Tokenization Getting Personal With New Opportunities and Old Dangers
Personal tokens are a means of assigning value to your reputation. There are two main categories: selling your time or selling your future. The biggest issue would arise from the issuer not honoring a token redemption for its suggested use-cases.
Personal tokens are here. Yes, that’s right: you can now tokenize yourself, putting a token on a blockchain that assigns a value to your own personal reputation.
Over the past few months, personal tokens have become more visible. While still remaining a fairly niche sector within crypto, some people are using personal tokens to effectively borrow against their own future.
And despite remaining a fairly controversial part of the crypto ecosystem, figures within the industry believe that personal tokens may actually have a longer term future. If they’re right, in the future, everyone from freelancers to entrepreneurs could end up using personal tokens as a way to gain funding for themselves.
Selling your time or future
As explained to Cryptonews.com by DeFi Rate’s Cooper Turley, personal tokens are essentially an attempt to monetize an individual’s reputation and professional viability.
“Personal tokens are a means of assigning value to your reputation,” he says.
“They are a way to borrow against your future by exchanging value today for work to be done tomorrow. Personal tokens are highly trust-based and a way for issuers to interact with a wider audience.”
Turley adds that personal tokens are claims on a given individual's specialized skills, something which was highlighted quite visibly in April, when Paris-based artist Ben Elliot announced that he was launching his own personal token on the Stellar blockchain. Basically, the token would grant him funding in the present, while also granting token holders the right to a share in the future value of his artworks.
Entrepreneur Alex Masmej provided another prominent example of a personal token in April, when he launched an ALEX token that would fund a soon-to-be-launched startup. However, he tells Cryptonews.com that there’s more than one kind of personal token.
“There are two main categories,” he says. “(1) selling your time or (2) selling your future.”
The first category relates to freelancer services, “especially if the person has an in-demand hard skill,” Masmej says. The second is basically a new form of “income sharing agreement, especially if the person has some community backing themselves, and thus could monetize perceived potential. This is what I did recently.”
As Masmej adds, both kinds of tokens serve to provide funds upfront, in order to accelerate career growth.
In fact, Masmej adds a third, more marginal, variety of personal token to this list.
This would be a kind of ‘recommendation token,’ which would serve as a way of “getting a recommendation from someone. For instance, “Vitalik Buterin” could give out a “Great Developer by Vitalik Buterin” token to trusted peers.”
An opening possibility
The question is: will personal tokens be successful? How successful?
“It's likely these raises will be successful as a hot topic in the short term,” Cooper Turley says.
“I believe that they are most effective for high growth individuals raising small amounts of capital (5 figures or less) largely due to the experimental nature backed by the personality types who can excite people by ‘sharing in their future upside.’”
Put simply, Turley likes to view personal token offerings as Kickstarters geared at very small capital contributions. In other words, they’re likely to be at least as successful as crowdfunding.
“I believe there is (and always will be) strong demand for investing in a private individual, especially if they have a proven track record of success and a strong reputation,” he adds. “If nothing else, the curiosity of exploring what these types of vehicles look like is enough to entice those looking for something new to dive into.”
Perhaps unsurprisingly, Alex Masmej agrees.
“Ambitious people have received grants or sums of money early on in their lives for having a huge potential,” he says. “This is about opening this possibility to the world.”
Masmej admits that not everyone will tokenize themselves to raise funds, but there will certainly be an appetite among investors and individuals, even if it will remain small relative to traditional investment.
Scams and securities
Of course, while there may be genuine – if limited – demand for personal investment in a tokenized form, aren’t there dangers?
“The biggest issue(s) would arise from the issuer failing to honor a personal token redemption for its suggested use-cases (time, advice, insights, etc.),” says Cooper Turley. “However, this would drastically tarnish their reputation and standing, in which case I find it highly unlikely that any issuer would sacrifice their future career potential for the amounts of capital that are being raised today.”
Likewise, there’s the obvious issue of whether personal tokens are actually securities, and thereby require registration with relevant financial regulators.
“Not all personal tokens are made equal,” says Turley. “Just as we saw with initial coin offerings, there are some tokens that are clearly securities and others which are not.”
In defense of this view, Turley notes that some personal tokens won’t qualify as a security under the terms of the Howey test in the US. That is, some won’t involve actual investments of money, that individuals generally aren’t ‘common enterprises,’ and that profits may not come from the effort of a promoter or third party.
If true, then personal tokens could have a long if modest life ahead of them. If not, the need to register a token as a security could kill off many personal tokens before they’re even born.
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