Fractionalization is crypto’s killer use-case.
- Problem: High transaction costs limit public access into finance, real estate, etc.
- Solution: Fractionalize complex assets using smart contracts and digital mirrors.
High costs per transaction → Winning crypto use-cases
- How many lawyers can we replace with smart contracts?
- How much of finance is just entities securing each others’ assets?
Imagine what increased fractionalization could do for startup investing:
- VCs (1-10+ wires) → Angels (10-100+ checks) → Crowdfunding (100-1K+ credit cards) → Crypto (1K-1M+ wallets).
- Legal innovations like SAFEs started this trend. Crypto can supercharge it.
- Crypto’s fractionalization and smart contracts will add 1000x more access to startup investing.
Fractionalization is a solution to the Social Token Paradox:
- There is a risk that social tokens lose value as their communities grow.
- This is especially true if a community mints new tokens for new members.
Scarcity and fractionalization solve this problem:
- Example: Right now you need a whole Ape to be in the BAYC.
- In a few years you might only need a fraction of an Ape to join.
- There will be levels to this club, so Whole Apes are in a different group than Satoshi Apes.
- Fractionalization allows for different tiers of value, like with Bitcoin:
- Everyone with a Satoshi is in the BTC club, but whole Bitcoiners are at a different level.
- In a few years you might only need a fraction of an Ape to join.
Look for businesses with high transaction sizes to get disrupted by crypto first:
- Industries with a lot of legal friction.
- Example: Real estate (escrow, title, collateral, insurance).
- Crypto will need to solve its trust and transaction cost issues before going mainstream here.
- Example: Real estate (escrow, title, collateral, insurance).
- Assets too difficult for one person to own/manage.
- Example: NFT demand is growing the market for fractionalized art.
- Crypto could take Masterworks to the next level.
- Example: NFT demand is growing the market for fractionalized art.
I would personally love to help spark the fractionalization of startup studios.
- I own 100% of Utopic, my indie startup studio.
- If I ever sold equity in my studio, I want to do it via public crowdsale.
- My idea to fund founders’ studios is called Utopic Ventures.
- I want to invest in founders’ whole portfolios, not individual startups.
- Success with my studio will attract founders to my fund.
- I want to invest in founders’ whole portfolios, not individual startups.
Fractionalization is on my list of the World’s Biggest Problems.
- This idea is a work-in-progress. If you’d like to riff on it, hit me up @neilthanedar on Twitter.
