Benefits of asset tokenization
At a time when the prices of many cryptocurrencies are surging, a major recent development is underappreciated. Tokenization of “real-world assets” is also surging.
To understand the implications of this development and the potential benefits of tokenizing these assets, we need to reframe how we view the digital asset ecosystem.
Here we often ask questions like: 'What is the price of ether?', 'How is the digital asset correlated to other asset classes?', 'How should I allocate for this asset class in a diversified portfolio?'. While questions like these are interesting, they all relate to digital assets as an asset class.
Another way to view the space is to view different networks (e.g., Bitcoin, Ethereum, or Solana networks) as digital infrastructure. Similar to how TCP/IP or POP3/SMTP are protocols for building and commercializing services, digital asset networks are the foundational layer on which financial (and other) services reside. can be deployed and provisioned.
Asset tokens are one such example. To quickly define the term, asset tokenization means using distributed networks and databases that form a component of these networks to register interactions between parties.
The most tangible example seen in recent years is the emergence of stablecoins, essentially tokenized US dollars. There are many ways to structure these stablecoins. A popular model is to accept US dollar deposits, typically invested in US Treasuries, and then issue US dollar tokens against those holdings (e.g. USDC, USDT ). The excess supply of these tokens now stands at approximately $150 billion – up from almost nothing five years ago.
Source: https://www.theblock.co/data/stablecoins/usd-pegged/total-stablecoin-supply
This product-market fit has now been established and now the question is: If one can issue tokens denominated in US dollars, why can't one issue other currencies or assets? Other products on the chain? This is the core of what the token trend seeks to provide.
Another example is the US Treasury. There is now about $750 million in tokenized US Treasuries, up from almost nothing just two years ago. These tokenized T-bills have one advantage over traditional stablecoins: they generate and yield returns. More generally, tokenized assets offer the potential for 24/7 exchange, faster settlement times (T+0), and greater accessibility because anyone with a mobile phone can use them. use them (for example).
These examples and others, including tokenized gold, demonstrate how digital asset networks can be used as the underlying digital infrastructure to deliver financial services. When looking through this lens, we can consider what other value-added services can be delivered through digital asset infrastructure, rather than measuring the success of these networks equal to their native cryptocurrency price.'An ideal outcome from using this technology would be for a financial system that is faster, cheaper, more transparent and more accessible to all. '
