Achilles is a legendary Greek hero of the Trojan War, renowned for his near-invulnerability except for his heel, his sole point of weakness.

Smart contracts, by design, operate in an isolated environment on the blockchain. They can't directly access real-world data or events happening outside the blockchain. This is where oracles come in. They serve as bridges, fetching external data and feeding it to smart contracts, enabling them to interact with the real world. This is essential for many use cases. Respective examples are

The reliance of smart contracts on oracles also introduces risks. Data manipulation can occur if an oracle's data source is compromised or if the oracle itself is manipulated, leading to incorrect information being fed to a smart contract and causing unintended consequences. Additionally, many oracles are centralized, meaning they are controlled by a single entity or a small group, creating a single point of failure and making them vulnerable to censorship or manipulation.Furthermore, if an oracle goes offline, any smart contracts depending on it may be unable to function correctly.

While oracles pose a significant challenge, the blockchain community is actively working on solutions to make them more secure and reliable. These solutions include decentralized oracles that use multiple independent oracles to reduce the risk of manipulation or downtime, reputation systems that allow smart contracts to select oracles based on past performance and trustworthiness, and security audits to identify and fix vulnerabilities in oracle code and infrastructure.

Oracles certainly represent a key challenge, and any vulnerabilities  can have serious consequences for the smart contracts that rely on them. However, with ongoing development and the implementation of security measures, the risks associated with oracles can be mitigated. Therefore, the goal is to create a robust and secure oracle ecosystem that allows smart contracts to leverage real-world data while minimizing the potential for exploitation.

As reported a few weeks ago, I am the proud owner of the first tokenized shares issued by NYALA Digital Asset AG to its shareholders. Since then, many people have asked me about the differences between traditional and tokenized shares. Here is my assessment, and I would like to extend my thanks to Johannes Schmitt for his input and feedback.

For centuries, the stock market has served as the gateway to corporate ownership, connecting investors to companies and fostering economic growth. Yet, the advent of blockchain technology has thrown open the doors to a new frontier: tokenized shares. These digital representations of ownership promise a paradigm shift, but how do they stack up against their traditional counterparts? To navigate this evolving landscape, it's crucial to grasp the key differences between these two modes of share ownership.

I) Beneath the Surface: The Underlying Asset

The foundation of any share is the underlying asset it represents. Traditional stocks offer a clear-cut claim: ownership in a company, complete with voting rights and a share of profits. Tokenized shares, however, can be more diverse. While some equity tokens directly mirror traditional stocks, others, like asset-backed tokens, might tie your investment to real estate or commodities. Still others, known as utility tokens, simply grant access to products or services, distinct from ownership itself. Understanding the nature of the underlying asset becomes paramount when navigating the tokenized world.

It is also conceivable for the near future that holders of tokenized shares, in need of short-term cash, can deposit their shares into a regulated version of MakerDAO, a decentralized lending platform, in addition to their digital identity, in order to obtain a loan that is instantly disbursed without further credit checks. And all of this, within a few minutes. Such use cases are only made possible through the tokenization of shares on a public blockchain, as this technology enables fast, flexible, and transparent lending.

II) Trading Platforms: From Brick-and-Mortar to 24/7 Markets

Traditionally, stock exchanges have served as the physical battlegrounds for buying and selling shares. With their set hours and reliance on intermediaries like brokers, these platforms provide a well-established, albeit sometimes sluggish, system. Tokenized shares, however, operate on decentralized exchanges, leveraging blockchain technology to offer 24/7 accessibility and a potentially faster, peer-to-peer trading experience. This eliminates the need for intermediaries, but introduces a different set of complexities and requires greater technological understanding.

III) Opening the Doors: Accessibility and Fractional Ownership

One of the biggest barriers to traditional stock ownership is the often-significant minimum investment amount. Tokenization breaks down this barrier by enabling fractional ownership, allowing investors to participate in larger assets with smaller amounts. This democratizes access to investments previously out of reach, potentially fostering broader participation in the market. However, the liquidity and regulatory landscape in the tokenized world can still be less developed compared to traditional markets, adding a layer of risk for the less experienced investor.

IV) Liquidity: Finding Buyers Matters

Liquidity, or the ease with which an asset can be bought and sold, is crucial for investors seeking to exit their positions. Traditional stocks, especially those of established companies, often boast high liquidity, meaning buyers and sellers are readily available. Tokenized shares, however, can exhibit varying levels of liquidity depending on the specific token and platform. Less popular tokens may present challenges when it comes to finding buyers, potentially impacting your ability to cash out your investment.

V) From Days to Seconds: The Speed of Settlement

When it comes to settling trades, the difference between traditional and tokenized shares is stark. While traditional systems can take days to finalize, blockchain-based platforms offer near-instantaneous settlement, potentially allowing for quicker access to your investment proceeds. This speed comes at a cost, however, as the underlying technology and regulatory frameworks for tokenized shares are still evolving, introducing potential new risks and uncertainties.

VI) Fees and Friction: Balancing Cost and Efficiency

Transaction fees are an inevitable part of any investment. Traditional systems involve various players, each taking a cut, which translates to higher fees for investors. Tokenized platforms, on the other hand, often boast lower fees due to their streamlined, peer-to-peer nature. However, it's crucial to factor in the potential volatility and lack of standardization in fees within the tokenized space.

VII) Navigating the Maze: The Regulatory Landscape

The regulatory landscape surrounding traditional and tokenized shares is vastly different. Traditional stocks operate under well-established legal frameworks designed to protect investors. Tokenized shares, however, exist in a nascent regulatory environment, with varying levels of protection depending on the platform and token type. While this dynamic offers flexibility and innovation, it also introduces additional risk for investors due to the potential lack of clear legal recourse.

VIII)  Tokenized Shares Come with New Risks

Both systems also present security risks, with traditional systems facing hacking and fraud, while tokenized platforms grapple with smart contract vulnerabilities and exchange security breaches.

Beyond the Basics: Additional Considerations

Several other factors differentiate traditional and tokenized shares. Some tokenized shares may not offer voting rights like traditional stocks, and distributing dividends can be more complex in the tokenized world. Both systems also present security risks, with traditional systems facing hacking and fraud, while tokenized platforms grapple with smart contract vulnerabilities and exchange security breaches.

Example: How Tokenization Can Expand Islamic Real Estate Investment for Smaller Institutions 

Islamic banking banks typically buy building projects and resell them to the buyer with a markup, instead of giving out loans. This process works well but includes an extra asset transfer, making it complex and only feasible for large banks that can afford entire projects. However, tokenizing large real estate projects could also allow smaller and mid-sized institutional investors to enter the market.

Making the Choice: Balancing Innovation and Established Systems

The world of share ownership is at a crossroads. While tokenized shares offer innovation, faster settlement, and potentially lower fees, they also exist in a less regulated environment with evolving technology and higher inherent risks. Traditional stocks, on the other hand, provide established regulations, investor protection, and high liquidity, but with limitations in accessibility and potentially higher fees. Ultimately, the choice between these two modes of ownership depends on your individual investment goals, risk tolerance, and technological comfort level. Thorough research and due diligence are crucial before diving into.

In conclusion, while traditional and tokenized shares share similarities in their function as investment instruments, they diverge significantly in their underlying assets, trading platforms, accessibility, settlement times, fees, regulation, and liquidity. Investors must carefully consider these dimensions when choosing between the two options, weighing the advantages and disadvantages to align with their investment goals and risk tolerance.

1️⃣ A New Era of Global Financial Integration Unfolds

By now, Bitcoin has established its presence in the world's most influential financial hubs, gaining recognition even from global banks and asset managers who were once critical.

2️⃣ Breaking Down Investment Barriers

The introduction of Bitcoin spot ETFs has simplified access to Bitcoin for investors previously constrained by regulatory limitations. Investors of all kinds can now participate in buying and selling, similar to traditional stocks, through regulated platforms.

3️⃣ Navigating the Price Structure of Bitcoin ETFs

While Bitcoin ETFs offer a convenient way to invest, there are additional costs involved, such as bank/brokerage custody fees, transaction costs, and spreads. This cost structure differs from holding one's own bitcoins, which incurs no management or custody fees.

4️⃣ #NotYourKeysNotYourCoins: The Vital Principle of Bitcoin Ownership and Security

The narrative #NotYourKeysNotYourCoins emphasizes the importance of maintaining control over one's Bitcoin. Bitcoin's core principles include decentralization, transparency, and resistance to censorship and manipulation.

5️⃣ Bitcoin is More than Speculation

Bitcoin is positioned as more than just a speculative investment. It can be a valuable asset for people in countries with corrupt leaders, dictators, or fragile financial systems, offering a way to escape currency devaluation and exclusion from the traditional financial system.

6️⃣ Inflation Resistance

Bitcoin's predictable nature as a form of currency without inflation sets it apart from traditional fiat systems. This characteristic gains significance when considering the substantial interest payments made by countries like the USA on their debt.

7️⃣ The Need for Custodial Diversity

Most Bitcoin ETF providers utilize Coinbase as a custodian. Fidelity stands out as the only provider operating with "self custody." Large investors seek diversification, not only in investment products but also in custodial practices.

8️⃣ Unraveling the Complex Factors Behind Bitcoin's Underperformance

Despite substantial capital influx into Bitcoin ETFs, the expected positive impact on Bitcoin's price hasn't materialized as quickly as anticipated. Factors like GBTC sales, low short-term demand for ETF-BTCs, and resistance from traditional financial players contribute to this underperformance.

The cryptocurrency and blockchain industry has the potential to reshape our perspectives on money, ownership, and trust. Cryptocurrencies and blockchain technology facilitate faster, cheaper, and more secure transactions, extending beyond digital currencies to include ICOs, STOs, and NFTs, among others. The current market cap of cryptocurrencies and blockchain tokens is approximately $1.76 trillion, representing nearly 2% of all global money.

As of August 2023, major cryptocurrencies such as Bitcoin, Ethereum, Ripple, Cardano, Dogecoin, and Tron are experiencing over 8 million daily transactions, a significant increase compared to August 2016.

Back in 2015, the World Economic Forum predicted that by 2027, around 10% of the global gross domestic product (GDP) would be stored on blockchain technology. Current trends indicate that this projection is on track. Notably, recent SEC approvals for cryptocurrency ETFs and new regulations like the European MiCA (Markets in Crypto-Assets) regulation are expected to further propel the crypto industry.

While the cryptocurrency and blockchain industry is still in its infancy, it is crucial for members of the board of directors to delve into key themes before these factors impact a company’s business model. It is recommended to gain insights into potential disruptions, new business opportunities, basic concepts and technologies, relevant laws and regulations, potential risks, and the dynamics of an emerging industry.

1. Potential disruption of several industries 

There are several industries that are potentially disrupted by cryptocurrencies and blockchain technologies. Members of the board of directors should observe the following industries and look for signs of disruption.

Supply chain management: Blockchain technology can enable increased transparency and security in supply chain management, allowing for more efficient tracking of goods and materials.

Real estate: Blockchain technology can be used to create a more efficient and transparent system for buying and selling property, as well as for tracking and managing property ownership.

Healthcare: Blockchain technology can be used to securely store and share medical records, as well as to facilitate more efficient and secure communication between healthcare providers.

Gaming & entertainment: Cryptocurrencies and blockchain technology can be used to enable new forms of digital ownership and monetization of in-game assets.

Retail: Cryptocurrencies and blockchain technology can be used to enable secure and transparent transactions between retailers and customers, as well as to improve supply chain management and inventory tracking.

Financial services: Cryptocurrencies and blockchain technology have the potential to disrupt traditional financial services by providing a more inclusive and accessible way for individuals and businesses to access financial services, such as banking and payments.

3. Basic concepts & technologies

It is recommended to introduce the basic concepts and technologies behind cryptocurrencies and blockchain to the members of the board of directors. Decentralization, immutability, transparency, cryptography, smart contracts, distributed ledger, limited supply, anonymity, borderless and digital are the most central ones.

Decentralization: Blockchain technologies and respective cryptocurrencies are decentralized, meaning they are not controlled by any single entity or organization. Crypto currencies are not controlled by any central authority such as a government or central bank. This allows for increased autonomy and control for users over their own funds.

Immutability: Once a transaction is added to a block and the block is added to the blockchain, the information in that block cannot be altered. This ensures the integrity and immutability of the data and crypto currency transactions stored on the blockchain.

Transparency: Blockchain technology allows for increased transparency by providing a public, tamper-proof record of all crypto currency transactions.

Cryptography: Blockchain and crypto currencies use cryptography to secure and protect transactions, making it a secure technology for storing and sharing sensitive information. This also ensures the integrity and security of crypto currencies.

Smart Contracts: Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. These contracts can be stored and replicated on the blockchain network. 

Distributed Ledger: A distributed ledger is a database that is spread across a network of computers. Each copy of the database is identical and is updated simultaneously.

Limited supply: The total supply of most cryptocurrencies is limited, meaning that there is a maximum number of units that can be created. This can help to prevent inflation and ensure the value of the currency remains stable.

Anonymity: Cryptocurrencies can provide a high level of anonymity for users, as transactions are recorded using a public key rather than a name or personal information.

Borderless: Cryptocurrencies can be sent and received from anywhere in the world, and the transaction can be done almost instantaneously, regardless of geographical boundaries.

Digital: Blockchain & cryptocurrencies exist only in digital form and are stored and transferred electronically.

4. Relevant laws & regulations

Members of the board of directors should consider a number of laws and regulations related to cryptocurrencies and blockchain when developing their policies and procedures. It is important to note that the laws and regulations surrounding cryptocurrencies and blockchain technology vary by jurisdiction.

In June 2023, the European Union implemented one of the most advanced crypto regulations: 'MiCA' - The Markets in Crypto Assets Regulation. 

Some of the most relevant general laws are AML, KYC, taxation, securities, GDPR and smart contracts regulations:

Security risks: Cryptocurrencies and blockchain transactions are vulnerable to hacking, fraud, and other types of cyber attacks, which can lead to financial losses for the company.

Compliance risks: Cryptocurrencies and blockchain technology are still largely unregulated, and companies may not be fully aware of the legal and compliance requirements related to their use.

Volatility risks: The value of cryptocurrencies can be highly volatile, which can lead to significant financial losses for a company if they are holding a significant amount of cryptocurrency assets.

Operational risks: Implementing and using blockchain technology can be complex and may require significant resources and expertise, which can lead to operational challenges and disruptions for a company.

Reputational risks: Companies that are associated with cryptocurrencies and blockchain technology may be perceived as risky or untrustworthy by some customers, investors, and partners.

6. Dynamics of the early industry

The early cryptocurrency and blockchain industry sometimes feel like Wild West and has several key dynamics that members of the board of directors should be aware of.

High volatility in prices, as the market is still relatively new and uncertain. 

A high degree of speculation, as many investors buy cryptocurrencies in the hopes of making a quick profit.

A lack of regulation, which has led to a Wild West atmosphere and a lack of protection for investors.

Innovation and experimentation, as many companies and individuals are working to find new use cases for blockchain technology.

Heavy competition, as there are many different cryptocurrencies and blockchain projects vying for market share.

High growth potential, as the technology is still in its early stages and has the potential to disrupt a wide range of industries.

High speed of technological changes with new crypto currencies and different blockchain versions coming up every now and then.

Finally,  it's worth noting that while the crypto-currencies and blockchain industry is still in its early stages, regulations and institutional involvement have been increasing which may change the dynamics of the industry.

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1️⃣ Check the Backgrounds of the Leadership & Team Members

One of the fundamental aspects of investing in cryptocurrencies is to thoroughly investigate the individuals behind the project. Examining their LinkedIn profiles, CVs, and assessing whether they are part-time or full-time contributors can provide valuable insights into their commitment and expertise. Additionally, evaluating their track record in previous projects can be instrumental in gauging their capability and reliability.

2️⃣ Code Activity Speaks For Itself

Most crypto projects are open source. Platforms like GitHub, serving as the repository for open-source code, are a treasure trove of information for cryptocurrency investors. Analyzing the project's coding activities can provide insight into the development team's breadth, dedication, and competence. Consistently active and transparent activities from numerous developers, along with progress updates, indicate a healthy and vibrant development community.

3️⃣ Test the Available Tools

The usability and functionality of the tools provided by a cryptocurrency project are crucial. Testing the website, apps, wallets, and other market-related tools can reveal the functionality, the convenience and user experience offered. A broad and deep ecosystem provides good indications of the seriousness and success prospects of a crypto project.

4️⃣ Assessing Exchange Support

To make informed investment decisions, it is crucial to assess the exchanges that support a specific cryptocurrency. Liquidity and market accessibility are directly influenced by the platforms on which a cryptocurrency is listed. Investigating the legal standing of these exchanges in relevant countries, their market approach, and any noteworthy stories associated with them offers valuable context for shaping a well-rounded investment strategy.

5️⃣ Understanding Tokenomics

In grasping the intricacies of tokenomics, one must delve into the fundamental principles governing a cryptocurrency's economic framework. This involves examining factors such as token supply, utility, governance mechanisms, and incentive structures. A comprehensive understanding of tokenomics is essential for navigating the dynamic landscape of decentralized economies and making informed investment decisions.

6️⃣ Understanding the Underlying Business Model

Investors should delve into the underlying business model of a cryptocurrency. How does the project generate value for its users and stakeholders? Understanding the utility and purpose of the coin can help assess its potential for long-term success.

7️⃣ Evaluating the Potential of the Coin

Assessing the potential of a cryptocurrency involves considering factors such as its use case, technology, and market demand. Investors should look beyond short-term fluctuations and focus on the project's long-term viability, scalability, and relevance in the ever-evolving crypto landscape.

8️⃣ Analyzing Sales and Social Media Strategy

The success of a cryptocurrency often relies on effective sales and social media strategies. From expert forums like Reddit and Bitcointalk to mainstream platforms like Facebook and Twitter, understanding how the project is perceived across different channels is crucial. Additionally, evaluating its international reach, including strategies in key regions like Asia, China, and India, can provide insights into its global potential.