For the last 6 years, since the last bear market, people in cryptocurrency have wondered what the Killer DApp will be. While many ideas were put forth, some in social media, none have emerged thus far.
Now, it looks like the Killer DApp for cryptocurrency and tokenization is going to be Real World Assets (RWA). Here we see the value of blockchain exploding in the future.
It is long said find a problem and solve it. Here we see some major steps forward due to tokenization that address issues we see in many industries.
Does this mean the future of the digital world (and the Metaverse) is dead? No. However, we are likely to see people gravitating to this area faster than the conversion into the digital realm, which is happening at a rapid pace.
Development online is often new. It is bringing new features and functionality to people. The tokenization of RWA actually solves problems people deal with on a daily basis.
This is all part of the "Tokenization Of Everything" Basically, it starts with the concept of tokenizing the value associated with an asset, either tangible or intangible.
The list could include just about anything:
On the surface it might not seem like much but it does address a number of issues.
The first is bringing liquidity to the table. Many assets, due to how they are sold, have no liquidity. This can also be present in this where they exist on an exchange such as some precious metals. Even though traded, there simply is no volume.
Tokenization adds liquidity in a couple different ways. The first is by democratizing the investing process. Essentially, it brings more players into the market.
Another way is through fractional ownership. When as asset such as a property can be broken into people and smaller parts sold, this also brings more buyers into the market.
Decentralized finance (DeFi)has captured the imagination of many. There is good reason for this.
Traditional finance or TradFi is often slow and costly. Anyone who has bought or sold a house understands this. He we have an extremely valuable asset that is most non-liquid. Even if one wants to access the equity, it requires getting a loan against the value of the asset.
Anyone who went this route know the two challenges: cost and speed.
To refinance a property one has to go through a slow process that can be costly. We often see a few percent paid in fees or commissions in addition to it taking weeks to complete.
This is known as friction.
Tokenization removes this will making things less expensive. How do you think things would look when refinancing a property is as simple as trading shares of stock?
It is a future that could be possible. Smart contracts could be designed to handle the entire process without human intervention.
As we can see, this is a huge market, the reason why I believe the tokenization of real world assets will be the Killer DApp.
Of course, once an asset is tokenized, it is now part of the DeFi ecosystem, able to be traded for any other liquidity digital asset. Think of the possibilities here when billions of people own tens of trillions in assets, all be swapped for each other.
There are technology challenges before this can happen. However, the true holdup is likely the legal environment. Like most things with technology, humans, especially politicians, tend to lag the advancements made by developers.
For many assets, we are dealing with highly regulated, long structured industries. Part of this was due to the fact that governments had to oversee the counterparty risk presented by financial institutions. We also see procedures surrounding real estate that extend back to a time before the computer was common.
In other words, we are dealing with legacy, which means change. This is not something governments nor the legal system excel at. Instead, we see how they can clamor back and forth over an issue for years. Cryptocurrency is seeing this in the United States with regulation. We can only imagine what the process will be like with artificial intelligence.
Our traditional system is one of complexity and layers with parties having a vested interest in maintaining the status quo. This is where we see disruption having to accelerate. The only way to overcome this is to blast through things. Technology can do that. We have numerous instances where corporations worth hundreds of billions of dollars were basically destroyed seemingly overnight.
What is interesting is tokenization is likely going after trillions in market capitalization of existing businesses. That means plenty of people have an interest in maintaining the status quo.
Nevertheless, there is simply too much potential to ignore. We are seeing the foundation of a completely new financial system being constructed. This is going to incorporate every asset we can think of. The present model of ownership is going to change. Fractionalization is the future.
The only question is how long until this really starts to accelerate. Development is key. As we build, the tools start to fall into place. This gets emphasized during bull markets as the hysteria towards the industry grows. While most are just looking for the quick hit in their wallet, breakthroughs are uncovered and do start to be utilized.
Something not discussed a great deal is the advancement of smart contracts. This is the foundation for a lot of what we are discussing. For that reason, it is imperative for them to keep expanding in capabilities. As more platforms are built, experimentation will grow.
Eventually, we will see a number of platforms that offer the ability to tokenize real world assets. This will lead us to a time when all assets are simply tokenized by default.
It is the Killer DApp for cryptocurrency.
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