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Be smart, leave the industry and go outside

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What is the current status of the security token and tokenization market? Is it developing at the right pace and direction? Is it following the Gartner Hype Circle just as expected? Are the market players doing a satisfying job in spreading the gospel to the crowd? Or do we need much more market making activities and storytelling to boost the industry further?

These are the questions that I – humbly – am trying to address in this article. Luckily, William Entriken, the developer of ERC-721, turned up along the way with some brilliant comments and answers to some of my questions.

We have seen it before, repeatedly. The excitement in the market when a new and promising technology appears on the horizon and rapidly rises like a shining star. The market and the media cannot stop talking about the potential of this new, technological revelation, and the excitement keeps growing.

Until a certain point. Then suddenly the enthusiasm seems to stall and almost imperceptible it has been replaced by something else, something completely different, like impatience and disappointment, and here and there critical voices start complaining about too few and too slow tangible results of this apparently after all not that promising new technology.

This is – more or less – the storyline of the Gartner hype circle, but luckily it often doesn’t end here, in the phase of impatience and disappointment, which is also known as the “trough of disillusionment”. If the technology in question is genuine, innovative and game-changing (and if nothing goes wrong) the trough will eventually be replaced by the so-called “slope of enlightenment”, which finally will be replaced by the phase that Gartner calls the “plateau of productivity”, where the technology has become a part of daily life and is taken for granted by anyone.


In the latest Hype Cycles for Blockchain from Gartner published in August 2018, anything related to smart contracts and smart assets (which is the closest we get to tokenization in the 2018 edition of the cycles) was still on the rise and had not reached the peak yet. However, that was almost a year ago, and tokenization and security tokens have been the talk of the crypto town for quite some time now – and in some ways, it does feel like we are entering a new phase currently.

To call it a “trough of disillusionment” would be wrong (we are still far from disillusionment, I believe), but it appears as if a kind of waiting game has started recently following a period of intense work by the first generation of security tokens issuance platforms and the first security token exchanges that are now – more or less – ready and open for business.

I have pondered over this situation for a while, asking myself why it seems as if the number of issuance platforms currently almost exceeds the number of STOs, which is – evidently – not sustainable and need to be changed as soon as possible. Furthermore, it seems as if the gospel of security tokens and tokenization of real-world assets is still a well-kept secret outside a relatively narrow circle of crypto and blockchain enthusiasts. And it seems as if the players of the security token space are still too much preaching to the converted instead of looking for ways to tear down the walls to the outside world and start spreading the message to a much broader crowd.

To some extent, this is only natural. It takes time to change the world, and market making is not necessarily a primary competence for most people in the crypto space. On top of that, the message of blockchain-based security tokens using smart contracts is not precisely self-explanatory, and it is a well-known fact that it takes most people time get their heads around it. Furthermore, this is not only a question of understanding something theoretically; to boost the market, you need people to trust the technology, trust the market players (this is about money!) and to make them confident enough to act in practice.

Last week – while still pondering! – I had the pleasure of interviewing William Entriken, who is the American developer behind the non-fungible token standard ERC-721. Obviously, we talked about standardization and non-fungible tokens first and foremost (soon to be published on The Tokenizer), but it was evident that he too was interested in the development of the market as such, and I started asking him about his views, especially regarding whether the growing number of security token issuance platforms will be able to attract enough clients – STOs and investors.

First, he completely dismissed my concern about whether or not we are about to build an industry without clients? (exaggeration furthers understanding):

”The customers are definitely there,” he said and continued with a twinkle in the eye: “They [the platforms] just don’t know how to find them, so the unfortunate thing about these companies is that – God bless them – they’re stupid.”

“They’ll say, okay, great; we’ve solved the problem of issuing tokens. We’ve got a great user interface. It’s low cost. It scales. We’ve got the solution. Great. And we’re going to go on a roadshow. We’re going to tell people about this. Even better. We’re going to go to DevCon and ten other technology conferences. So, then I ask them, how many customers will you find at these ten technology conferences? Well, we’re going to find developers. Yes, but your product’s built. You don’t need developers.”

William Entriken’s point is of course that the way these companies are currently marketing their products is, as he puts it, “terrible” because they are marketing it to their peers, “and in my record, nobody buys blockchain products and services from another blockchain company.”

So, what is the answer? Well, it is relatively simple to point out a solution, although it is not necessarily easy to implement in practice. The solution is about market making through communication, information, education, storytelling and marketing. As William Entriken puts it:

“The smart companies leave the industry and go outside. That is how you announce an enterprise project. You announce it in front of your customers. You do not announce it at Devcon.”

Even though it is still early days in the industry of security tokens and tokenization a lot has been achieved in an impressively short time. Right now, the industry players collectively seem to hesitate, not quite sure what to do next and where to go from here.

If we do not want our fascinating new industry of security tokens and tokenization of real-world assets to get lost in the “trough of disillusionment,” the answer, I believe, is precisely to ‘leave the industry and go outside’. Leave your comfort zone and start mapping your customers, start reaching out to them, start communicating with them, start educating them, start building the market – and then you can start selling your services.

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