The big idea and why it matters: There are ongoing improvements to help make processes of our daily lives (today’s examples include whiskey investing, real estate investing, and logging into websites) more efficient and convenient, and much of it ties into the ongoing evolution of blockchain technology.
“The price of doing the same old thing is far higher than the price of change.” -Bill Clinton
We’re now in the middle of the second official heat wave of summer in NYC, and it seems as good a time as any to serve up some smaller topics that I’ve had on the back (grill) burner for some time. They all represent new ways of doing old things and relate to (you guessed it) Alts. Here we go!
One bourbon, one scotch…
Shoutout to our friend, Joey G., for bringing this to my attention. Unless you’re close to distillery owners or have very deep pockets, making a legitimate investment in bourbon or scotch has historically come with some challenges. If doing it yourself, there’s the obvious issue of manufacturing, scaling an operation, and turning out a quality product (not to mention the “fun stuff,” like government regulation). Perhaps one could have purchased a barrel and sat on that, hoping for a value increase, but that still would have also required storage, transportation, and potentially bottling for monetization. And, again, abiding by (or skirting) various regulations would only have added to the complexity.
As with many corners of the Alts world, distilling is a space that is becoming more democratized for investors. Now, at least a few services help simplify the process while (ideally) enhancing risk/return through scale and diversification. They leverage relationships with distilleries across the Bourbon (US) and Scotch Whisky (Scotland) worlds, which are very different for various reasons, including the regulatory environment of each. And they are solving for the ability to invest across a spectrum of vintages and distilleries, plus the eventuality of how one may ultimately monetize such an investment.
Slicing and dicing real estate
About two years ago, I wrote an Alt Blend post on how some ideas were being implemented using securitization instead of via blockchain and tokenization (The Future is Off the (Block)Chain), an anticipated application of blockchain/crypto technology. In other words, areas where I thought crypto (tokens) would be a solution were being addressed in more traditional ways (i.e., using securities that were more like stock ownership).
But now, if you search online for “tokenized real estate,” you’ll see that the world has evolved substantially, as many related sites will present themselves. Per Forbes, real estate tokenization could be a $16 trillion market by 2030. Given how bad people are at predicting the future, I’d expect that forecast is wrong, but let’s just say that the tokenization of illiquid assets is expected to grow substantially.
Real estate tokenization is exciting because it represents a real-world use case for blockchain technology that people can start to wrap their minds around. For example, investors can own a fractional interest in a large commercial building by owning particular tokens created to represent such ownership. It’s conceptually very similar to owning shares in a company, but here’s why it’s a bit different:
- Blockchain allows ownership to be securely tracked/managed on a distributed ledger; the data exists in many places worldwide simultaneously. It doesn’t rely on the ledger/books of a given company, exchange, or custodian for secure tracking.
- It can avoid the need for a financial intermediary, like a traditional custodian, that one would need to buy/sell/hold stocks, for instance.
- It can facilitate a more liquid secondary market. Someone who owns tokens of a given project could be able to sell them to others in a marketplace. Thus, that would be more like buying and selling shares of stock instead of the way secondary markets function now, where there are companies who essentially act as matchmakers between private buyers and sellers. [As a reminder, selling existing shares to another investor is known as a secondary transaction..and you can find more on that subject here]
That all being said, real estate tokenization isn’t the Wild West and currently doesn’t solve many other usual impediments of real estate transactions; regulation, fund structuring, investor qualifications, lock-ups, etc., may all still apply, so it isn’t like we can now just get on our phones and immediately start buying pieces of buildings. The managers of these solutions still have to go through the real estate purchases in the traditional, complicated way – long closing periods, title searches, and all that jazz. They’re now simplifying the fundraising process (pooling of investor capital) via tokenization, which could add some convenience, but it’s not something I’d tout as a “game-changer.” If/when blockchain makes it possible to buy/sell an entire property instantly on the open market, THAT would be a pretty incredible moment in history.
Last, none of this requires one to believe in the value of specific cryptocurrencies. But, where the rubber meets the road is that, as more of these solutions are built on the blockchain, the technologies behind them (e.g., Ethereum, Solana) benefit from the related traffic and tiny fees that are beginning to generate actual cashflows, which then can be fundamentally analyzed for valuation.
Say goodbye to passwords?
What I’m talking about here are passkeys. You may already use them and not even know it, but they are growing in prominence. This article from Dashlane is easy to follow, and here’s their overview that falls under the heading, “Explain it to me like I’m 5”:
Passwords are a common way to log in to accounts, but if they get stolen (which they often do), anyone can use them to gain access. Passkeys are a way to log in without a password. They use your phone or another supported device to prove that you are who you say you are before letting you into your account. A lot of security happens behind the scenes, but the main benefit of passkeys is that they can’t be stolen like passwords. Plus, there’s nothing to remember, so you’ll never forget them!
We won’t dive into this further today, but you may notice some sites/apps starting to prompt you to convert your login process from a username/password to a passkey, which can be easier and more secure. And what makes all of this possible? Cryptography (aka blockchain). Thus, the interface is pretty simple, but its technology is complex and relatively new.
Glass half full
Owning illiquid investments like whiskey (or whisky) or real estate isn’t going away, and it seems the number of apps and websites we interface with increases daily; however, there are ongoing improvements to help make those processes more efficient and convenient. If nothing else, it’s one more reason to be optimistic about the future.
Until next time, this is the end of alt.Blend.
Thanks for reading,
Steve
