Digital assets, future markets and Van Gogh

  • Shared concept: Vincent van Gogh, Self Portrait with Bandaged Ear. 1889

    Shared concept: Vincent van Gogh, Self Portrait with Bandaged Ear. 1889


Imagine a world where you could own a Van Gogh painting. The kind of investment available to only the super-rich, not tied to the ups and downs of traditional markets, which could drive steady appreciation over time owing to its rarity. Digital assets will make this kind of ownership a reality.

Marc Andreessen, the internet pioneer and famed venture capitalist, has said there are really two kinds of businesses in this world: “businesses that have the mentality of adding value, and businesses that have the mentality of extracting value”.

It is an expansion of a quote from his Netscape co-founder, Jim Barksdale, who originally explained it as there are “only two ways to make money in business: one is to bundle; the other is unbundle”.

Andreessen and Barksdale gave a great interview regarding these concepts in the Harvard Business Review a few years ago. They used the music industry to explain how technological innovations cause industries to shift from adding value or extracting value through bundling and unbundling.

They tell a story that when Jim was younger, he used to buy 45s. “They only had one song on the front and one on the back, and the one on the back — the B side — was always a terrible song. But you had to buy both sides.”

When technology shifted, and LPs and new stereos were introduced, they allowed eight or more songs to be bundled together and sold as an album.

Albums disrupted the music industry. The focus and the style of production changed. Bands and record labels became focused on producing groups of content rather than singles with an unwanted B side. When the internet came along, it gave people the ability to download or stream individual tracks. Suddenly, a whole industry was disrupted as these packaged albums were unbundled such that you could get only the songs you wanted.

Today we have seen a shift again towards re-bundling with the rise of online subscriptions such as Pandora or Spotify. They have taken whole libraries of songs and packaged them together to give you greater access to music, and in doing so have disrupted the notion of buying individual songs.

The approaching opportunity is an industry shift where unbundling and re-bundling traditional forms of ownership become possible. The technology being developed to power digital assets enables a new means of creating a digital wrapper around the concept. The key aspect being that it will lower drastically the cost of creating new forms of property ownership. It allows us to take a traditional concept, such as creating shares of ownership of something, and not only apply it to a wider range of things, but also do new things with it.

Jeff Pulver, a pioneer in the migration of voice-based phone calls on to the internet, was on the island last week. He is founder of the Blockchain Token Association dedicated to advancing these concepts and will be having a conference of some of the leading players in the industry on island in March. I had the good fortune to sit down with him to have a bit of a chat about it and his views on the opportunities in this space.

Jeff described how back when he was working for a telecommunications company, switching equipment that manages phone calls made the leap from analogue to digital. Industry executives saw only increased efficiency, which he described as only seeing things in black and white. By contrast he was able to see the colour of a whole new opportunity. He went on to recognise that rather than simply extracting value in terms of increased efficiency there was an opportunity to add value in terms of a whole new layer of communications possibilities built on this digital technology.

This takes us back to our Van Gogh. With the help of the digital asset revolution, we will be able to create a whole new form of capital market that allows us to unlock value in previously inaccessible investment products. The ownership of a Van Gogh painting could be unbundled and divided into small chunks such that someone with as little as $100 could own a part of it.

Owning a fraction of a Van Gogh painting doesn’t seem like much of an innovation until you consider the idea that you could unbundle the type of ownership alongside it. You could separate out the right to display the work from the right to the increase or decrease in value of the work.

Suddenly, you have a model where museums could simply purchase the right to display the work for a given time period separately from having to invest in the underlying value of the piece. This unlocks capital for the museum to invest in other works while also allowing the right to the underlying value of the piece to be unlocked for investors and speculators. When made openly tradable on a digital assets exchange, this has the potential to unlock a new store of value and capital appreciation that was not accessible before. There will not ever be any new Van Gogh paintings.

Our story doesn’t end there, however. Once you have unbundled the ability to own your own piece of a Van Gogh, you could then consider the opportunities for bundling using this new technology to add whole new types of value. It becomes possible to consider that if one Van Gogh could be turned into a digital asset, many could be. If many could be, why own a piece of only one?

As soon as any painting can become a digital asset, you unlock the ability to repackage these assets into investment funds. This could enable you to purchase a broader bundle that represents ownership in multiple works of post-Impressionist painters or some other combination. Suddenly, you have a whole new opportunity to unlock and make investable a new asset class and make it accessible.

The ability to unbundle ownership of individual things and re-bundle them in new ways provides a world of potential new ways to add and extract value. This opportunity is what sits in front of Bermuda to create a new industry and new jobs. What better place to unlock these forms of ownership for the world than the very place that acts as a free port in the intersection of global finance and trade?

Denis Pitcher is a software and technology solutions consultant with an interest in exploring the potential of blockchain and distributed-ledger technologies. He is also tech co-founder and chief architect of resQwest.com, a global tourism technology solutions provider. He can be reached at mail@denispitcher.com

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Published Dec 18, 2018 at 8:00 am (Updated Dec 19, 2018 at 8:20 am)

Digital assets, future markets and Van Gogh

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