Financing with Crypto Assets

Abstract

Money appears to cover the deficiencies of barter, and cryptocurrencies appear, as an evolution of money. Entrepreneurs have in cryptocurrencies a new asset to invest their treasury and an alternative means of payment to “fiat” money. Moreover, blockchain technology has multiple applications in the real world that are very useful for the entrepreneur. Security and utility tokens are a new source of financing and a tool to foster relationships with their customers or fans, and NFTs allow a safe and no fake art market.

1 Introduction

Coins appeared in the seventh century BC to facilitate trade, replacing barter as a means of payment, with three basic trade functions: to be a means of payment, to be a store of value that allows wealth to be accumulated, and to be a good that facilitates product valuation. Since then, money has evolved slowly in its conception, initially with the appearance of banknotes, and very rapidly in recent years with the appearance of fiat coins and cryptocurrencies.

In this chapter, we will go back to the origin of coins to learn about their functions and analyze their evolution until the appearance of cryptocurrencies and crypto assets. With the emergence of Fintech companies that offer services to buy, sell, and hold them, these new digital assets are becoming a new source of financing for companies and a type of alternative investment to traditional investments.

Blockchain technology is finding new use cases in the real business world. With the appearance of security tokens and utility tokens, we find a new form of financing for companies, both in their initial stages (startups) and in more mature phases. Financing through tokens will allow the democratization of investment, like other sources of financing such as crowdfunding, with the power and security offered by blockchain technology.

2 The Origin of Money

Although some authors do not agree with the origin of money as described in texts on money and banking, the origin of money begins with trading through bartering, followed by the appearance of coins and finally money, identified as the instrument that allows us to fulfill our obligations and is related to legal tender. Its emergence gave rise to a boost to the economy due to different characteristics as follows:

• 1. Means of payment: Money is universally accepted. This eliminated the inefficiencies of barter by facilitating exchanges. Everyone could trade with everyone and not just those who were interested in exchanging the goods they owned.

• 2. Deposit of value: The first coins had to have some characteristics of durability or permanence over time to allow savings. This enabled the minting of metals of greater or lesser value in order to transfer the value of transactions over time.

  The need for coins to be durable in order to fulfill their function as a store of value resulted in delaying the appearance of banknotes, and it was not until the seventh century in China that they began to be used officially. In Europe, banknotes came into use later, with paper money being introduced in Europe in the mid-seventeenth century in Sweden, although not as a means of payment, but as a receipt that an amount of gold or another metal had been deposited in the Bank of Stockholm.

• 3. Unit of account: It should be the unit of measurement in which the prices of all goods and services in the economy are expressed. Money is the numeraire of the economy, which facilitates the valuation of products and services.

The world’s first coin appeared in what was known as Asia Minor, which is located in present-day Turkey, in the seventh century BC, and was a natural alloy of gold and silver known as “electrum.” Shortly afterwards, coins began to be minted by the orders of Darius of Persia, and later in Greece, almost simultaneously, other types of coins also appeared in China and India.

Coins proliferated rapidly in all the developed countries of the world. Monarchs, aristocrats, cities, and institutions all began to mint money with their identifying seal to certify the authenticity of the coin’s metallic value. Some of the earliest coins had a very stable composition, such as the drachma issued in Athens in the sixth century BC, containing around 65–67 grams of fine silver. Gold and silver coins used to circulate outside the country that issued them because of their intrinsic value. For example, the Spanish silver peso, whose material came from the mines of Peru and Mexico, became a common coin in China from the sixteenth century onwards.

From this point onwards, a monetary system originated, whose characteristics have remained constant for thousands of years. With the emergence of the gold standard, it was established that one currency unit was equivalent to a specific amount of gold and governments guaranteed the conversion of currency into a specific amount of gold and vice versa. Before the implementation of the gold standard, countries used gold and silver as a means of international payment, with the value of the different coins and banknotes issued in a country being equivalent to that country’s gold.

After World War I, there was a decline in the gold standard, when the countries involved in the war began to print money without supporting it with this precious metal. The major European powers felt the need to complete large military projects. The financial burden of these projects was so great that there was not enough gold at the time of the exchange for all the excess currency that governments were printing. In 1971, the United States abandoned the gold standard, leading to the break-up of the system after World War II, with the dollar becoming the world’s reference currency. The fall of the gold standard led to establishing an economic system based on trust. This resulted in the emergence of fiat money, whose existence is due to the authority that governs it, from the Latin “fiat,” which means “let it be done” or “let it be so.” It is a type of money that is characterized by its inconvertibility and lack of intrinsic value.

As fiduciary money, its value is formed on the basis of the economy, political situation, and foreign trade of the issuing country, i.e., on the basis of a more or less free supply and demand process. For example, if a country exports a large number of products or attracts foreign capital, the demand for that currency will increase, and it will therefore become more expensive in relation to the currencies of other countries (Fig. 1).

Fig. 1

Evolution of money. Source: Own elaboration

3 The Foreign Exchange Market

It is the largest financial market in the world with an average daily traded volume of around 5 trillion dollars. To get an idea of the size of the foreign exchange market, in 1 day a volume equivalent to the average monthly volume recorded on the Wall Street stock exchange is traded.

Most of the transactions involve the purchase and sale of financial assets denominated in a different currency, which implies an associated foreign exchange transaction, so this market is quite independent of actual business transactions. This implies that exchange rate developments cannot be explained by trade flows alone.

There are two important variables to be considered with respect to currencies, the exchange rate and the quotation.

The rate at which one currency is exchanged for another is called the exchange rate, which we must differentiate between:

• Nominal exchange rate: the relative price of two currencies, expressed in monetary units.

• Real exchange rate: used to measure the purchasing power of a foreign currency, it allows us to know the purchasing power of one currency against another.

• Bilateral exchange rate: the exchange rate that is measured relative to another currency.

• Effective exchange rate: weighted average of the bilateral exchange rates of a currency in relation to the currencies of the area’s main trading partners. The weights used reflect each partner’s share of trade in the area.

As for the quotation of the rates, it is no more than a quotient between the monetary units of the two currencies involved in the transaction. Thus, we can have:

• Direct quotation: Number of local currency units per foreign currency unit. For example, if we say that the exchange rate is 0.91 EUR/USD, we are saying that for each US dollar we would get 0 .91euro cents.

• Indirect quotation: This is the opposite, i.e., the number of foreign currency units per local currency unit. If we say that the exchange rate is 1.10 USD/EUR, we are saying that for every Euro exchanged, we will receive 1 US dollar and 10 cents.

Having analyzed these two variables, it is important to mention the different types of currencies in terms of convertibility, the power of the holder of a currency to convert it into another currency of the holder’s choice. These are convertible and non-convertible currencies. In Europe, only the currencies accepted by the ECB are admitted to trading. To facilitate the identification of each currency, there are different types of coding, one of the most widely used being ISO coding.

The most important fiat currencies are:

• 1. Dollar (USD): The US dollar is currently the most important currency, as it is the most widely used globally, with an average daily turnover of USD 2.2 trillion. In addition, this currency is also used in other countries in Latin America and the rest of the world, either as an accepted means of payment or as a reference currency to which the exchange rate of the currency of these countries is anchored.

• 2. Euro (EUR): Although its creation dates back to the beginning of 2002, it is now the second most important business currency, being pegged to 19 of the 28 countries of the European Union.

• 3. Yen (JPY): Japan’s official currency has its main value in being one of the reserve currencies of choice for Asian countries. It is also the third most traded currency, with a trading volume of close to $550 million.

• 4. Pound sterling (GBP): The British currency holds the title of the oldest currency still in circulation, as well as being the fourth most traded currency in the world, with almost 324 million dollars a day.

• 5. Swiss franc (CHF): Although it is not one of the most traded currencies today (it is in the seventh place with a daily turnover of $122 million), it gained prominence on the international scene during the First and Second World Wars, when it established itself as a reserve and exchange currency during those years.

There are two differences between cryptocurrencies and “fiat” money. The first is found in the way in which they are issued; while fiat money is issued by a state or public institution, cryptocurrencies are issued in a decentralized manner. The second difference is that cryptocurrencies are not physically minted.

These two differences do not affect the way in which some currencies are exchanged for others, for this reason it is necessary to know the currency market to understand how to invest in crypto assets.

4 Interest Rate Parity and Purchasing Power Parity

Financial assets such as stocks or bonds can be valued by discounting the cash flows they generate. But currencies are an asset that does not create cash flows, so how can they be valued?

Interest rate parity means that the interest rate differential between two countries is equal to the differential between current and future exchange rates. It means that if there is a positive difference in interest rates, there must also be a positive difference in exchange rates. Thus, the future exchange rate will be higher than the current one. Therefore, the country with the highest interest rate will have to depreciate its currency in the future.

This relationship is what avoids a possible arbitrage in the foreign exchange market, because otherwise someone could finance himself in the country which offers lower interest rates and buy the other currency, obtaining a risk-free exchange.

As for the theory of Purchasing Power Parity, it proposes that the exchange rate between the currencies of two countries should allow the same goods and services to be purchased in each other’s currency, i.e., for the purchasing power to be equivalent. It is currently used by the International Monetary Fund to adjust the nominal GDP per capita of each country and make a direct comparison of different economies through their GDP.

Currencies are associated with a country that has an inflation rate and an exchange rate, but cryptocurrencies are a global and decentralized phenomenon. Although there are different attempts to value cryptocurrencies (e.g., based on the cost of their mining) for the moment there is no consensus on their use, and we can conclude that their price is determined exclusively by supply and demand.

5 Cryptocurrencies: What Are They and How Did They Appear?

A cryptocurrency or crypto asset is a digital currency that fulfills the three main functions that are attributed to money.

• Means of payment: In this case, as it is a virtual currency and is not physically minted in the form of banknotes or coins, it can only be accepted as a means of payment in digital transactions.

• Deposit of value: It is an asset that can be exchanged for fiat currencies at the market exchange rate and is, therefore, a store of value, although with a certain level of risk, as it has been observed that the exchange rate volatility between cryptocurrencies and the dollar (the main reference currency) has historically been very high.

• Unit of account: In the same way that goods and assets can be valued in fiat currencies, they can be valued in cryptocurrencies according to that exchange rate.

They are considered an alternative investment asset to traditional investments, which allow for investment portfolio diversification and have similar characteristics to a safe haven value of other types of investments such as gold (Bouri et al. 2017, 2019; Paule-Vianez et al. 2020). For many users, they are considered a type of high volatile investment due to their high level of speculation (Baur et al. 2018), with revaluations of 122% and 1360% during 2016 and 2017, respectively. In fact, cryptocurrencies are not the first digital currencies, as digital money has been used for years, such as debit and credit cards, transfers, etc.

In addition to being an asset in which companies can invest their treasury, more and more companies are accepting cryptocurrency as a means of payment for their products and services, especially those that operate globally and in the technological field. Due to the appreciation that cryptocurrencies have had since their origin, there are real fortunes based on these assets. Offering the possibility of disinvesting cryptocurrency by buying goods and services is an option that can open up new markets for companies.

In 2008, Satoshi Nakamoto developed the code to create and exchange Bitcoin and introduce it as a payment, that is, “a new electronic money system that makes full use of a peer-to-peer (P2P) network, with no trusted third party” (Ammous 2022).

About why cryptocurrencies appear, in the press we can read the most disruptive interpretation: A new decentralized monetary model is sought, independent of states and central banks. Alternatively, a more materialistic interpretation can be reached: Cryptocurrencies appear because, in a context in which all registry systems are centralized, there is an unsatisfied demand for free, secure, and decentralized registry systems.

6 Trading with Cryptocurrencies

Having analyzed the concept of cryptocurrency, it is essential to study how buying and selling cryptocurrencies works. Essentially, the cryptocurrency market follows the same characteristics as the foreign exchange market described above, which offers the possibility of buying and selling currencies bilaterally and through exchange markets:

• Brokered, through an exchange that puts supply and demand in contact with each other.

• Bilaterally, through a P2P “Peer to Peer” or “Person to Person” exchange. It is a form of exchange in which both people agree with each other to make the exchange. P2P exchanges allow market participants to trade directly with each other without any third party to process all trades.

Advantages of P2P trading:

• The price is agreed between the parties.

• There can be total anonymity if desired.

• There are no transaction records.

• Agreed prices can be higher or lower than market prices.

• Greater availability of means of collection and payment.

• Low commissions.

Disadvantages of P2P trading:

• Security, as it is often unknown with whom the exchange is made

• Less liquidity, as we have to find someone who is looking for the same amount as us

• More complex, as it not so simple at the beginning

• Slower when it comes to exchanging

• The need to negotiate the price

Finally, with regard to the taxation of cryptocurrencies, the tax agency indicates that investing in cryptocurrencies is taxed in the same way as investing in any other asset. The sales made are taxed in personal income tax, in the savings tax base as capital gains from a purchase and sale.

7 What Is Blockchain?

Blockchain technology was first introduced by Satoshi Nakamoto. It is at the basis of all cryptocurrencies, such as Bitcoin, and is used by the financial industry and applicable for different areas. It can be defined as a shared, unalterable ledger that facilitates the process of recording transactions and tracking assets in a business network. Virtually anything of value can be tracked and traded on a Blockchain network, reducing risk and costs for all involved.

Whenever a transaction takes place, it is recorded as a “block” of data. These transactions show the movement of an asset, which can be tangible (a product) or intangible (intellectual). The data block can record the information of your choice: who, what, when, when, where, how much, and even the condition, such as the temperature of a food shipment.

Each block is connected to the previous and subsequent block, forming a chain of data as an asset moves from one place to another or changes ownership. The blocks confirm both the exact time and sequence of transactions and are securely linked together to prevent them from being altered or inserted between two existing blocks – the transactions are linked together and form an irreversible chain, a blockchain.

Each additional block reinforces the verification of the previous block and, therefore, of the entire blockchain. This makes such a chain tamper-proof, which is the main advantage of inalterability. This prevents altering the chain and creates a reliable distributed ledger of transactions.

The advantages of blockchain networks include the following:

• Increased confidence: If you use a private network to which only members have access, with blockchain you can be assured that you will receive accurate and timely data and that your confidential blockchain records will be shared only with specific members of the network whom you have authorized.

• Increased security: All network members must agree on the accuracy of the data, and all validated transactions are unalterable, as they are permanently recorded.

• Greater efficiency: Time wasted on record reconciliation actions is eliminated. In order to speed up transactions, a set of rules, called a smart contract, is stored on the blockchain and executed automatically.

8 Types of Blockchain Networks

Cryptocurrencies are usually registered in public networks, but there are also other types of blockchain networks that we must mention:

• Public blockchain networks: A public blockchain is one that anybody can join and participate in, such as bitcoin. They have very little privacy for transactions and security is weak. Examples of public blockchain networks are Bitcoin, Ethereum, or Polygon.

• Private blockchain networks: A private blockchain network, similar to a public blockchain network, is a decentralized peer-to-peer network. However, a single organization manages the network and controls who is allowed to participate, decides when to run a consensus protocol, and is responsible for the shared ledger maintenance. A private blockchain network can be run behind a corporate firewall and can even be hosted locally.

• Licensed blockchain networks: Companies that establish a private blockchain network will generally do so on a licensed blockchain network. It is important to note that public blockchain networks can also be authorized. This imposes restrictions on who can participate in the network and in which transactions. Participants will need permission to join.

• Consortium blockchain: Several organizations can share the responsibilities of maintaining a blockchain. These preselected organizations determine who can send transactions or access data. A consortium blockchain is ideal for businesses when all participants must be authorized and have a shared responsibility.

9 Cryptocurrency Mining and ICOs

Cryptocurrencies are generated through the digital mining process, whereby cryptocurrency units are rewarded for investing computing power in its public blockchain network to process transactions, ensure network security, and keep all participants in sync. Two important concepts need to be analyzed:

• Miners: Anyone can become a cryptocurrency miner by using specialized software and hardware. Mining software looks out for transactions that are announced over a peer-to-peer network and performs the appropriate tasks to process and confirm those transactions.

• Gas fee: Miners perform this work and can thus obtain fees paid by users who want their transactions processed on that network faster, in addition to receiving cryptocurrencies, which are created based on a fixed formula.

To mine cryptocurrencies, be it Bitcoin, Ethereum, or others, specialized equipment is required. This equipment is known as cryptocurrency “miners.” They are available from a number of global retailers.

The factors to consider in assessing the viability of a cryptocurrency mine are as follows:

• The equipment and its cost

• The competition at that moment

• The price of electricity and the energy consumption of being connected 24 hours a day

• The cooling required by the equipment and its corresponding energy

• The profitability of the cryptocurrency at that time

• The cryptocurrency we want to mine will vary from one to another

Alternatively, the cryptocurrencies can be issued in an ICO. An Initial Coin Offering (ICO) is a type of financing using cryptocurrencies. In an ICO, cryptocurrencies are sold in the form of “tokens” to speculators or investors in exchange for traditional cash or other cryptocurrencies such as Bitcoin or Ethereum (Hacker and Thomale 2018). The tokens are sold as “future” units of the coin when the ICO reaches its target, and the project is launched. They are smart contracts based on Blockchain technology that allow users to obtain external funding by issuing tokens without the need for intermediaries and financial globalization, as well as to raise capital much more quickly from the sale of tokens to different users.

ICOs do not have a good reputation nowadays. Projects have been observed that have raised financing with the sale of cryptocurrencies in the ICO. That money had to be used to develop a project whose utility pivoted on that cryptocurrency, but in some cases, nothing was developed. As a cryptocurrency is just a means of payment, there are no rights associated with it and investors felt cheated. This bad experience is a disincentive for entrepreneurs who want to finance themselves through an ICO.

10 Asset Tokenization

A blockchain token is a digital representation of a value or utility. Its registration on the blockchain ensures the record of token transactions taking place between people or entities. Asset tokenization is the process of generating tokens that digitally represent the securities or rights that can be legally issued by any natural or legal person, as well as any digital asset representing a work of art or a collector’s item.

This tokenization process provides the following advantages for investors:

• It democratizes investment: It allows retail or wholesale investors to invest in financial or non-financial assets with minimal capital or to diversify the investment portfolio.

• Liquidity: It provides a bilateral secondary market that allows for immediate liquidity of the investment.

• Transparency: It facilitates free determination of prices showing the market value of assets.

• Security: Blockchain technology, as it is based on a distributed system, which is practically impossible to hack.

11 Types of Tokens

There are different types of tokens. All of them are recorded on blockchain networks, but each one has different characteristics:

The Security Token is a hybrid between company shares or a financial asset and a cryptocurrency, with the advantage of having a lower cost than stock market shares and the security and advantages of blockchain technology. Security tokens are a type of cryptographic token linked to traditional security (financial assets).

Blockchain technology enables security tokens to be digitalized, providing them with many advantages that reduce costs, time, and bureaucracy. Security tokens provide their owners with rights and obligations:

• Political rights: For example, voting rights

• Economic rights: For example, the right to participate in dividends

There are many types of security tokens according to which asset is representing:

• Equity: One of the most common is traditional company shares, which instead of being listed in a tradition stock market, or being represented physically, each share of the company is represented by a token recorded in a public blockchain network (Ethereum, Polygon, etc.).

• Debt: Entrepreneurs can go to the bank to request a loan, or they can issue tokens representing that debt and finance themselves through the sale of tokens. The owner of the token will have the following rights associated with the loan:

  • Right to receive interest, at a fixed or variable rate or by participating in the benefits of the project

  • Right to return the principal or to exchange it at the time of amortization for another asset

• Investment fund: The manager of a project can issue tokens, and each one is representative of the participation in an investment fund with a specific objective. The owners of the tokens will participate in the collective performance of the fund.

Insofar as a token is representative of a financial asset, it will be subject to the regulations that apply to that asset, in the case of Spain, the Securities Market Law and the MiFID regulations, and must therefore be supervised by the CNMV (Spanish Securities Market Commission).

The Utility Tokens are a special type of token that help companies by creating a kind of voucher that can be redeemed in the future for access to their services or any other commercial advantage such as discounts, participation in events, prize draws, etc. Unlike security tokens, by offering a potential reward, they fall outside the scope of financial assets and are therefore not regulated under MiFID.

Fan Tokens are a kind of utility tokens very famous nowadays. These tokens are designed to give owners the ability to enjoy special benefits. These assets act as a digital pass that allows their owners to win exclusive prizes or live unique experiences and even vote and influence some of the decisions of your favorite teams. Likewise, Fan Tokens are also used to purchase goods and function as a tool to enhance user loyalty programs.

Despite being closely linked to soccer, Fan Tokens are not exclusive to this sport. Although it is true that most of the teams that have launched this type of digital asset belong to the world of football, there are also basketball, tennis, Formula 1, or rugby teams, among others.

One of the main advantages that Fan Tokens provide to their owners is the possibility to influence some minor team decisions like the choice of a new uniform, the team motto, warm-up, or celebration music. These digital assets also offer new ways to bring fans closer to their favorite teams and players. This is what has grown the number of sports teams joining Partners and other platforms in the last year. In socios.com there, are currently more than 120 sports teams discovering the potential of blockchain technology through Fan Tokens. Likewise, the sale of Fan Tokens helps the teams to access financing resources.

Therefore, utility tokens and fan tokens have become a new source of financing for entrepreneurs, while also being a catalyst for the relationship with their customers or fans.

Up to this point, all the tokens described are fungible. The concept of fungible asset is defined as an asset that is determined only by its gender and can, therefore, be replaced by another, provided that the gender is the same. For example, coins are fungible because each unit is interchangeable for any other equivalent individual unit. A ten-dollar note is interchangeable with any other ten-dollar note that is genuine. This is an essential characteristic for any asset that is intended to act as a means of exchange.

In contrast, the non-fungible good is not replaceable; it has been determined by its species or individuality and cannot, therefore, be replaced by another, even within the same genus: the Non-Fungible Token (NFT). This is a token registered on the blockchain network that represents a unique asset. These can be fully digital assets or tokenized versions of real-world assets (paintings, sculptures, autographs, coins, etc.).

Fungibility is not an attribute that is beneficial for collectibles. Since NFTs are not fungible and therefore interchangeable with each other, they can act as proof of authenticity and ownership within the digital environment. Transactions are secure for bidders because tokens’ unique code allows to verify the provenance.

NFTs have become the ally of artists of both physical and virtual works of art. They guarantee the authenticity of the work, thanks to the security and traceability of the blockchain network, in addition to allowing participation in the payments made to the holder of the copyright of a product for its exploitation, known as royalties.

NFTs are registered in public blockchain networks, especially in the Ethereum network, which makes it possible to define smart contracts with the characteristics of the asset and the transaction. In this smart contract, royalties can be defined in such a way that the author of the work can receive a percentage of the price of all transactions carried out with that asset.

Entrepreneurs who work in the world of art or whose activity is capable of generating highly valuable collector’s items have NFTs as a tool that will allow them to guarantee the authenticity of these assets and participate in the second-hand market by applying royalties.

Likewise, businessmen in the luxury sector have in NFTs a differential tool to certify the authenticity of their work. Until now, luxury items have been associated with a certificate of authenticity that is as falsifiable as the item itself. A luxury bag or watch will only be authentic if it has an NFT associated with it. The absence of NFT will be an indication that we are talking about a fake.

12 STOs and UTOs

An STO (Security Token Offering) is the process of issuing and distributing security tokens that grant economic rights over the issuing company to investors, either in the form of equity or debt, and are backed by something tangible: profits, cash flows, assets, etc.

The process by which an asset, represented in a physical document, is converted into a digital asset (token) is as follows:

• 1. Signing of the contracts reflecting ownership rights.

• 2. Registration of these contracts and issuance of tokens for the proportional value of these assets.

• 3. The tokens are deposited in the owner’s wallet.

• 4. Tokens can be exchanged bilaterally.

• 5. The issuer of the tokens will periodically remunerate the token holder for the return that these property rights have generated.

The process of issuing a token is equivalent to that followed by the IPO in the stock markets. The difference is that transactions are recorded on the blockchain network instead of being recorded in the centralized systems of an organized market.

A UTO (Utility Token Offering) is the process of issuing and distributing Utility Tokens to investors, giving them the right to access a service or receive a product, without affecting the fact that the offer usually refers to expectations of revaluation and liquidity or the possibility of trading them on specific markets.

13 Conclusions

Money appears to cover the deficiencies of barter, and cryptocurrencies appear, as an evolution of money, to cover an unsatisfied demand, offering a distributed and secure ledger system. Entrepreneurs today have in cryptocurrencies a new asset in which they can invest their treasury and an alternative means of payment to “fiat” money that opens up the marketing of their products and services in a new market.

In addition, blockchain technology has multiple applications in the real world that are very useful for the entrepreneur. Entrepreneurs have a new source of financing with the issuance of security and utility tokens, which they can also use as a tool to foster relationships with their customers or fans.

Another instrument based on blockchain technology, available to the entrepreneur, which is revolutionizing the art and collectors’ items sector, is the NFTs, which allow these works of art and luxury items to be sold safely and without counterfeiting.