Generally, bidding at high-end auction houses such as Christies, Bonhams and Sothebys is done by individuals acting purely out of self-interest, a model that has a number of drawbacks:
Buying as an individual
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The buyer usually takes on the full financial commitment by themselves. This might be preferable, but there should be a viable alternative in which buyers could purchase a fraction of the asset - this is known as real world asset (RWA) fractionalisation.
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Extra costs for buyer and seller. These include a seller’s premium, a buyer’s premium, insurance, delivery costs and taxes that could add up to fifty percent on top of the sale price for the buyer. With RWA fractionalisation, such costs would be shared.
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Autocratic ownership. What often happens with a high-end asset bought at auction is that not only does the new owner hides the item from view, but any future decision-making is usually made from the point of view of the owner. This is emblematic of modern society, where a tiny minority have control over scarce or highly valuable assets.
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The asset lies dormant. The only way for the asset to increase in value is by selling it and sadly, this often happens when the owner passes away.
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Value of asset can diminish. This is not always the case, but when an item disappears from public view, fewer people see it and less people are inspired by it. Perhaps this is what happened in the devaluation of ‘The golden age cricket bat and ‘Bardswell bat’.
Buying collectively
A system using real world asset (RWA) fractionalisation offers a number of benefits:
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Own a part of something previously unattainable. RWA fractionalisation offers ownership possibilities previously limited to the exceedingly wealthy. Consider these examples from sports, music and movie memorabilia.
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Sell at any time. With RWA fractionalisation in a digital age, a fractional owner could sell their portion of an asset at literally any time, any day.
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Have a say in defining the rules associated with the investment. Unlike the old autocratic system, a group of buyers could share their views and vote accordingly.
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Investment protection. For instance, one of the rules could be that a seller isn’t allowed to sell their portion for less than the original purchase price.
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Earn interest on your investment. This would be in the form of the cryptocurrency governing the system.
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Earn royalties when others sell. A rule could be set where a percentage of the seller’s profits could go into a fund that is equally shared among the original buyers.
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Fractionalisation frees up expenditure. Consider a museum offering 50% for sale to the public whilst retaining ownership of the other half. In this way, there would be more money available to make further acquisitions.
Consider the possibilities …
It is only right that certain ‘iconic’ things should belong ‘to the masses’, rather than an individual. If a system using RWA fractionalisation was created, consider the following examples in ‘The benefits of buying collectively (Part 2)’, where ordinary people could own something really special and potentially make money whilst doing so.