One thing I’ve always enjoyed doing on a sleepy Sunday afternoon is hunting for the latest tech products. Recently during one of these weekend intellectual excursions, I stumbled upon an interesting new-ish concept: digitizing/tokenizing physical assets.
I’ve been thinking a fair amount lately about where web3 intersects with the physical world, and what it means. Coincidentally my parents also recently asked me to move a bunch of childhood baseball cards, coin collections, and other items of some value from their basement. I guess now that I’m in my mid-30s with a family of my own, they don’t want my childhood stuff in their basement anymore. So here I am, moving at least one hundred pounds of collectibles from one basement to another, and thinking “there has to be a better way.” The concept of tokenizing, not just digitizing, physical assets is incredibly intriguing. Particularly for collectibles.
Courtyard.io, a recent Y-Combinator graduate is doing exactly this: digitizing physical assets. I was intrigued enough to give it a trial run and send in one of my old baseball cards that my parents had kindly asked me to take back: a Randy Johnson rookie card.
In exchanging a few emails with the Courtyard team over several weeks, they informed me that at the moment they are only able to accept graded sports cards from certain reputable grading companies. Makes sense. There needs to be some third-party standard of verification. They don’t want to be in the authentication and pricing business, just the tokenization and asset storage business. They don’t even want to be in the tokenized asset sales game. It is an interesting niche. One I expect we’ll see more of in the coming years.
While I was hesitant at first to mail an item of some financial value to a stranger I’d never met, I decided to take the chance and explore the service. The process was incredibly seamless. The courtyard team made it just about as easy as it could possibly be – down to sending me a prepaid label to ship it.
It ended up taking me longer than I had hoped to just make it to the post office to mail the item. I imagine this will be a growth bottleneck the team will need to solve in order to scale…it’s too expensive to have the item picked up from your home, but for many people like me, it can be a challenge to make time to get to the post office. In many cases, I imagine people will default to not sending the item.
Once I got out of my own way and got it in the mail, it worked like clockwork. Several days later, the Courtyard team emailed me letting me know they had received the item. A few days after that I was notified that the tokenization process had finished, and it was now available for me to view via my wallet on Open Sea (an eBay-like platform for digital assets).
As a very early eBay user (both buyer and seller) back in the mid-90s and then Amazon in the late 90s, I can easily see this type of tokenization of physical assets, and the exchanges like OpenSea that they can now be traded on, becoming the next generation of online marketplaces a la eBay or Amazon. For the crypto-native this isn’t an interesting thing to point out. But remember, at this point, there are still vastly more skeptics / non-adopters, than there are adopters.
Currently, startups like Courtyard are holding the asset for you in a vault-like manner, but it’s easy to imagine a more expanded future. If this gains broader mainstream adoption, I imagine there will need to be some sort of government regulation like how banks are regulated. After all, companies like Courtyard would be taking custody of millions of dollars worth of assets from third parties. From any jurisdiction. So, there are lots of potential regulatory questions.
Just like entire new cottage industries, and lifestyle businesses sprang up around eBay stores, Amazon drop shipping, etc. It is not a stretch to imagine some new types of businesses that are likely to emerge around the tokenization and digital asset marketplace value chain.
While today its sports cards, memorabilia and collectibles, tomorrow it will be planes, trains and automobiles. Consumers will have a choice of purchasing a physical good with an accompanying digital version, a digital-only version, or a physical-only version. Depending on what one wants, there will be varying prices.
The Courtyard.io team does a good job pre-empting potential questions in their FAQ, but I still have a few including:
What happens if Courtyard goes bankrupt? How do I get my items back?
How do I know they did not just take my baseball card, sell it, and give me a JPEG of it?
What is covered and what isn’t in their insurance policy?
How do they make money on this?
The Courtyard team has been kind enough to jump on the phone with me in the coming weeks to talk through their process in greater depth. Hopefully I’ll have some more details to share.
#digitalassets #tokenization #collectibles #alternativeassets #alternativeinvestments #web3