Tokenization is an extraordinary application of blockchain technology that a recent report by Bank of America (BAC) believes could revolutionize both financial and non-financial infrastructures, along with financial markets in the next half to one and a half decades. This innovative process whereby real-world assets are converted into blockchain-based tokens may well herald an impending sea change in the way we facilitate the transfer of value, handle settlements and store massive data across every contemporary industry.
According to the illuminating insights of analysts Alkesh Shah and Andrew Moss, the potential offered by tokenization stretches far beyond mere cost-efficiency measures. They argue that tokenizing traditional assets and issuing assets in tokenized format can not only increase efficiencies and reduce costs across an asset’s life cycle, but also effectively optimize the allocation of capital, streamline global supply chains, and pave the way for a fresh wave of software-as-a-service (SaaS) companies pushing the envelope of mainstream adoption.
In drawing parallels with the time frames surrounding the acceptance of revolutionary technology from yesteryears like radio, television, and email—which took three decades to crack the mainstream—the analysts believe the journey of digital assets toward broad acceptance will be significantly faster-paced.
However, while embracing the potential of blockchain technology, there is also awareness of the inherent risks. The Bank of America report speculates that an astonishing 99% of the 26,000+ tokens currently circulating within the digital asset ecosystem may disappear over the next ten years.
There is a stark distinction drawn between the mass proliferation of memecoins, like shiba inu (SHIB) and pepecoin (PEPE), and their mature counterparts, the former denounced for their lack of utility and intrinsic value. On the other hand, public permissionless blockchains such as Bitcoin, Ethereum, and other third-generation platforms are recognized for their decentralised nature, necessitating tokens in order to incentivize participants to facilitate transactions on their networks.
Ultimately, the tension between the revolutionary potential of tokenization and the fast-paced, potentially volatile nature of digital asset implementation constitutes the undulating landscape faced by financial and technological institutions alike. The acceleration of blockchain incorporation into mainstream finance is forecasted, but alongside, the awareness of rapidly changing digital asset landscape is also looming.
Source: Coindesk
