Blockchain Tokenisation: ‘NFTy’ Trick or Griftonomics?

Abstract

<p>The widespread hype of blockchain technology over the past decade or so has sparked a wave of interest in ‘tokenisation’. Borrowing an expression from data security in which sensitive information such as credit card details were tokenised through substitution with non-sensitive information, blockchain tokenisation refers not so much to the desensitisation of sensitive information intended to be repeatedly used, but the use of a blockchain ledger entry to represent property rights in an off-chain asset. This trend began with the initial coin offering (‘ICO’) boom of 2017, which envisaged unregulated ICOs as an alternative fund-raising mechanism to initial public offerings. This phase of excitement involved tokenisation through the launch of an independent blockchain on which said tokens would be issued. With the recent mania surrounding non-fungible tokens (‘NFTs’), tokenisation is now envisaged to deploy on blockchains with smart contract functionality such as Ethereum. It is claimed that literally any type of asset, from land to art and shares to bonds, can be ‘tokenised’ in this fashion. The benefits of tokenisation, according to its advocates, include the ability to sell fractional interests in otherwise extremely expensive assets such as real estate and art as well as increase transactional security and transparency, create greater liquidity, and facilitate trade. This article critically examines these claims and exposes the flaws in the reasoning in support of this fad, concluding that tokenisation, like so much of the crypto space, is mostly predicated on grifting rather than a true innovatio<br></p>