#3 Your Math Teacher Was Right

Why fractions will take over the world

1 Concept 💡

Fractionalized ownership provides a way for a group of people to collectively own something. For example, 10 people could each own 10%, 100 people could each own 1%, 1000 people could each own 0.1% … you get the idea.

Fractionalized ownership isn’t something new - its been around since the early 1600s when the first corporations were formed. Owning a share of a company’s stock (Apple, Disney, etc) = owning a fraction of the company. And it turns out this is a win-win proposition:

  • The corporation benefits because it can sell some fraction of its shares to fund research & development, expenses, etc.

  • The shareholder benefits b/c they can participate in the upside as the company grows in value. The stock market is one of the most powerful wealth creation machines ever created.

So um, this already exists - why are we talking about it here?

Let’s get meta for a sec: fractionalized ownership unf only exists for a small fraction of assets and a small fraction of people. Within the stock market, many people who have capital don’t have access to participate due to lack of knowledge, being unbanked, etc. Outside of stocks, many other assets (art, real estate, collectibles) need to be owned by a single entity which pushes the price point out of reach for most people.

Good news: once again, technology (notably blockchain) is coming to our rescue and will democratize fractionalized ownership by providing these three tailwinds:

  1. Make fractionalized ownership easier - Historically, it has been hard to fractionalize something and required TONS of paperwork. Now, you could put an asset “on chain” (on the blockchain), tokenize it with each token representing a % of ownership, and create a market for those tokens with a snap of your fingers (a little hyperbolic, but not too much). You now see this across many different asset classes:

  2. Expand the realm of possible assets that could be fractionalized - Cryptonetworks and NFTs have offered us a glimpse of this, but the future is actually much more exciting (and lucrative). IMO, every sports team, music artist, social influencer and community will one day offer a social token to its fan-base. We’ve already seen examples of this with FriendsWithBenefits and the soccer/football club PSG (whose token spiked up in price when they signed Messi). Having a social token will be EXTREMELY powerful because it aligns the incentives of all parties to grow. Imagine if Olivia Rodrigo had a social token and you were an early holder: you want more people to listen to her so you’d play her music on every TikTok you made -> they in turn would become fans and want to buy the token -> token price goes 📈. Everyone wins.

  3. Making fractionalized ownership more accessible - Instead of dealing with the rigamarole of brokerage accounts, banks, etc - tokens (just like BTC/ETH) will be available to everyone with a phone and a digital wallet.

So what does the future look like? I see someone’s portfolio owning small pieces of many things they have an emotional connection to:

  • A Manhattan penthouse

  • A Picasso

  • LA Lakers digital community

  • 3LAU digital community

  • CryptoPunks NFT

What’s something you wish was fractionalized today that you’d buy in a heartbeat? Reply to this email or comment in Geneva!

2 Themes On Our Mind 🤔 

  1. We’re still looking for amazing learners to be part of cohort #2. If you haven’t gotten to it yet, please share your amazing HAX experience with your friends + fam today and intro them directly to Karthik. We appreciate it as always <3

  2. Last week, Coinbase announced that its buying $500MM and investing 10% of its quarterly profits in crypto! Visa revealed yesterday that it bought a CryptoPunk NFT for $150K! As more and more institutions come into the crypto space, it further crystallizes its staying power (and lowers downside risk).

3 Things To Check Out 🔍

  1. Loved this tweet. Don’t get caught up in the “religion” of being a Bitcoiner, $ETH-only or some other coin. Understand them all, invest in the ones you believe in, and always be learning (HAX has got your back here!)

  2. Remember how clunky DeFi is to use when Brennan did his demo with Compound? Don’t worry - there’s going to be a wave of companies that make this MUCH easier to use and open up access to the far better interest rates you can earn in DeFi compared to TradFi. Burst is a recent one, they are worth checking out:

  3. Check out the great piece 1729.com had on the power of memes.

If you have questions or want to discuss further on any of this, book time in the HAX weekly AMA with me here.

Community Happenings

  • Reminder: Adam is organizing a bi-weekly townhall at our old class time of Tuesdays at 8PM EST (first one is next Tuesday). It’s a great way for us to get together, discuss recent happenings, and have fun. Can’t wait!

Listen 🎧

We had Shriya Nevatia (On Deck Catalyst program director) and our very own Adam Bartley on the show. Enjoy!

Until next time,
Karthik