token economy Arturo Bris - IMD Business School
News Stories · Digital - Finance

‘Capitalism without capital’: Monetizing digital tokens

Despite market woes, digital assets have the potential to transform traditional business models, facilitate different forms of financing, and monetize physical and intellectual capital.
September 2022

Despite market woes, digital assets have the potential to transform traditional business models, facilitate different forms of financing, and monetize physical and intellectual capital.

The value of cryptocurrencies may have slumped in what has been dubbed the “crypto winter”, but corporations can still make good use of the potential applications of digital assets. Digital tokens that represent virtual and physical assets can facilitate access to capital for issuers, spur digital business model innovation, and enable individuals and businesses to monetize their own physical and intellectual capital.

These were the key takeaways from Tuesday’s keynote address delivered by Arturo Bris, Professor of Finance at IMD and head of the school’s World Competitiveness Center.

The move to a tokenized economy has already spawned new business models. Brave is an opt-in advertising platform that rewards users for putting up with marketing. In exchange for paying attention, they earn 70% of the ad revenue that Brave makes, in the form of Basic Attention Tokens. Users can withdraw their BAT in cash.

This turns the traditional advertising model deployed by Google with its Chrome browser on its head. “This is very important as businesses will traditionally obtain data from browsing history and sell the data to vendors,” said Bris. “It’s also very interesting as Brave is using the same business model as Google but [the user] is monetizing their own attention.”

He said this would have important implications for the labor market and the structure of modern economies. “This represents jobs of the future – not necessarily a physical task that is productive – but a way of using technology to monetize your own attention.”

As another example, he cited Lympo, which enables people to exchange their fitness and wellness data, stored on a blockchain, for tokens. “What blockchain technology is doing is enabling you to earn a decent living on top of [your] traditional job,” he said.

A fundamental revolution 

But beyond the individual, there are important use cases for businesses as well. Bris urged delegates to abandon any skepticism. “We may think it’s only for a bunch of techies or kids that devote their time to playing games, but that’s not true,” he said. “It’s a true, fundamental revolution.”

He pointed to fan tokens, a type of cryptocurrency issued by sports clubs that can be traded on exchanges and used to buy tickets and merchandise. They are a source of new revenue for sports clubs as well because they can appreciate in value when the team is performing well.

Bris said: “This type of digital asset is transforming football fans into shareholders who invest their capital and the value of their investment depends on the performance of the team. Doesn’t this sound similar to buying Tesla shares?”

The Qatari-owned French soccer club Paris St Germain’s token has a market capitalization of about $26.8 million, enabling the club to bypass traditional capital markets to raise funds in innovative ways.

Capitalism without capital 

“We are replicating capitalism, without capital, or without capitalist institutions,” said Bris. “The privately held club does not need to go to the stock market to raise capital. This marks a profound transformation of our financial system, as companies can seek totally different forms of financing.”

These digital assets were given further legitimacy when Switzerland last year gave tokens traded on a blockchain the same legal standing as traditional assets.

Bris saw utility tokens, which help in the capitalization of corporate projects, and can then be used to buy a good or access a service from the issuer, as having the greatest commercial use case. “These tokens represent a massive [opportunity] for digital business model innovation as they result in total transformation of traditional business models,” he stated.

Utility tokens differ from payment tokens — digital certificates such as cryptocurrencies that represent a means of payment or can be sold on a platform like Kraken in exchange for fiat (government-issued) currency. They also differ from asset tokens, which represent digital or physical assets, such as debt or equity, art works or real estate.

Last year, for instance, the digital asset bank Sygnum and Artemundi, an art fund manager, tokenized Picasso’s Fillette au béret painting, thereby enabling investors to purchase and trade “shares” in the CHF 4 million artwork, in the form of Art Security Tokens (ASTs). Holders of the ASTs have ownership rights in the Picasso, recognized under Swiss law.

However, Bris said digital tokens differ from traditional securities like shares. This is because tokens usually grant no rights or control over the underlying asset, whereas shares generally confer only voting rights and dividend rights (aside from a few Silicon Valley tech companies).

NFTs for business models 

But while Bris saw a good deal of value in asset tokens, he drew a distinction between those with genuine utility and those with no underlying value beyond their uniqueness. “We need to distinguish NFTs for business models, and NFTs for idiots,” he said, referring to non-fungible tokens, which are associated with a particular digital “asset”, even a Tweet.

The greatest potential he saw for NFTs was to enable the transactions that drive the metaverse, an immersive virtual world facilitated by use of virtual and augmented reality that is being billed as the next evolution of the internet.

“The metaverse is going to be the next big revolution,” Bris said. Already, brands are launching virtual cars, museums, travel and real-estate in the metaverse. This virtual world also enables brands with physical stores to engage their customers in new, immersive ways. “Companies can create a lot of value out of it by increasing loyalty,” said Bris.