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By Doug Leonard, CEO of Hifi Finance
The world of finance and investing is ripe with opportunities, but itâs often difficult to access these markets. Many asset classes remain largely inaccessible to all but the wealthiest investors, with high entry costs and complex regulations.
Private equity, luxury cars, and even race horses have all been off limits to the average investor, fraught with risk and inefficiencies. Horse racing, for instance, is rife with scandal, from cocaine kingpins to bait-and-switch tactics. To an outsider, this may seem like a niche problem â but when you realize that the horse racing industry is a massive $300 billion economy, itâs clear that these issues cause real-world damage.
In fact, the priciest horses go for tens of millions of dollars, similar to that of the most expensive digital art. It should come as no surprise, then, that bad actors in the horse industry have used everything from spray paint to fake death certificates to attempt to defraud buyers.
When you get down to it, these issues are not dissimilar to those of other collectibles or even real estate â a lack of authenticity, accessibility, liquidity, and trust. OpenSea, the leading NFT marketplace, exemplified the possibilities when it recently enabled the sale of a home as an NFT.
All of this makes NFTs a perfect fit for tokenizing and disrupting traditional asset classes. By allowing users to fractionalize assets like race horses, luxury cars, and real estate, NFTs make these high-end investments accessible to the average investor.
Tangible Assets Are Uniquely Suited For Tokenization
The first wave of NFTs was dominated by digital art and collectibles, but the technology is quickly expanding to real-world assets, which are stuck in the past. If, for instance, you want to go buy a racehorse, you canât just pick one off the shelf. You have to go through a broker and pay someone to handle the ownership transfer. Not only is this costly and time consuming, but it also carries with it a high risk of fraud.
Remember that horses can run in the millions of dollars. For many owners, this is more valuable than their home or car. Without the proper authentication, thereâs always a risk of getting scammed.
Enter blockchain technology, which is uniquely suited to solve these problems. Blockchain makes it possible to securely and efficiently transfer ownership rights with far fewer middlemen involved. In addition, because of its decentralized nature, blockchain creates an open ecosystem where users can easily connect and transact with one another â even across international borders.
This is evidenced by the recent launch of Crown Ribbon â the first-ever regulated NFT-backed horse ownership platform. In addition to eliminating the barriers to horse ownership, Crown Ribbonâs blockchain solution allows users to bring their valuable assets on-chain in a safer, transparent, and more flexible ecosystem.
CurioInvest is another example of how NFTs are opening up the world of luxury assets. Instead of needing to be a millionaire to own or invest in exotic cars, investors can buy fractional shares of luxury cars through their platform.
NFTs Make Luxury Assets Accessible
When people hear the term âluxury asset,â their mind may jump to private jets, yachts, or even classic cars. But why stop there? Horses are just as much luxury assets, and accessing these opportunities isn't just a prestige play â it's also a great way to diversify your portfolio.
Wealthy investors know better than anyone the importance of diversifying their assets and spreading out risk. Fool.com reports that ultra-high-net-worth investors invest at least 50% of their portfolios in alternative assets, compared to just 5% for the average investor.
Beyond diversification, investing in many tangible assets also comes with a number of tax benefits. Race horses, for example, are typically considered "depreciating assets," meaning that owners can write off their annual costs and depreciation on their taxes.
Moreover, you don't have to strike a one-in-a-million deal to invest in these assets. One operator in the premium equestrian sport segment, Holger Hetzel, reports that âROI of more than 15 percent is no exception.â While there are no guarantees of any particular return, the potential upside is significant.
NFTs Can Take Off By Upgrading Legacy Assets
When looking to the future of investments, it's helpful to analyze what young and wealthy investors are doing. After all, they're the ones that will be driving the markets of tomorrow.
A recent study of millionaires aged 21 to 42 found that 80% are turning to so-called alternative investments, which fall outside of traditional asset classes like stocks and bonds. Of course, investing in legacy assets like horses isn't even on the radar of the vast majority of investors, but that could soon change.
NFTs are helping to make these investments more accessible than ever before. With new platforms, investors will be able to buy and own shares of racehorses, luxury cars, and even real estate â allowing users to invest in these asset classes in a way that is regulated, transparent and compliant. This opens the door for more people to get involved in the industry and further democratize access to these asset classes.
Author Bio
Doug Leonard is the CEO of Hifi, a fixed-rate, fixed-term lending protocol built on the Ethereum blockchain. Doug holds a B.S. in Information Systems from Brigham Young University and a masterâs degree in management information systems from Brigham Young University. Before being named CEO of Hifi Finance, Doug spent a year as a senior software architect at Mainframe.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.