The advent of digital ownership

On March 11th, the art piece “Everydays: The First 5000 Days” by digital artist Beeple was auctioned at Christie’s as a non-fungible token (NFT), and purchased by an anonymous collector for more than $ 69 million.  

For the record, non-fungible tokens are unique and irreplaceable blockchain-based digital assets, becoming the newest digital scarcity, and differing from cryptocurrencies like bitcoins that are identical sets of assets which can be traded at equivalency.

Although they are very recent, NFTs’ real-world applications shake certain business-to-consumers markets, such as the collectibles, art and housing markets. In addition, new digital markets which were uncharted so far suddenly pop up thanks to NFTs, as illustrated by the latest sales of tweets and of digital real estate.

So, are we witnessing either an other-worldly passing fad for NFTs or a heralding seismic event prior to a tidal wave of great innovations and applications?

We may be at the dawn of a substantial paradigm shift, triggered by the advent of digital ownership, that may impact not only individuals but also companies. NFTs may deeply transform the ownership of equity stocks, and later of many other classes of financial assets. The fields of corporate finance and financial law will be exposed to dramatic changes in professional framework and practices if company stocks are turned into digital assets.

Yet, NFTs seem at first sight to meet the most prominent conditions to disrupt the equity capital market in the coming years. Like many other tokens relying on Ethereum protocols, NFTs enable indeed a full transparency on and traceability of transactions, with a rather straightforward access to the list of the former owners of specific assets. Powered by smart contracts, NFTs keep memory of the ownership transfers of the corresponding assets since their inception. Most importantly, NFTs are perfectly fitted for the ownership of financial assets precisely because they are non-fungible and attached to unique assets. The ERC-1155 and ERC-721 norms, which are the two main standards for non-fungible tokens, may prove convenient and well-adapted to ownership transfers such as equity transactions.

Some crypto-applications are on their way to become mainstream, such as the democratization of crypto-payments referred to in our February issue. In addition, for long considered the lair of illicit transactions and money laundering practices, the innovative crypto-sphere could paradoxically soon spearhead the most advanced financial transparency and anti-fraud technologies.

In hindsight, the advent of digital ownership also questions the blurred boundaries of the sharing economy, as well as the paradigm shift towards the end of ownership and personal property.

---

Odyssey assists tech startups, SMEs, and large corporates in the design and end-to-end execution of strategic, M&A, and capital raising projects across Europe.

Please contact us for more info:

[email protected]