Doc's Daily Commentary

Mind Of Mav

Looking Beyond Tesla: Tokenized Stocks, The Next Big Thing

As we covered yesterday, Tesla and Elon Musk are now Bitcoin Bulls.

But, I think people are misinterpreting why this news is incredibly bullish, and why this builds upon the Gamestop short squeeze two weeks ago.

Both of these events promote the change I am expecting will hit soon: Tokenized Stocks.

SEC Chairman Jay Clayton recently acknowledged in Oct 2020 that all stocks could become tokenized one day and that the door was “wide open” to the possibility if someone wanted to show them how to do so in a way that “adds efficiency”.

Let’s explore some functions this could open for our financial markets.

What is Tokenization?

Tokenization is the process of converting a hard asset into a digital token. The purpose of tokenization is to remove sensitive identifiable information — for example, a bank account number — with a randomized number.

What are the Benefits of Tokenization?

Tokenization facilitates smooth payment experiences and allows for much faster payment mechanisms than traditional payment methods. For example:

If you wanted to transfer money from one bank account to another external bank account, that process can take anywhere from 1–3 business days.

For tokenized assets, that same transfer would occur within minutes.

How is this possible?

Short answer: Tokenized assets live on the blockchain. The level of security the blockchain provides allows for much faster payment processing.

Why Does This Matter?

From a user’s perspective, the buying and selling of assets would likely look the same. However, instead of buying stock shares, you would be buying digital tokens that represent shares of a company.

Utilizing the blockchain to convert stock shares into digital tokens would allow for much more exciting features.

Goods for Goods Exchange

On the Crypto market, you are able to exchange one token directly for another. Let’s say that you own 1 whole Bitcoin (w.o.w). You are able to exchange your Bitcoin directly with any other token.

 

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Token Exchange

How would this look on the stock market?

Now let’s say you own 100 shares of Apple stock. In order to buy shares of a different stock, let’s say shares of Amazon: you would have to sell your Apple shares in exchange for money, then use that money to buy shares of Amazon.

 

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Stock Exchange

Now, imagine if you could trade your 100 shares of Apple directly for shares of Amazon, eliminating the need to sell shares of Apple into liquid cash.

Cool huh?

Faster Withdrawals

Currently, on any stock exchange, it would take about 3–5 business days for your funds to settle after making a stock sale. If you want to cash out a portion of your portfolio, you would have to wait close to 2 weeks to actually spend the money you invested in the stock market.

The process would look something like this:

You sell stock shares and wait 3–5 business days for your funds to settle.

After your funds settle, you would transfer that money back into your bank, which would take another 3–5 business days.

This process can be simplified with some auto-withdrawal features, but I feel this is still not optimal for individuals with lower amounts of cash.

With tokenized stocks, you would have instant access to your invested funds. No more waiting for funds to settle or transfer times.

This would eliminate a major barrier to entry for a majority of people living paycheck-to-paycheck and truly provide equal opportunity for everyone to partake in financial markets.

Even cooler, huh?

A Whole New Financial System

Now, let’s take this to the next level.

If you are able to exchange tokenized stocks for other tokenized stocks and have instant access to those funds, this opens the door for very exciting opportunities.

You could, hypothetically, make everyday purchases with stock shares.

Let’s say you need to go out to pick up some milk. You could buy that milk with stock shares.

Let’s say you go out to a nice dinner with the family. You could pay for that dinner with stock shares.

Let me put it this way: someday you can actually OWN the stocks you buy instead of having Robinhood sell your shares against your will. This would truly revolutionize the way our economy functions. There would be no reason to own liquid cash at this point, as you would be at a disadvantage from not participating in financial markets. It would completely change the way individuals invest and interact with money.

There are so many possibilities. You could be the one to decide to loan out your shares to collect interest. You could have airdrops right to your wallet with dividends. You could easily transfer ownership to your Dad if you wanted to. It is superior in every way, it just needs to break the barrier of those who stand to lose power.

The circumstances of COVID-19 have highlighted the large disconnect between the general economy and financial markets. Tokenized stocks can bridge that disconnect.

What I Imagine

Banks can offer a tokenized stock investing service for everyone. Customers will have the option to opt into this service. The user’s interaction with their money would remain the same. However, banks would hold the customers saving balance in the form of tokenized stocks. This will allow savings rates to parallel financial market growth.

 

The ReadySetCrypto "Three Token Pillars" Community Portfolio (V3)

 

Add your vote to the V3 Portfolio (Phase 3) by clicking here.

View V3 Portfolio (Phase 2) by clicking here.

View V3 Portfolio (Phase 1) by clicking here.

Read the V3 Portfolio guide by clicking here.

What is the goal of this portfolio?

The “Three Token Pillars” portfolio is democratically proportioned between the Three Pillars of the Token Economy & Interchain:

CryptoCurreny – Security Tokens (STO) – Decentralized Finance (DeFi)

With this portfolio, we will identify and take advantage of the opportunities within the Three
Pillars of ReadySetCrypto. We aim to Capitalise on the collective knowledge and experience of the RSC
community & build model portfolios containing the premier companies and projects
in the industry and manage risk allocation suitable for as many people as
possible.

The Second Phase of the RSC Community Portfolio V3 was to give us a general idea of the weightings people desire in each of the three pillars and also member’s risk tolerance. The Third Phase of the RSC Community Portfolio V3 has us closing in on a finalized portfolio allocation before we consolidated onto the highest quality projects.

Our Current Allocation As Of Phase Three:

Move Your Mouse Over Charts Below For More Information

The ReadySetCrypto "Top Ten Crypto" Community Portfolio (V4)

 

Add your vote to the V4 Portfolio by clicking here.

Read about building Crypto Portfolio Diversity by clicking here.

What is the goal of this portfolio? 

The “Top Ten Crypto” portfolio is a democratically proportioned portfolio balanced based on votes from members of the RSC community as to what they believe are the top 10 projects by potential.
 
This portfolio should be much more useful given the ever-changing market dynamics. In short, you rank the projects you believe deserve a spot in the top 10. It should represent a portfolio and rank that you believe will stand the test of time. Once we have a good cross-section, we can study and make an assessment as to where we see value and perhaps where some diamonds in the rough opportunities exist. In a perfect world, we will end up with a Pareto-style distribution that describes the largest value capture in the market.
 
To give an update on the position, each one listed in low to high relative risk:
 
SoV/money == BTC, DCR
Platforms == ETH, XTZ
Private Money == XMR / ZEC / ZEN
DeFi == MKR / SNX and stablecoins
 
It is the most realistic way for us to distill the entirety of what we have learned (and that includes the RSC community opinion). We have an array of articles that have gradually picked off one by one different projects, some of which end up being many thousands of words to come to this conclusion. It is not capitulation because we all remain in the market. It is simply a consolidation of quality. We seek the cream of the crop as the milk turns sour on aggregate.

Current Top 10 Rankings:

 

 

Move Your Mouse Over Charts Below For More Information

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