All this talk about regime changes, inflation, and financial repression is hardly the normal fare for something new and dynamic! Gems are opulent, expensive, and beautiful, but to put them into an investment concept - a collectible, a store of value - is anything but sexy.
Arguably that's a metaphor for growth versus value.
Yet beneath this dour, Scottish, and sensible value proposition, which we have discussed over the past 6 blogs, there is a potent, zestful and in our (admittedly biased) view an irresistible growth story - in fact, a game-changer.
Let's start by reviewing the here and now.
Rubies do not trade on a financial market; they are only traded at auctions, in private sales, or as jewellery.
All the major luxury closed markets - for fine art, jewellery, gems, and antiques - trade via the auction-based method, or private sales as they have done since time immemorial.
Auction houses have aggressively tried to move their business online, but by and large, as the never-ending ongoing cost increases ably display, this isn't working as hoped.
The outcome remains the same auctions are opaque markets for both buyers and sellers, they are expensive (with costs continuing to grow), and thus overly intermediated.
As we wrote in our WP:
"Traditionally, the gem market is viewed as being able to run successfully only with the current infrastructure and auctions, ensuring prices are stable & thus profitable for all parties concerned.
It is the argument of the cartel - exerting restrictive or monopolistic influence on the production and sale of a commodity, aimed at regulating prices, and output. Members maintain their separate identities and financial independence while engaging in common policies."
They are the domain of the wealthy and the cartel that serves them.
These assets are unique, incredibly valuable, and well beyond the means of the average person, but they are not just mere extensions of the wealthy's power, and prowess but extraordinary and rare stores of value (beyond their obvious and celebrated aesthetic beauty).
So how do we succeed where the entirety of the financial community and outsiders, including to a degree the auction houses themselves, have failed in gazillion attempts to create a functioning, deep secondary market?
(More on why these attempts have failed, and the inappropriate structures involved, in another forthcoming blog.)
The answer to how we succeed in creating a flourishing and open secondary market is something we have alluded to in the WP, website, and any number of these blog commentaries.
We are locking up luxury collectible(s) in legal trusts, in a fully insured safekeeping depository, ensuring the asset can never be sold. We can then digitalise these real-world collectibles as NFTs and as such offer the crypto-verse the same exposure and ownership as in the real world.
All this allows for the continuing stability of the "fragile" demand and supply of the underlying real-world gem and thus there can be no fear of external price fluctuation from something like aggressive or forced sales. Indeed you are effectively taking supply out of the market, which is a long-term boost for demand, and a price enhancer.
We are not just building the methodology for this transformation, but putting our money where our mouth is and bringing our own assets (with an assessed value of US$16bn) to begin the transformation from what is possible into what will be.
The real differential or revolutionary aspect is applying fractionalisation to those NFT's. Fractionalized Non-Fungible Tokens (F-NFTs)
Fractionalisation isn't a new idea, is a tried and tested approach, almost all financial instruments refer to a situation where an asset is fractionally and jointly owned by more than one person. Think shares, that's fractionalisation of a company. The concept of splitting up ownership of something so that many people can receive benefits from it in a proportion to the amount they own has been around for hundreds of years.
We're not splitting the atom here, but we are using fractionalisation in what we think is the most innovative, user-friendly, and sensible manner ever attempted in relation to the traditional closed auction-based real-world markets.
The benefits speak for themselves, but let's allow the lawyers to have a say:
"Increase the number of people able to participate. This can be done by fractionalisation of the asset. So, an expensive investment may have an investment threshold too high for many to participate. If that can instead be divided into many fractional interests, the bar to investment can be reduced. Then, there are many more people who can participate. For instance, there may only be a handful of people in the world that could buy an original Andy Warhol. But there could be many more who could buy a security token that represents 1/1,000 of an Andy Warhol. That’s depth."
Power to the people!
The end result is it allows the masses to diversify and benefit from these unique stores of value for the first time, creating a new vibrant, transparent and deep market where there has been none before.
It is a win for buyers, asset owners, and lenders (you need clarity to ..... well.... lend!), and it is also a win for the great god of disintermediation (lower costs).
There are other points to make
1) As we suggested in BLOG 3 we vehemently disagree with the internet question and answer below:
"Can NFTs be used as currency?
A non-fungible token (NFT) is a unique digital asset that represents ownership of real-world items like art, video clips, music, and more. NFTs use the same blockchain technology that powers cryptocurrencies, but they're not a currency.17 Feb 2022"
Our argument is simple, they are (certainly in our case) asset-backed, a store of value and with a finite issuance ..... that's pretty close to being the textbook definition of money, but of course, we can't say or even think that (regulators would be most upset) and besides it is not for us to decide it is up to the crypto-verse and what they decide and believe.
2) As the luxury market offerings broaden - Art, antiques, gems & jewellry - so too can the types of F-NFTs.
Partial sales can occur (with an owner retaining a controlling stake/ownership) which can be used to peg a value while giving the mass market exposure to a rare and valuable asset. This also allows the owner to recoup some costs and hedge his exposure. And/or allows the owner to bid on other collectibles, enhancing demand and upward price pressure (all of which means that collectible asset prices can and will appreciate more).
You have liquified a stale and inefficient real-world market.
3) There are bigger picture ways that such a new format of digitalising physical assets and that market can be utilised, trust us we have thought about that a great deal (and are having many interesting conversations with countries/governments).
4) From a green angle, one that hopefully could diminish the exploitation of developing countries, there is the potential to allow countries themselves to offer their natural resources in such a way without having to drill or mine for them.
5) Portability - yes we have talked about how important that is, but let us finish this blog commentary by repeating it:
rather than let fear drive desire there is also deep practicality in portability, in terms of enhancing the crypto-verse and we will let the superb NYU professor and serial entrepreneur Scott Galloway explain:
"One of the keys to NFTs will be portability across mediums. A Twitter blue check can’t exist on Instagram, but the NFT equivalent of a Twitter blue check can — and deliver credible authenticity, thanks to that NFT deed. This is the metaverse vision of interoperability that could help make digital belongings feel similar to physical belongings.
Digital belongings exist on the internet, but there aren’t that many types of them. On Fortnite you can acquire guns and outfits. On Reddit you gain badges. Point is: There’s a lot of stuff on the internet, but there isn’t much stuff that’s yours."
Those two paragraphs, coupled with the desire to perfect the smart contract, are what drive our company/project on its journey to offering something truly unique, robust, and groundbreaking when it comes to the development of digitalised (F-NFT) collectibles and the platform supporting the trade in them."