Unlocking the Power of Cultural Assets
It’s only the beginning.
The ERC-721 standard (aka NFTs) represents a true inflection point in how we preserve authenticity and prove ownership. As a result, we’ve seen some huge runs from Bored Apes, CrytoPunks, and Deadfellaz. We have so much love for the founders behind these amazing projects (shoutout to Betty @ Deadfellaz). Even with all the hype and money being thrown around, NFTs are only one aspect of the broader picture and we’re just scratching the surface…
Let me explain.
It’s important to first understand how the value of a cultural asset is derived.
In most instances, cultural assets are rare or scarce items that retain their value from not being consumed, used, or worn. So whether your investing in a vintage Cabernet Sauvignon or a pair of Deadstock Off-Whites (R.I.P Virgil), the value is based upon the perceived utility.
Put another way, an asset’s value is inherently linked to “culture” and the surrounding context (*by culture, we’re referring to a shared system of meaning within a specific group). Therefore the value of the asset lies in the intangible halo of the artist, designer, craftsperson or even the brand. This dynamic relationship is what makes memes go viral and NFTs reach their exorbitant prices. Let’s call this relationship cultural velocity.
Cultural assets have long been labeled alternative assets due to the lack of understanding of how both perceived utility and cultural velocity affect the underlying price. Traditional marketplaces for these assets are typically small, fragmented, and only open to only a few with deep pockets. To everyone’s benefit, the landscape is changing rapidly. Patrons of culture are no longer bound by legacy constraints, opening up a decentralized, fluid, and global marketplace for cultural assets.
So what does all this really mean?
To cut to the chase. It means the future of investing in cultural assets will be unlocked by a combination of the mechanisms below:
- Tokenization — an immutable record of ownership.
A multitude of asset classes have already benefited from tokenization, particularly in cases where verifying authenticity or ownership is a complex process. The concept is quite simple. It involves creating a “token” which acts as a tamper-proof link between you, the owner, and the public ledger (the blockchain). There are some great use cases, but I’ll hone in on this one in particular. Imagine saving up for several years to buy an expensive watch. You make the purchase and along with your receipt you’re sent a non-fungible token to your wallet address. This token represents your ownership of this watch on the blockchain. You will now be able to show this proof of ownership to anyone — the watch repair person, another investor, or even your friends that don’t believe it’s real. It’s public, it cannot be changed or overwritten. This sounds much better than a faded or lost receipt.
2. Fractionalization — a more affordable entry point + greater liquidity
Just as the name suggests, this is about breaking an asset into smaller portions. By breaking an asset into fungible tokens, the asset not only becomes more affordable but the tokens provide a source of liquidity in an otherwise illiquid marketplace. To make things clearer, it means that you can own a fraction of a really expensive asset like a Jordan Olympic 7 and be able to sell it much easier if the prices go up or down.
Fractionalization has been embraced by DAOs as a key way to pool funds to make a purchase and then distribute tokenized ownership to DAO members. The real beauty in fractional ownership is the collective power to acquire assets that were previously out of reach.
3. Synthetic Assets (synths) — no holding costs, unnecessary liabilities, and fairer market access
Synthetics assets, or synths, are a derivative product that mirrors the price of real-world assets on-chain. Think of them as a digital sibling to a physical item. Synths allow anyone in the world to access marketplaces that were previously geographic-specific or overlooked by brands or services. This means that if you live nowhere near a dope sneaker store but love Yeezys, you can still mint a synthetic Yeezy collection that mirrors its real-world value.
Synths also provide the benefits of not incurring holding costs such as storage or maintenance. Given most cultural assets derive value from being in pristine condition, maintenance is a burden that comes along with these types of investments. Synths are a solution. They offer practical benefits such as not having to physically move your watch or sneaker collection when you move house or not needing to file an insurance claim after your basement flooded and destroyed your Pokemon card collection. Synths offer exceptional flexibility for cultural assets.
Xsauce is focused on enabling communities to keep up with the pace of cultural value. By combining all three mechanisms, we’re building the Xchange. The first ecosystem where investing in xAssets (our synthetic assets) provides exposure to cultural assets in a seamless, affordable, and risk-mitigated manner.
Legal Disclaimer: $SAUX tokens are not investments or investment contracts, nor should they be construed as such. Rather, the Xsauce ($SAUX) protocol tokens are a means of participating in a community-owned, -operated and -governed network protocol. Because the success of the protocol described depends on the efforts of a disparate group of actors, the products and services described herein involve substantial risk. Materials published by Xsauce do not constitute the provision of advisory services regarding investment, tax, legal, financial, accounting, consulting or any other related services, nor are they a recommendation being provided to buy, sell or purchase any product or service. Further, materials published by Xsauce reflect the information available as of the time of publishing and are subject to change at any time without notice. Xsauce will not be liable for any direct or consequential loss arising out of the use of this material or its contents.