Imagine if your company’s brand image (or branding) or even your “personal branding” was listed on the stock exchange. Thanks to the possibilities that are opened up by the blockchain, this idea that may appear utopian to some suddenly becomes much more realistic than one could believe.
If your work consists of producing dematerialized content or other such intangible products, there is a real possibility that you have seen your sales and licensing revenue decrease—or melt like snow in the sun—over the past 20 years. In today’s digital environment, dematerialized content has become non-rival property and the law of supply and demand does not apply as it normally would given value is based on rarity. In short, on the internet—our new ecosystem the genesis of which is founded on the principle of “duplicating information to protect it”—anything that is heard is copied and anything that is seen is reproduced. That is the intrinsic nature of the web itself. That is also why the content economy subtly gave way to the attention economy.
As part of a series published on CMF Trends, we first had the opportunity to discover the concept of reproducing rarity in the digital environment. We then introduced you to the concept of using the blockchain to tokenize intellectual property. To continue along the same lines, we will now attempt to introduce you to the fascinating [and rather disruptive] concept of tokenizing the brand image. This concept could certainly have an impact on audiovisual production environments.
By recently searching the web thoroughly for other cases founded on the tokenization principle, i.e., this miraculous process by which a tangible value can be assigned to something that is intangible, we fell upon a scientific article titled “Brand Tokenization and Monetization Through Cryptocurrencies” signed by Indian doctor Kartik Hegadekatti.
So what follows is an attempt to explain this concept in simple terms, an attempt inspired by the highlights of the full original article signed by Dr. Hegadekatti. For your reading pleasure, we have provided the download link at the end of this text.
Separating what is tangible from what is not
Heading the Indian government’s internal blockchain training project, Dr. Hegadekatti sought to demonstrate in his article that it is now possible to dissociate a company’s tangible assets from its own intangible value. In other words, using blockchain technology, it becomes possible to manage a company’s “perceived value” independently of its asset-based market value.
In his article, Dr. Hegadekatti reminds us that the value of a company’s stock depends on several factors including its capitalization, its performance, its market traction, the composition of its board of directors and advisory committee, the reputation of its management team, the identity of its main investors and so forth. However, the onerous and costly operation of getting a company listed on the stock market often requires several months of work. Consequently and in theory, it is very rarely possible to immediately capitalize on the brand’s value. When it comes to branding, friction-free impulsivity and reactivity are crucial. Timing is everything as the Chinese proverb goes.
Taking stock in real time
Blockchain technology makes it possible to create a finite set of unique digital tokens representing the value of a brand image. By resorting to exchange platforms to put these tokens on sale on the market, it becomes possible to track the tokens’ market value in real time and, consequently, to take stock of market sentiment for a brand image.
For example, imagine if Facebook isolated the value of its tangible assets from its perceived value. On the one hand, its patents, trade secrets, logo, trademark, proprietary code lines, private database, advertising production, real estate and servers could be the property of Facebook Inc. and be represented as shares issued and quoted on the stock market, as is already the case.
On the other hand, the value of the brand image of Facebook Inc. (or of its “branding”), i.e., its perceived value—or the “social construction” that is founded on impression and public confidence—could then be transferred to a different firm that would be responsible for managing and marketing it separately. Let’s name this part of the company “Facebook Brand Inc.”
Facebook Brand Inc. could then go on to issue 100 million unique tokens created from scratch: 49% of these tokens would be issued on the market and sold to the public at a hypothetical unit price of $1. Each and every investor betting on Facebook’s brand image (Facebook Brand Inc.) would personally hold control and ownership of their digital tokens (or nanofractions thereof) without however owning equity in Facebook Inc. There is little doubt that Facebook Brand Inc. would raise $49 million in cash, possibly even in less than 24 hours.
But here is where things get really interesting. The law of supply and demand could enable us to measure market sentiment for Facebook’s brand image in real time without necessarily exerting the slightest notable influence on the value of its tangible assets. For example, during the recent scandal involving Cambridge Analytica, the value of the Facebook Brand Inc.’s token could have dropped from 1 dollar to 10 cents. Also, how Facebook could have managed the crisis as well as its undertakings toward the community among others could have contributed to boosting the token’s value.
But how can one know if Facebook Inc. was not trying to manipulate its own perceived value (the value of Facebook Brand Inc.) in order to buy back its own tokens at a bargain price? The beauty of the blockchain lies precisely in that everything is transparent and that it is possible to know “which entity purchased how many tokens, when and from whom.”
On that basis, we recently saw JPMorgan Chase show its true colours in the media when its CEO Jamie Dimon proclaimed loud and long that “Bitcoin is a Fraud!”. In the wake of this proclamation, the Bitcoin lost 24% of its value in less than three days… Clearly, it has been proven since then that some of the major players that bought or bought back this cryptocurrency in the days following the sensationalist declaration were associated with no other than JPMorgan Chase! If this market had been correctly regulated at the time, some people would have probably been prosecuted for market manipulation and insider training.
Thus the ICO (initial coin offering) concept applied to their brand image offers companies the opportunity to tokenize and monetize their “perceived value” (i.e., their brand image) without having to divest themselves of equity. That’s a net advantage for them! This principle enables the operating forces in a market to more closely observe and influence corporate governance, reward good behaviour and penalize companies for their bad attitudes. In the long term, such a principle would contribute to making the rules of the game fairer and more transparent for all competitors—large and small—within a given market. Had JPMorgan Chase’s brand image been tokenized, it is clear that its recent manipulation of the market would not have remained unpunished monetarily.
And what about in the audiovisual field?
The article titled “Blockchain: What If Xavier Dolan Had Been Tokenized?” explains how the tokenization principle could facilitate the management of resale rights related to deferred work. We have also seen how this principle can transform traditional “social philanthropy” (La Ruche, KickStarter, Indigogo, KissKissBankBank, Haricot, etc.) into actual crowdfunding with a return on investment for those fans who decide to invest. However, this financing logic is always founded on a “per project” basis.
And what about if we began thinking differently than on a “per project” basis? One could well recognize that Xavier Dolan has a reputation, a brand image and a vision that he carries. One could imagine that, as investors, beyond the monetary profit, we could also be interested in participating in his evolution, having the opportunity to express ourselves and express a different vision of life. In short, certain investors would prefer to support and encourage the artist rather than one of his projects, his career rather than his productions… In other words, the brand rather than the product.
Ordinarily, such a theory would have involved demanding and time-consuming management. Today, such a concept could be executed without any friction and in a fully safe manner using cryptocurrencies and smart contracts, i.e., technologies founded on the blockchain.
Currently, there exists no solution or application that covers this type of principle. It [still] does not exist among the products on the market. Therefore, in the coming months and years, we can expect that this avenue will be widely explored and prototyped.
We will certainly have the opportunity to come back on the topic and examine [future] existing initiatives of this type.
We invite you to read the full version of the text that inspired this post: Brand Tokenization and Monetization Through Cryptocurrencies by Dr. Kartik Hegadekatti, Project Head, Blockchain (DoPT), Government of India.