fluctuate with supply and demand. However, art is an investment which generally appreciates over time and is therefore seen as a safe and alternative store of wealth. If you would like to read about how the recent Cryptocurrency Chaos affected the price of NFTs, click here. Although there is no direct regulatory guidance at the moment on NFTs, FNFTs would fall into the category of securities meaning that you would need a regulated exchange to sell these tokens and allow for users to trade them on a secondary market. This is where Tokenise comes in.
The Tokenise platform is a fully regulated global exchange for the trading of security tokens. We are providing a secure and inclusive digital exchange that will be available 24/7 for the purchase of tokens in a primary issuance and the secondary market trading of them. So, whether you are an avid art lover, a day trader, or just the average Joe or Jane looking to get into the world of security token asset ownership, our solution aims to grow your wealth through the ever-innovative investment method — that of tokenisation. We are launching soon so make sure to follow us on our social media channels to be the first to know about The Tokenise Stock Exchange.