By Nik Lysiuk
Nik Lysiuk's work focuses on long-term allocation, ownership and custody, behavioural discipline, and continuity planning. Nik shares practical Bitcoin education through YouTube and social media, where his content has reached over half a million views.https://www.niklysiuk.com/
My to-do list, like yours, is no doubt simultaneously urgent, growing, and stressful to even consider, let alone deal with. So why did I sit in front of the TV last night for 4 hours straight until the clock struck 1 am? Well, because I was glued to a docuseries about the sinking of the Titanic.
Perhaps one’s morbid curiosity clicks up a few levels in January when all is cold, dark and bleak. But more than that, what kept me on edge was the programme’s focus on rigid structures being torn asunder, beyond the horrific and metaphorical sight of the ship itself breaking in two.
The class system across Britain and America in 1912 was deeply embedded across society, but this social construct – where real men were seen as being immune to fear and first class passengers held the moral high ground in every situation – all disappeared at the first real sight of danger.
Anywhere you care to look today – wealth, health, relationships – you’ll see examples of humans simply accepting that the current modus operandi is just fine. Until one day it isn’t. Life is highly contextual and financial markets are no different.
For example, ‘Bitcoin is a Ponzi’, and tokenisation is perhaps orders of magnitude more boring than watching grass grow. Play with context however, and each may go from quite interesting, to absolutely necessary. Just as a breath of fresh air is mindlessly free in this moment, but priceless to poor Benjamin Guggenheim being pulled down to the ocean floor by that unsinkable ship.
‘Bitcoin has no intrinsic value’ if your net worth has already reached a certain point without it, but is highly valuable if you’re a Venezuelan human rights activist trying to avoid assassination attempts, navigate borders and save your country from a leader that builds fabulous wealth while the country and its people collapse into chaos.
The point isn’t that Bitcoin suddenly becomes exciting. It’s that value itself is contextual and often only revealed under pressure.
Closely linked to Bitcoin and blockchain is tokenisation, a concept that may well be mind-numbingly boring if you don’t give a second thought to the timing of when your investments settle or dividend payments clear. Hours, days, weeks – who cares?
Which begs the question, in what context might tokenisation be exciting?
When Larry Fink refers to tokenisation as an overhaul of financial market plumbing, we might have a job on our hands making the concept interesting (apologies to any plumbers who may well find backflow protection systems fascinating). But even plumbing can be exciting in the right context – a flooded basement full of presents on Christmas Eve, for instance.
One problem with tokenisation is that it is inherently boring due to the highly regulated nature of financial markets. The Bitcoin network, for instance, is censorship-free (public), whereas tokenised networks must have participants meet certain entry criteria (and thus be censored) in order to deliver a given quality of service (fees, known counterparties, etc). Adequate regulation is vital in a tokenised world.
So while Bitcoin and tokenisation are related concepts, the latter may never attract cypherpunks intent on changing the world. Perhaps that’s a good thing? But a potential lack of fervour in adoption will not hold tokenisation back because the concept taps into the nature of capitalism itself: the desire to remove cost, friction and dependence on other parties
There are many exciting use cases for tokenisation that ultimately may help protect your portfolio (or company) from AI’s ability to rapidly squeeze margins and accelerate a race to the bottom. When cost cutting becomes a survival technique, tokenisation becomes the lifeboat.
Financial institutions of course abound with examples. The world of investment banking in which I used to live is one that springs to mind, where the need for a persuasion machine across equity research, sales and trading, supported by various middle and back-office functions, collapses when information, price discovery, compliance, and settlement can be embedded in the tokenised asset itself. A report by financial services consultancy firm, Broadridge, estimated that up to 40% of post-trade processing costs could be stripped out by banks using ‘utility models’ to capture economies of scale and network effects.
In fact, any industry with a chain of events that relies on a third party to link provider and user is likely to be capsized by tokenisation. Tokenised property for example, a market where roughly 30% of UK property transactions collapse before completion due to communication breakdowns, could see vast improvement in the costs, speed and efficiency of transactions (not to mention processes across the Land Registry, estate agents, solicitors and insurers).
The Titanic struck an iceberg at 11:40pm, without so much as an ‘I say, what the bally hell was that?’ The incident passed without much notice until she finally plummeted to the depths more than two and a half hours later.
If our current processes are indeed doomed in their current form, the rate at which we are taking on water is slow enough that most people won't notice. But at some point, a mass of people will clock that the passenger-to-lifeboat ratio doesn’t look promising.
Avoiding such panic might be the difference between your portfolio, business, or even your career thriving rather than barely surviving in this new world.
