Industry 4.0 and digitization. These keywords describe ongoing processes that will change our economy in the long run. Because even beyond the information-hungry tech giants, the trend toward digitization is opening up a field for new business models. Blockchain technology and token-based forms of financing could play an important role here.
At least this is the thesis of the economist Philipp Sandner, who wrote in an article for Forbes dreams of a “Tractor-as-a-Token” model. The title alone is reason enough to take a closer look at Sandner’s thoughts.
Digitization means more flexibility
The starting point for all these considerations is the realization that digitization is also paving the way for flexible and dynamic business models in the productive sector. Sensors and the Internet of Things (IoT) finally make it possible to measure the actual use of comparable machines and capital goods: the tractors that give them their name. If companies previously sold their machines to commercial customers, they are now increasingly offering subscriptions or comparable “pay-as-you-go” models. Billing is based on usage, often fully automated.
These usage-based business models give manufacturers access to new groups of customers. In this way, it opens up additional sources of income. However, on the financing side, digitization also requires more flexible methods of raising capital.
From flexible loans to the token economy
The first flexible, data-driven financing strategy Sandner discusses are so-called pay-as-you-go loans. In Germany, for example, Commerzbank has been offering this financial product since 2018. Company A sells a machine to company B, which finances it with a loan. Typically, Company B would always pay the same loan principal. With a pay-as-you-go loan, the amount of the refund depends on the actual use of the machine. In phases of lower productivity, the amount of the refund decreases accordingly.
In Sandner’s scenario, however, things seem slightly different. Company A did not sell its machine to Company B at all, it only loaned it. This ensures a higher capital requirement on the part of the loan company in accounting. A pay-as-you-go loan can help in this scenario, especially for Company A. At a time when the company’s own machines are barely being used, the repayment amount would automatically decrease here as well. Liquidity would be guaranteed.
Instead, tokenization allows a financing option that does not require banks. If machines, say a tractor, are allocated as tokens, even small investors can invest in them. The acquisition of the tokens assures them a part of the profits generated by the use of the machine. The value proposition of the Internet of Things and blockchain technology would be confirmed here in the most impressive way. Because while selling tokens is relatively quick and easy, an automatically calculated profit distribution is guaranteed.
Decentralization and flexibility: The genuine advantages of digital assets would be realized in such business practices. Hence, tokenization also promises interesting use cases in the decentralized power grid of the future.
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