Cryptocoin detractors often hammer the point that cryptocurrencies like Bitcoin aren’t “real” because they’re not tethered to concrete assets in the physical world. They’re volatile, speculative, and can potentially lead unsuspecting investors to financial ruin. While these criticisms may hold some weight, they hardly scratch the surface of the true potential of cryptotechnology.
The real revolution might come in the form of cryptographic “tokenization” of real-world assets (RWAs), such as stocks, bonds, cars, or even artwork. Lucas Vogelsang, CEO and co-founder of Centrifuge, has declared that tokenization can bring unprecedented liquidity to properties currently hard to sell or buy.
Tokenization is effectively taking assets from the real-world and bringing them on the blockchain, combining the flexibility of blockchain technology with conventional hard assets. Be it real-estate, luxury goods, or even intellectual property, practically anything can be tokenized.
In theory, tokenization could streamline and democratize access to capital markets. Even seemingly bland business operations like grain shipping could be revolutionized by this technology. The potential market for tokenized real-world assets may soar to $16 trillion by 2030, demonstrating the transformative capacity of this technology.
Tokenization technology has been around since 2017, and advancements in infrastructure and growing institutional interest could potentially lead to widespread adoption. While it’s important to note the risks, blockchain’s inherent transparency could pave the way for more informed, safe investments.
Tokenization could also revolutionize the way we buy and sell stocks. You see, when you buy or sell a token, the transaction is immediate. Instantaneous settlements carry a significant value in financial markets as it keeps capital at work with great efficiency.
Imagine being able to trade stock tokens 24/7, just like cryptocurrencies. Major Corporate America decisions that traditionally adhere to the Monday-to-Friday U.S. stock market rhythm may be overhauled with tokenization. The potential changes to Wall Street and the broader financial markets could be immense.
Tokenization of private equity funds could render the entire fund management process more fluid, offering a ‘smart-contract based secondary market’ that creates an organized avenue to mitigate or increase risk based on market perception. This might attract the traditional finance influencers who are essential for extensive adoption of blockchain and cryptocurrency.
Tokenization of traditional assets may appeal to accredited investors, but its ultimate aim is to democratize finance for everyone. By tokenizing small business loans or other private credit avenues, it could level out the financing playing field, thus allowing these businesses to prosper.
Money is undergoing the tokenization process too, through what we know as stablecoins. These developments increase transparency in global finance, possibly averting future financial crises. Crypto-believers suggest that more and more assets will be tokenized, to the point where we may drop the “real world” tag and just call them assets. As such, the prospect of a tokenized future is more exciting than ever.
Source: Coindesk
