Democratizing Investing: The Power of Tokenization

Published on
October 29th, 2020
61 minutes

“The Gold Bull Market Is Only in the Fourth Inning”

Democratizing Investing: The Power of Tokenization

The Interview ·
Featuring Stephane de Baets and Marc Cohodes

Published on: October 29th, 2020 • Duration: 61 minutes

Stephane de Baets has emerged as a pioneer in blockchain-based real estate investing by leading the development of the security token market. He is the founder and president of Elevated Returns, the international asset management firm which controls the iconic St. Regis Aspen Resort in Aspen, Colorado and other hospitality-centric commercial properties in the United States, Europe, and Southeast Asia. De Baets explains to short-seller Marc Cohodes his efforts to tokenize his entire portfolio of real estate assets. He utilized the Tezos blockchain to tokenize the St. Regis Aspen Resort and partnered with tZERO, a distributed ledger platform and subsidiary of Overstock, to enable the trading of the AspenDigital token. He also discusses opportunities to tokenize restaurants and airlines and breaks down the difference between cryptocurrencies, Initial Coin Offerings (ICOs), and security and utility tokens. De Baets is also the founder and owner of Chefs Club, a restaurant group with a rotating residency of world-class chefs at its locations in Aspen, New York City, and Taipei. Filmed on October 26, 2020. Key Learnings: De Baets visualizes a future where every asset, whether a small business or property, can be tokenized and sold on the blockchain. He thinks there will be a massive transformation of capitalism in which consumer-funded businesses will lead the next wave where consumers become the major stakeholders of a business.



  • DM
    Douglas M.
    17 December 2020 @ 01:58
    Thoughtful... Cohodes asks some good questions here - this was information rich material in an interesting section of the crypto ambit.
  • EO
    Erk O.
    8 December 2020 @ 14:33
    Marc is truly a great interviewer! Thanks
  • aD
    amol D.
    11 November 2020 @ 01:20
    Maybe I'm missing something but the hoteling tokenization sounds like my parent's timeshare...just with a digital token?
    • EO
      Erk O.
      8 December 2020 @ 14:33
      it sounds the same to me as well
  • HT
    H T.
    30 October 2020 @ 09:23
    Gonna call spade for what it is... Putting the "bites" or "hotel time-share" utility token on a distributed ledger is the most inefficient way of creating a rewards program. You don't need to decentralise stuff like that. This is the shitcoine-ry pitch playing out again all over again and it's only been 3 years since the ICO Scambrian explosion. I could be wrong and they find an actual product market fit. I wish Stephane all the best.
    • PS
      Peter S.
      30 October 2020 @ 13:43
      Exactly my first thought as well... I actually really like the way Stephane and Mark think but why is a blockchain necessary for this??
    • PB
      Paolo B.
      30 October 2020 @ 14:46
      If I understand correctly a token cannot be that, or it becomes an equity. In other words tokens must be tied to income statement not balance sheet assets liabilities.
    • JW
      J W.
      31 October 2020 @ 13:25
      Same thought here....I heard him talking and failed to understand why..the security token discussion was interesting and compelling but unless I am missing something (entirely possible :-) the bites thing is a solution looking for a problem.
    • JY
      John Y.
      30 November 2020 @ 04:51
      For land in the 3rd world, maybe tokenization contributes a solution to the dual "title chain" problem and the hypothecation problem, land reform finally unleashing the 3rd world from feudalism. not sure. tokenization may make ready sense for "non-rival goods" (IP)... copyrights, patents, both for finance (input) and output (royalties). Lord knows artists have historically been willfully deprived of their royalties. The Beatles garnered. paltry royalties until they launched their own (Apple) label. I would like to see how "smart patents" were tokenized as to the unique, novel, non-obvious claims in the patent: the "four corners" of the patent.
  • WG
    Wade G.
    9 November 2020 @ 23:45
    Marc is such a genuine and humble guy, I really enjoy every chance I get to hear him. Great interview. Lots to think about. Thank you.
  • RD
    Ryan D.
    7 November 2020 @ 05:14
    Security Tokens make sense and I hope they turn modern Wall St on their head but the Utility Token aspect sounds like "Groupon" on the Blockchain.
    • RD
      Ryan D.
      7 November 2020 @ 05:18
      ....with some Kickstarter thrown in
  • BV
    Bas V.
    29 October 2020 @ 11:39
    I really like the content and ideas of Stephane. Though I appreciate the conviction of Marc, it would be great to have the interview be a little more critical. It's wonderful to fully be on the same page but it becomes hard to ask the tough questions that deliver the extra mile. Example: Great to know that there is nothing preventing athletes to tokenize themselves. But it'd be great to try and dig deeper into why then it doesn't really happen en masse as of yet.
    • TS
      Thomas S.
      6 November 2020 @ 00:01
      with respect to athletes .. check out Spencer Dinwiddie. the "prevention" came from the NBA. said he is not allowed to "assign" his contract to a 3rd party. i believe it got worked out but other leagues may have similar issues ?
  • MP
    Mark P.
    2 November 2020 @ 03:09
    I'm not sure if I were the owner of, say a restaurant, how I would feel about a perpetual discount. How much money would I need to charge for a forever 20% discount that is transferrable? A loan would be eventually paid off but forever discount seems similar to a property tax.
    • TS
      Thomas S.
      5 November 2020 @ 23:52
      resto owner gets time value of money on upfront receipt. use could get pushed out years or maybe never used. obviously if inflation went through the roof very quickly, the owner could get whipsawed but how likely is that ? plus, i thought i heard stephane say that when its actually used, the resto owner "takes it back" and can resell it again. if inflation was way up ... he would sell it for more the next time around and start all over again.
  • TS
    Thomas S.
    5 November 2020 @ 22:56
    Marc and Stephane .... thank you for the discussion. wants me to do more research on securitization and tokenization. Marc ,,, to one of your questions (assuming it was not rhetorical) .... I believe that Spencer Dinwiddie of the Brooklyn Nets NBA team has tokenzed (or is trying to) his contract. Initially, the NBA had issues and "denied" it or made him make some sort of changes.
  • LB
    LUIS B.
    2 November 2020 @ 22:49
    Those utility tokens sound like they could be a better way to measure specific types of price inflation and hedge against it. 50% discount on the total cost of the product: if the price of the product goes up then the value of the utility token goes up as well and vice versa. Bam, inflation tracking index which can be traded 24h/day anywhere in the world! Now imagine if you sprinkle a bit of leverage on top of it.
  • PI
    Paul I. | Contributor
    30 October 2020 @ 01:28
    Marc is an engaging and enthusiastic advocate and Stephane is a really good salesman; but the interview missed the major point. Investments require governance mechanisms which often are important influences on secondary market value e.g. spreads between voting and non-voting shares . Passive outside investors need representation and oversight mechanisms such as boards or general partners with fiduciary obligations . The evolution of laws , tax systems and businesses often require modification of governance mechanisms , business forms , capital structures and/or corporate by-laws over time . How will this be done in tokenized systems? What is the equivalent of shareholding voting, shareholder books and records requests and proxy access in this tokenized world? Liquid markets require financial transparency and governance mechanisms with respect to manager compensation , conflict of interest relationships , financial reporting and accounting oversight. How will these be managed and what rights to receive them will token holders have ? Marc had an outstanding career researching and shorting stocks of companies which were abusive in many of just these areas . His work was facilitated by legal , market ,governance and accounting norms and rules which eventually recognized abuses as they became more apparent . Tokens seem to be in a remarkably primitive stage in addressing such issues. Usually that means early promoters and principals are able to sell investments and structures in the first blush of enthusiasms that subsequently prove unfair and/or costly to the outside investors and they are often remarkably difficult investments to re-sell at anything close to their theoretical net asset values. Until we see a lot more about how tokenized investments will deal with fundamental issues of their operations and corporate governance their theoretical relative cost advantages in being re-traded in blockchain markets ( in this case controlled by the promoter of the underlying investments ) is likely to prove scant consolation.
    • DD
      Dmitry D.
      1 November 2020 @ 10:38
      This is a great point. In my humble opinion tokenisation can truly take off and deliver on the vision only when the underlying cashflows (be it business or any possible stream) are facilitated in full (or thereabouts) by blockchain/smart contract technology, which would allow smart contracts to take care of at least some of the issues mentioned by Paul above and remove a substantial number of links in the chain between the owner and the asset/cashflows.
  • df
    diamantino f.
    1 November 2020 @ 08:42
    Marc that so much for this, something new, fresh air in RV!
  • JK
    John K.
    31 October 2020 @ 02:41
    I love how at the 21 minute mark, baetz is joking that marc has access to his harddrive and marc just deadpans a no lol. I love this guy
  • RM
    Russell M.
    30 October 2020 @ 21:59
    I don't see how there is transparency as to solvency of the restaurants/hotels the tokens gives you a claim on. I don't see how assure that the discount offered to token holders is a real discount from everyone else. The hotel or restaurant could could give discount coupons to any repeat customers that are the equivalent of the tokens. And what happens if the quality of the food/hotel goes down? Seem like there is just too much uncertainty for what you are getting.
  • VS
    Varvara S.
    30 October 2020 @ 06:54
    It is a great interview! Love Marc! I do not see why consumers should or would want to prepay for their consumption when the whole point is to postpone payment. It seems like an idea for places with high rates of inflation which takes out all of the developed world. All in all sounds like Crowdsourcing 2.0. Also can anyone explain all the excitement about the ease of trading private companies' shares? If retail investing in them proliferates further and there is indeed no reason to go public, then what you are going to end up with in the US is just regulation and disclosure standards on par with EM. Which - I can say as an EM person - would be very-very unfortunate.
  • MD
    Matt D.
    30 October 2020 @ 04:28
    Great interview, thanks Marc and Stephane. Well explained. It seems to be putting the risk onto the consumer? I understand the utility tokens have a wider use than a single business (multiple restaurants for eg), yet there is still risk if one of them goes bankrupt (value of the token would fall?) Why would I chose to do that I wonder (buy a token to fund a business)? A discount v the risk I just mentioned? I am assuming there would be an incentive for an investor/user/token buyer. What about localisation - I wouldn't invest in a token (utility) for the US (assuming I won't be travelling there) - yet an Australian investment bank might chose to fund an investment in the US if they see a return. So it might limit the capital allocation? There might be better examples than hotels/restaurants as the concept in general sounds positive. I know however - frequent flyers say - are ok but normally end up being a dud and the company ultimately benefits. Security tokens sound a bit more interesting. Still, early days and great to be hearing about it at the ground level. Thanks.
  • MB
    Muhammed B.
    30 October 2020 @ 02:16
    So the st Regis token is locked up on tzero for a year prior to be traded ?
  • TZ
    Toomas Z.
    29 October 2020 @ 19:15
    Maybe I'm misunderstanding something, but the tokenized utility token idea for restaurants/hotels seems kind of pointless. So you basically get a voucher/discount if you buy the token for that service, but what is the difference with vouchers you get now? Additionally, I quite often get vouchers when I buy something, it makes you feel special, until you realize that there are free 20% off vouchers/other things you can find online, for free, and I can imagine restaurants/hotels having other vouchers that are given to repeat customers or to those that look hard enough (or sometimes discounts are applied to attract customers to low occupancy hotels). How is this product any different from a club/loyalty customer card that exist for most chain venues today? If this product is advertised as a "voucher" or with some other wall street window dressing, it just seems like an absolute nothing burger to me. What I really want, is the ability to buy an actual fractional share in the restaurant/hotel/business and its profits. You could envision a world where you can speculate on businesses in individual cities that are experiencing high growth, or you think will experience an influx of tourists/growth/people flocking to the city to spend their money based on different trends/data acquired from other sources (e.g. traffic, train occupancy, satnav data). This would allow the construction of flexible portfolios that could truly never be constructed before, with innovative risk management approaches and fractional ownership, that would ideally encompass a dividend or some right to the profits generated, or more fractional shares of assets that the money is invested into, based on my own fractional ownership and right to profits. It would also allow businesses that are struggling or need to raise cash (particularly chains), to do so while maintaining majority, or some stake in their business. I imagine that there is some regulatory issue or some other problem why it has not been done this way, or is it just pure greed? I'm really sorry, I would be happy to be proven completely wrong by someone, but if someone tried to sell me a voucher for discounted food in a restaurant or a hotel night in Southeast Asia, I would pass them for a Nigerian salesman that mistook me for my grandmother. On a more positive note, what Elevated Returns has done with tokenization with the Tezos platform is quite interesting and is probably the industry leader in that STO category, but this I would not invest in.
    • LS
      Lewis S.
      30 October 2020 @ 00:00
      What if your restaurant token paid out a share of profit and let you vote on menu items?
    • RH
      Ron H.
      30 October 2020 @ 01:20
      Putting 'time share' vacation real estate, or corporate loyalty programs on blockchains does not strike me as innovative, let alone revolutionary. Does the world really need more corporate marketing? 'Pre-sales' are not going to solve the corporate world's financial issues either. Honestly I'm surprised all of this was treated so enthusiastically here. Securitization of assets, however, is very interesting, as is the Tezos migration. I see that a 'decentralized' automated market maker (AMM) exchange was just launched on Tezos. I would be curious to hear a debate from this 'centralization' perspective on why decentralization will not eventually win out in the end, given the decentralized nature of blockchains--i.e. why a 'native' solution won't prevail, as it were.
    • PB
      Paolo B.
      30 October 2020 @ 01:28
      I understand your point but token is not supposed to be an investment instrument, so that is exactly what they want to avoid, the direct connection to the business enterprise. Threshold is the mentioned Howey test... I take the liberty for a little digression but necessary. In US law Howey test is the result of 1946 US Supreme Court decision against a Florida citrus producer that leased part of its property to finance operations. Was that transaction a security? Since the purchasers "main skills were not the growth of citrus trees" SCOTUS decided that they were deemed as speculators and Howey was supposed to file with SEC. The transaction "involve investment contracts, as so defined. The respondent companies are offering something more than fee simple interests in land...they are offering an opportunity to contribute money and to share in the profits of a large citrus fruit enterprise.". This sentence is key in the US to define what is a security and what is not. Anytime there are 4 key elements: a. the existence of a contract; b. the formation of a common enterprise; c. a promise of profits by the issuer; d. the use of a third party to promote the offering, then you are handing a security. Tokens and crytpo are "in limine" very wary not to go outside that Rumi poetic field where SEC is waiting for it. " Out beyond ideas of wrongdoing and rightdoing there is a field. I’ll meet you there. When the soul lies down in that grass the world is too full to talk about."
    • JH
      Joe H.
      30 October 2020 @ 02:00
      I felt the same way at the outset of the interview and generally am not excited about utility tokens, even as a consumer. That said, I could see the benefit in a scenario where there's a single token usable across multiple businesses (even sectors), where the consumer doesn't need to have 10+ loyalty cards to reap the majority of benefits; one of the primary reasons I don't utilize reward programs broadly is my unwillingness to track 10s of accounts and/or cards. Also, something to be said for not having to provide personal information to all these companies through their sign-ups versus just holding a token. There's likely some market premium to the token price for this and a simple, broad, and, ideally, easy user mobile interface. How much? Who knows, still very early. The rationale provided for focus on utility tokens here I think is reflective of the lack of regulatory clarity within the US; you can hear Stephane de Baets specifically mention the necessity to provide utility tokens, not security tokens, in various contexts. I absolutely agree fractional shares and ownership is what can potentially unlock significant liquidity and value in assets that are not currently liquid, not to mention providing new businesses with lower friction paths forward to capitalization. The US would do well to accelerate a regulatory framework which embraces such innovative technology, beneficial for both the government and public. Big question for the utility token plan laid out in this interview is, if a business joins such a network and accepts the token (say, as 50% of the payment for the service), what rate will they receive when they want to exchange for a stable coin or fiat in the country they operate in? Is it just market rate on ERX, for example, or will there be some fixed exchange value (discounted or premium)? Getting the incentives and market structure/economic environment right early on for both consumer and business is probably a primary challenge in getting "mass adoption". A consumer can easily see the benefit of locking up some cash to receive ~20% discounts/rewards easily across a network of businesses they frequent. However, does access to this network of people holding (Byte/Bite token?) provide a similar economic value to the business? Probably highly context-dependent on the business, but tougher to anticipate adoption, and will be interesting to see how such utility tokens are rolled out (supply, contract mechanics, extent of free market price discovery, etc.). Overall, interesting to see how different entrepreneurs are seeking to gain exposure into tokenization and enjoyed the listen!
  • sh
    steve h.
    29 October 2020 @ 23:12
    I thought Marc did a great interview.
  • mw
    michael w.
    29 October 2020 @ 20:16
    Anyone know why OSTK got killed today?
  • PB
    Paolo B.
    29 October 2020 @ 17:52
    Extremely interesting conversation! Thank you for this! Learnt much more about DLT, ICO crypto and tokens... But I have still so many questions, because it seems to me that a token can pierce the veil of Howey test unintentionally by its use. For example; if an athlete or an artist tokenize him/herself and puts on the platform X tokens based on his/her net worth contract etc and some of those are acquired for example by Y at $1000. If the professional value of that individual each then sold again at $1100 isn't that practically a security? Or more tokens have to be released? And what about if the value goes down? Or am I getting it wrong? BTW love the idea to use it in the hospitality and restaurant industry! Actually all small businesses. Thank you again.
  • JF
    J F.
    29 October 2020 @ 17:08
    Great interview. Have been hearing more about STOs migrating from Eth to Tezos. Will look into Tezos.
  • LK
    L K.
    29 October 2020 @ 16:46
    Very clear explanation of the difference between security and utility tokens. Although Marc doesn't explicitly say it, he makes it seem like many of the most popular crypto assets are unregistered securities.
  • LB
    Leanne B.
    29 October 2020 @ 15:28
    Awesome interview - thank you. I didn’t have any knowledge of this topic and it was very well explained. It is clear to me that tokenization will change the world for the better and eliminate a great deal of systemic risk through consumer owned businesses. I also really appreciate Marc bring his wealth of knowledge and his perspective as an interviewer on RV.
  • MR
    Marco R.
    29 October 2020 @ 15:21
    Unbelievable how early we are, to get information about that stuff. Great 45min, well spent. Thank you so much
  • dd
    diego d.
    29 October 2020 @ 12:56
  • TM
    Tommy M.
    29 October 2020 @ 12:51
    Transcript please?
  • DO
    DIOGO O.
    29 October 2020 @ 10:50
    superb interview! awesome! cheers!!
  • SS
    Steven S.
    29 October 2020 @ 09:30
    Well done. interesting and informative interview!
  • SG
    Sashi G.
    29 October 2020 @ 09:04
    Marc is a heavy investor in Overstock having spoke of it on other media that I follow, apart from his interview with Raoul. I have not listened to this as yet, but a disclosure of this in the description, even in passing, would be good to see.
  • SC
    Sebastian C.
    29 October 2020 @ 08:56
    Marc is so biased when it comes to his trades. He really owns them. Its not something I normally see when speaking to other investors. Great interview and happy to see these investment opportunities reveal themselves here at Real Vision