How to convince the middle of society about digital assets


The range of digital assets is growing steadily. Strong growth is expected for the group of security tokens in particular. But does the new offer of tokens also reach the center of society or the center of investors? How blockchain technology can successfully replace old structures with the medium token. A comment.

So far, the crypto market has stood for maximum risk and enormous volatility. The profile of the still chaotic asset class does not fit the average savings bank customer with a home loan and savings contract and Riester pension. So it’s no wonder that few people still place their trust in digital assets.

Now even blockchain technology and the token medium will not help risk-averse proponents of home loan and savings contracts and life insurances to independently create a diversified token portfolio. Even if it is about real assets and no longer native cryptocurrencies, the fear of contact with the medium token will still be high in the next few years.

Neither building society savers nor crypto day traders: How to reach the “middle”

While token investments were previously only something for digital experts, an ever stronger path to the center of society is paving the way. This is not about the people who do not make any investments other than savings accounts, building society contracts and life insurance. Nor is it about the investors who only do what their bank advisor advises the house bank. Rather, it is about the type of investors who independently save one or the other index fund or who even make an individual investment in a share.

Since the financial crisis of 2008 at the latest, most investors have become aware that financial products from banks do not have to be so secure. The low level of interest rates makes life insurance and building society contracts as unattractive as possible. The framework conditions and arguments for new investment offers are therefore better than ever.

In order for the token adaptation to reach the majority of investors, in addition to significantly better user-friendliness and secure custody solutions, an offer that includes down-to-earth real assets is required. As exciting as Bitcoin and other blockchain protocols are, they can and should only make up a small portion of the portfolio – with the exception of absolute crypto enthusiasts. The rest should be divided between stocks, real estate, precious metals, bonds and cash. What many do not know: Security token offers are already available for all of the asset classes listed.

How to establish a dual financial system with attractive digital assets

The point is not to close the securities account at the bank and instead put the capital in security tokens. Rather, the goal of the entire blockchain economy must be to enable a dual wealth sector. In the short to medium term, there is no way around the bank account and securities account in their current form. So instead of desperately trying to replace banking services that often work well, the main thing is to create new offers that do not yet exist in the traditional world.

This is the only way to ensure a smooth transition to the medium token over the next few years. Be it digital fiat currencies or company shares, which by default are based only on tokens and no longer on securitized securities. The transition to the token economy will only be smoothly possible through convergence and compatibility, i.e. customer-friendly transitions. The alternative to a smooth transition would be a scenario like the one currently in Venezuela. Where the traditional financial system no longer works, blockchain alternatives can form a safety net and develop particularly quickly. However, such a transition is not desirable.


It is not the medium that decides, but the investment property

The decision whether to make an investment should not be made on the basis of the securitization medium, but on the quality of the investment property. If new assets can now be tapped with the help of blockchain technology and with better framework conditions than in the “old world”, then investors will inevitably also invest in tokens.

Initially there may be reservations. Sooner or later, the money of (institutional) investors always finds a rational way to the best investment. If new tokenized real estate and company shares perform above average, then the market will inevitably decide in favor of the medium token. The advantages of tokenization must be proven in attractive returns and good tradability. If they do, then the fear that digital assets, ergo security token offerings, will not gain acceptance is unfounded.

Of horse-drawn carriages and automobiles

The transition from analog to digital asset management can be imagined as similar to the transition from horse to automobile. 100 years ago there were only a few cars on the streets and mostly horse-drawn carriages, but the picture changed over the years until in the end only cars dominated the streetscape.

A similar transition is being initiated, among other things, by the many new real estate investment platforms. Examples of this are Finexity and KlickOwn, which use blockchain technology. In the foreground or in external communication, there is hardly a word about blockchain. The focus is on attractive real estate projects in which investors can invest. Beautifully prepared, as one is used to from Engel & Völkers real estate agents, investors can invest in individual real estate properties. In contrast to comparable real estate projects without the use of blockchain and tokens, investors simply benefit from better framework conditions.

Not only can costs be reduced through a greater degree of automation. In particular, small ticket sizes can be traded, which previously would not have been economically feasible. So it is about an infrastructure that, above all, enables easier, cheaper and faster tradability. As a result, investment properties can be developed economically and offered to a broad investor audience that were previously only open to institutional investors.

It will be precisely those superior and new investment products that will ensure that more and more “average investors” are gradually opting for digital assets. This evolutionary process will take many years to complete and will require many reservations to be resolved. In a few years, it will be so far that in the end only token infrastructures will remain. Until then, however, there will be analog and digital assets in parallel.

Disclaimer

This article was published by BTC-ECHO in January 2020. It has now been checked and updated again.