What are Non-Fungible Asset Tokens?
Tokenisation is already with us, the mass-fractionalising of assets will follow
When I talk about NFTs I get one of two reactions from the person I am speaking to; a) an enthusiatic tale of what NFTs they have bought, what profits they have made and if I know of any ‘good ones’ coming up or b) a roll of the eyes and some derivative of the comment ‘I am not interested in buying pixelated jpegs’.
I have some sympathy for those disinterested because it does seem a crazy world of digital land and artwork. I do, however, think that there are many benefits to NFT that will come with the maturity of the market. Utility is important, I have bought the Adidas NFT and I am supporter and owner of some Greedy Gramps NFTs, both have utility that I am interested in.
This article, however, is not about the NFT but the NFAT, non-fungible asset token. Fungible simply means that one thing is the same as another, i.e if you give me a ten pound note, I can give you any ten pound note back and you are happy. Non-Fungible means if you give me your favorite pen, you are not going to accept another pen that looks like it, you want that exact pen.
The NFT market has taken off in digital art where you buy the whole Bored Ape or Greedy Gramps because ownership of that exact piece can be recorded on a blockchain. What if you are creating an NFT around something tangible, like real estate?
One of the ideas around creating an NFT around a property would be to fractionalise it, allowing multiple people to own it.This could create liquidity for a holder of the asset or even assist a property buyer to purchase the asset.
To do this you would have to fractionalise the NFT, it now becomes fungible, i.e it doesnt matter which piece you own and trade as all other are the same. This is why the differential needs to be made between an NFT and an NFAT. The NFT you buy all of it and sell all of it on Opensea or Rarible etc. With an NFAT you are more likely to trade it on an digital trading market like an ASMX DTM.
The NFAT possibilities are immense. What if you own a unique property, you could NFT it, rent it out on Air BnB, with the income split between holders and a trasaction fee to you every time it is traded or rented. You sell your proeprty have multiple income streams for as long as that NFAT is traded.
Asset managers could spread risk across a property portfolio. If you invested in Dubai, but you want reduce geographic risk, you NFAT your portfolio and buy into other property investors NFATs.
Diversification is the key to investment success and NFATs could provide that in spades geographicly and across a broad range of assets from commercial real estate to intellectuall property.
It will also be a new way of funding projects. If you are a business that is building renewable energy projects for example. You can take out debt, which has its downside, you can take out equity but you end up giving away a larger portion ofyour business, or you could forward sell you revenue and wrap it up in an NFAT and smart contract.
Exciting times.
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