Blockchain technology has the potential to disrupt multiple industries, from healthcare to supply chain and voting systems to banking systems. The technology allows businesses to create digital tokens that represent a tangible or intangible asset.
What is Asset Tokenization?
Asset tokenization refers to converting an asset into its digital counterparts and deploying it on a blockchain network. In a short span of about three years, the concept of asset tokenization has grown increasingly popular. The tokenization market grew from $65 million to nearly $435 million in the past three years, and the market is expected to reach $1.5 trillion soon. To understand asset tokenization, let's say, you have an asset such as a property worth $100,000 and you urgently need $10,000 but don't want to sell the property. Asset tokenization will allow you to convert this property into digital tokens using a smart-contract platform, like Algorand. You can create 100,000 tokens of property, with each token representing 0.0001% of the share in the property. As blockchain records are immutable, no one can erase the ownership of the investors who buy tokens of your property. This concept is not only limited to real-estate; financial assets, priceless arts, and now the entertainment industry as well.
Tokenization in Entertainment Industry
There has been a seismic shift in the entertainment industry, from the evolution of Netflix and Hotstar to the advent of fan-based crowd investment. However, a few things remain unchanged: a general mistrust, unequal opportunities, lack of transparency, and high-risk to keep many investors out of this $183 billion industry. But, asset tokenization on blockchain technology can change this outlook for the good.
The entertainment industry has taken this emerging technology to transform the space by making it more inclusive with low barriers to entry, thus enabling the flow of liquidity.
Benefits of Tokenization in Entertainment
Asset tokenization of the entertainment industry on a blockchain network has its set of advantages.
Incentives for Viewers: Nowadays, viewers are not rewarded for watching content, which blockchain technology can permanently change. It's possible to build systems to pay users for their attention using a blockchain-based token that can open a wide range of possibilities for viewers, including tipping a celebrity or buying premium services. There are platforms like Theta and Mzaalo that have already set out to revolutionize the entertainment industry by incentivizing users with their native tokens for consuming media.
Equal Opportunities: The movie industry is largely dominated by big production houses that have their preferences of movies to invest in. Asset tokenization allows even small and talented filmmakers to get their projects funded by allowing everyone to participate in a project. For this first time, blockchain makes it possible for the audience to have a say in the creation of a project.
Fractional Ownership: Asset tokenization allows for fractional ownership over movie rights. Investors can divide movie assets into multiple tokens, with each token representing fractional ownership of the token holders. It also removes the need to have a high capital in order to invest. Instead, everyone can participate in the investment and hold small shares of a movie asset.
More Liquidity: Equity shares of a movie or showbiz are not easy to find and essentially cannot be converted into liquidity. Asset tokenization enables producers to create tokens similar to financial products or movie shares on a blockchain network, which can be further sold on exchanges. Investors can gain instant liquidity by selling movie tokens on a secure platform.
Efficiency and Transparency: Stakeholders of a movie including producers, cinema halls, and investors will have access to a common database on a blockchain network, that records the immutable data across the entire blockchain. Blockchain technology brings transparency to the information stored on a ledger, thus making the Bollywood accounting process a lot easier and more efficient.
Non Fungible Tokens - The Next Big Thing
While deep-pocketed hedge funds are focusing on Bitcoin, more curious investors are looking at another growing class of digital assets: namely, Non Fungible Tokens (NFTs).
An NFT is a cryptographic token that is unique, indivisible, and cannot be exchanged for another NFT. These tokens contain identifying information that is recorded in its smart contract that verifies their ownership. Although the concept of NFT was first circulated in 2012 with the launch of Bitcoin 2.x - also known as Colored Coins, last year made them mainstream. In 2020, the NFT market grew by 200%, and the value of all NFT transactions grew from $62 million to over $250 million in just one year.
The exponential growth of NFTs enticed many big names from the industry, including Warner Music, Nike, BBC, and Samsung. Even celebrities investors are weighing in. Billionaire Mark Cuban wants to sell his tweets via NFTs, while social media star, Logan Paul partnered with Bondly to sell personal NFTs and NFTs in the form of pokemon cards as collectibles.
In addition, in January this year, a CrytoPunk NFT was sold for 605 ETH, roughly equivalent to $762,000 at the time of selling. Meanwhile, a well-renowned auction-house, Christie's is about to auction images created by Mike Winklemann aka Beeple, who also sold digital tokens worth $3.5 million in Dec 2020.
Not just art. Due to their borderless nature and unique characteristics, NFTs could also represent a potential avenue for the digital creators to generate revenue through unique assets of which truthfulness about the ultimate ownership is secured by the blockchain.
NFTs can also enable Decentralised Social Governance through the use of fan tokens. These digital assets that provide brands, teams and influencers to engage directly with their fan base and include them in their social life. For celebrities is a new way of direct brand monetisation for the fans a unique opportunity to be part of the success of their most loved celebrities. Xfinite will integrate a Decentralised Social Governance giving verified and loyal users engagement opportunities, like the ability to compete in leaderboards, VIP status, premium experiences and the ability to vote on special social events as well as on protocol changes.
Though blockchain technology promises multiple opportunities for businesses, the concept of digital securities is still in its infancy. Tokenization of production studios, movie assets, or licensing rights is not very simple and will have its share of risks and challenges. But, asset tokenization is poised to bring a revolutionary change to the Bollywood industry. Instead of production houses, users are now in control of media content.
"Mario Casiraghi is the Chief Financial Officer and Chief Strategy Officer of Xfinite Global, a blockchain-powered global entertainment platform. Mario has been enmeshed in the blockchain sector since 2016, first as the founder of DandYlion and as a partner at Blockchain Solution Partners. He previously worked in traditional finance markets, both at Bank of America Merrill Lynch and at RBS."