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Personal Tokens – Selling Your Future to Fund Your Present

Posted by Flux on 

19 April 2021

The world has woken up to the (huge) market potential of NFTs (non-fungible tokens) as a new way to copyright, collateralise and trade digital artworks and artefacts. However, less well understood are the implications digital tokenisation can have on personal finance.

The same underlying blockchain and cryptographic technology involved in creating and securing the digital scarcity and ownership immutability that make cryptocurrencies and NFTs valuable and tradable, is enabling the adoption of new financial instruments that can be used to allow you to mint and trade shares in your future self as an alternative to taking on personal debt to fund your lifestyle or aspirations.

These equity alternatives to personal debt obligations turn people (and their future earning potential) into tradable financial instruments. These instruments include human capital contracts and income sharing agreements that allow college graduates or individual entrepreneurs to sell stakes in their personal future earnings as a natural person, as opposed to selling shares in a particular business venture (legal entity) in exchange for cash up front.

Examples of individuals who have done just this, effectively selling themselves to investors, include the artist and entrepreneur Coin_artist who “turned herself into an NFT” and the 23-year-old Alex Masmej who tokenised himself and raised $20,000 on the Ethereum blockchain, selling the rights to control his life to strangers.

Debt and equity, of course, have very different future effects, and pros and cons, for both buyer and seller.

For sellers, debt is an obligation: they are required to pay it back according to the agreed terms or face blacklisting or bankruptcy. That said, the obligation is limited to the value of the loan terms. For investors, debt is exactly that, an investment. 

Furthermore, in order to obtain a loan, you are required to provide a credit history, and in most cases, some form of collateral, meaning many young people are excluded from this source of funding.

With equity, sellers are trading away a right: they make no promises that they will deliver returns and they are under little obligation to produce a return for the investor (when it comes to finance, debt holders are paid before shareholders). The investor takes on the most risk in exchange for a stake in the upside of their investment.

In other words, sellers of personal tokens could end up paying rent on their own life to an investor (“landlord”) who effectively owns their labour and time. 

Interestingly, this means debt is generally a good option if you expect your personal future value to be greater than your present value. By the same logic, depending on the price you manage to get, selling shares in your future makes most sense if you believe that the future value of those shares will be less than the value you are selling them for today.

For these reasons, personal tokens can be seen in two ways: as a viable alternative to expensive, crippling student debt, an important source of financial inclusion and empowerment for people who have been excluded from financial markets, or as a form of “neo-serfdom”, “voluntary digital serfdom”, or “indentured labour” which exploits desperate people and traps them into a Faustian bargain over their future. Whichever way you view it, whatever your personal and societal ethics and values, it is important to understand the ripple effects these sorts of emerging markets will have on society and business at large.

By Bronwyn Williams 

Book the Unreal Estate – The Future of Finding and Creating Value in the Metaverse trend briefing to find out more one NFT’s and the various ways the digital world is gaining value? 

For more information on this presentation and other flux services contact Bethea Clayton on connected@fluxtrendsc.co.za  

Further reading:

Image credit: Hackernoon

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