Tokenization & Defi

Tokenization & Defi

Tokenization of assets: Unlocking the value of luxury assets

by Jillian Godsil

8 months ago

As a means of creating liquidity out of real-world assets and enabling fractional ownership, tokenization of assets holds huge potential. Idoneus is putting the concept into action with luxury assets.

Tokenization of assets addresses a concrete problem: for high net worth individuals, divesting out of luxury assets can be a real headache. For example, a beautiful villa with a big-ticket market value may take years to find the right buyer, costing the owner time and money. And while the owner may not need liquidity from the sale of the asset, no one wants to take a hit on price or compromise value.

It may be that the asset has served its purpose for the owner: perhaps the children have grown up, or business taken the family to another part of the world. There are many reasons why the original asset is no longer required.

The concept of trading or swapping assets is not uncommon, but it is difficult to find the asset swap that suits both parties. In addition, it can be hard to match the value of both.

Then how would it be possible to increase the number of potential buyers? What kind of an ecosystem would allow individuals with more modest incomes to enjoy luxury goods, even if on a fractional basis or for a temporary period?

The answer is Idoneus, headed by Jarrett Preston. He is a man with extensive experience in international asset trading and a global reach that is second to none. His experience in founding and running the world’s only international asset trading company, Obsidian International. The volcanic glass obsidian was traded for items of value by our ancient ancestors, who also believed it to be blessed with protective qualities. Obsidian International now looks back on 20 years in business and covers all corners of the globe.

Understanding the man behind the Idoneus Ecosystem is key to understanding why the match is so strong.

“No room for failure”

Jarrett’s career began in the military, where he established his leadership style in the United States Marine Corps. Asked what his main takeaways from his time in the military were as a precursor to his successful entrepreneurship, he offers a very fast response: “There is no room for failure.”

Turns out his job was as a combat engineer and underwater demolition specialist, where failure would have meant probable death.

His transition from successful underwater demolition specialist to entrepreneur happened very fast, even by the standards of well-known success stories. At the age of 21 he was invited to join a senior business partner who had a publishing opportunity in Atlanta. Not a company, but an opportunity backed by a meagre US$ 100 in seed funding. However, in just 11 months they went from the concept of a magazine to a full-sized 120-page publication. They quickly secured 1,000 points of distribution. It was at this moment that they needed capital to continue to scale and approached the world’s largest franchise of the RE/MAX brand.

“We went to them looking for growth capital and instead they simply wanted to buy us rather than making the relatively small investment requested. And so, we exited with agreement of a seven-figure sum for our efforts.”

Quite the opening salvo for a young entrepreneur. The high-profile success led to many demands for him to talk about his story and share his insights. In fact, over the next ten years, Jarrett gave more than 600 keynotes, many of them in the real estate industry.

“We were lucky, but we also did a lot of things intentionally and that is what the people wanted to hear about. It was also at this stage that I on purpose, or maybe it was accidentally, stumbled across asset trading. With one of the assets I retained from my share of the company I traded for a boat, instead of paying with cash.

“Once I had decided to complete this trade, I recognized there were many benefits and wondered if other people had considered this course of action.”

Jarrett began to research the concept. He quickly realized that he was onto something unique.

“What if there were other folks who might have high value or interesting assets that they didn’t want any more. Maybe they had inherited them, grown out of them, increased their value through redevelopment and now they wanted to monetize them.”

He placed a number of small public advertisements and within 30 days he had between 45 and 60 people looking for his help. Initially it was ranches, cabins, condos, high-performance boats and sailing yachts, most of them valued from US$ 500,000 up to maybe US$ 3m.

“Since those early days we have expanded significantly both in terms of value, scope and global reach. To date, we have matched trades for private islands, aircraft, signature residences, rare diamonds and other assets valued as much as US$ 200m.

“The problem the owners have with these unique, high-value assets is that they are not easy to monetize. This is where we stepped in.”

Obsidian International

From his fledging asset trading company, Obsidian International was created in 2011.  By then Jarrett had created a huge network of high net worth individuals, family offices and organizations looking to divest their assets, but not necessarily into cash or to a single buyer.

“There are also tax implications for asset trading as opposed to direct sale and of course we refer to licensed advisors on beneficial tax treatments in different countries.”

There are a number of reasons why Obsidian International has been so successful and indeed hard to replicate. Jarrett’s customer focus means he is determined to add value not take fees. In fact, his company does not charge a fee until the trade is agreed and completed.

“That can work both ways. We take a hit upfront for travel, introductions, marketing, meeting people and matching assets etc. But it can take months if not forever before we find a match. On the other hand, sometimes it can happen very fast. We are well rewarded when we make it work. That approach has proven to build trust over the years.”

Jarrett and his team have also created a global reach that allows them to match unlikely bedfellows who might otherwise not have ever met.

“I like to say that Marco Polo started it, but in this modern world we are continuing on his tradition.”

However, Idoneus takes asset trading to a whole new level with the introduction of blockchain and cryptocurrency. When joining forces with the development team at Idoneus, Jarrett could instantly see the benefit of tokenizing the assets.

“When trading assets there can often be a financial imbalance between the assets however much both parties may wish to trade. So, it can be hard to figure out the shortfall. By tokenizing the underlying assets it offers asset owners a number of choices. We have built a barter trade token, a global digital currency that allows owners to move in and out of assets and move into other currencies. We will also go to the public exchanges with the token, which creates a path to liquidity that has not been available to asset owners before.

“In the history of barter networks, one outstanding challenge is that there is no pathway to liquidity with barter dollars. We have solved this issue with Idoneus and the IDON Token.”

Tokenizing the assets offers more avenues for the owners of assets. They might barter a high-value yacht and decide to purchase diamonds on the platform – it doesn’t have to directly match anymore, as the value can be taken in tokens and then used to purchase other diverse assets on the platform. Or indeed traded back into fiat via an exchange as adoption and trade volume builds.

Efficient, secure, transparent

Using blockchain technology, Idoneus can also offer an efficient, secure and transparent technical solution.

The final part of the puzzle is the sale of tokens directly, which will be available to the global population. The public sale commencement is scheduled for the first quarter of 2020. The company is based in Switzerland, where it is currently completing final regulatory approval. The token is based on the ERC777 and will be deemed a payment utility. The 777 token was selected as it is the most advanced and secure utility token available.

“We have taken great care with every aspect of creating the Idoneus Ecosystem and this absolutely extends to the choice of the token which holders will use. The ERC777 is the most advanced token standard which will be able to meet the needs of those within our ecosystem. It has new theft-prevention capability, more advanced levels of functionality and is highly customizable when compared to the previous gold standard, the ERC20.”

The interesting aspect of the Idoneus project is that the token is asset-centric from the get-go. While purchasers of the IDON Token will not inherently own a part of the underlying asset, as members of the ecosystem, they can use their tokens to gain access to the assets in many different ways. As the platform acquires more and more assets, and forms more and more joint ventures with companies that sell or rent/charter luxury assets, goods, services and experiences, it will build in utility for every token holder.

Idoneus intends to provide a pathway for owners of luxury assets to divest out of their holding and into an asset class that is experiencing rapid growth, increased utility and no holding costs. It can also serve as a diversifying counterbalance within a portfolio.

Cooperation with luxury brands

The company synergistically works with luxury brands to drive their sales. “Idoneus assists its strategic partners by expanding their client base of luxury consumers, thereby allowing them to sell more. Essentially, the core demographic at Idoneus is the exact same person that luxury brands seek to reach. Each strategic partnership expands the options for those within the Idoneus Ecosystem and allows the luxury company to sell more of their goods, services or experiences. It’s an unmatched scenario which provides exceptional value for all involved.”

Jarrett remarks that at the time of our call he is meeting a wholesale diamond importer and fine jewellery producer that is creating a unique collection for Idoneus, which will be offered soon to IDON token holders.

“The major difference is that we’re bringing real-world assets onto the digital marketplace of the blockchain. We have a substantial network of asset owners who are very keen to be involved and are anxiously awaiting final legal and regulatory approval to launch IDON publicly. The impact on the industry will be substantial.  For example, if someone owns a US$ 40m property in the Caribbean, they might have to wait a decade to exit via traditional avenues. With Idoneus they could secure their exit in minutes.

“Likewise, someone else could join the network and use the IDON Token to purchase a luxury experience at a discount. Perhaps they want to rent a villa, buy a diamond or spend a week aboard a private yacht.  As we expand the ecosystem and increase the portfolio, we expect the market to respond very, very well.”

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