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Investments in Asset Based Products

Updated: Feb 17, 2018

By Abhinav Ramesh

Aug 3, 2017. Originally published here.


Investments on future assets — Asset based products

The Mortgage Backed Security (MBS) was basically low risk debt that was sold as assets because the underlying houses always increased in value. Hence, any asset that appreciates in value could be packaged into an ABS (Asset Backed Security) and sold in the market (after adhering to the securities rules in that country). Another possibility is to sell an equity security in an asset that will become more valuable with time; every buyer of equity expects the institution issuing the equity to rise in value over time. However, there is a risk associated with buying equity, in that the company may default on its debt, in which case that equity will be worth nothing. What if you could by equity in an asset that certainly appreciates in value over time, and for which demand will always be high?

I am talking about alcohol, specifically whisky and wine. Both these drinks get better and get more expensive with age. What if you could invest in a barrel of wine or whisky now, and sell it 10 years later for a much higher price? This would be similar to an options contract, in that you can reserve the right to buy a bottle of whisky 10 years from now. The WandX platform can be used to create a token for say Irish Whiskey with a particular supplier. That supplier can issue those tokens now to users who can reserve the right to buy their whiskey 10 years from now. These tokens can be bought by users and sold in the secondary market, or packaged into products combined with other tokens. The supplier could also create an entity, similar to an ETF on WandX, issue shares/tokens of that entity to fund further development of his business now, and promise users some bottles of whiskey 10 years from now. Whisky and wine grow more expensive (and better) over time, they are assets that have been in high demand for centuries, they have a limited supply and only grow well in certain climes.

Along similar lines, tokens or products can be created on any asset that can appreciate in value over time. Artwork is another asset that is being recorded on the blockchain, on which financial products can be created, or tokens created by artists to fund their latest work. This may sound crazy, but that is exactly what’s happening in the ICO market currently, with many millions being raised for the chance that an application will be released into the market and that it will be used by many users. Whiskey, wine, and art is an already established market, with known producers and customers. There is an established need, established suppliers, and uniform growth. The tokenization of these assets can be used to meet the growing demand for these products. So if you do purchase such tokens, and someone asks you in an interview “where do you see yourself in the next ten years”, you can answer with some confidence “sipping a 10 year aged scotch”!

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