We are seeing a lot of signs that things are ready to explode. By this, I am not referring to cryptocurrency pricing or what the markets are doing. In fact, we are going to find out that cryptocurrency, as most people frame it, is only a small part of the technological disruption that is taking place.
How do you know disruption is occurring?
One area is to look at the metrics. When they are obsolete, or outdated, that is a sign.
For example, same store sales did not apply to Amazon. How can you judge a retailer based upon an important metric that has no applicability? Obviously, Amazon became one of the leading retailer entities and it had no stores.
The same is true for Netflix. By this time, it is safe to say that completely disrupted entertainment. Unlike Blockbuster, we could also not apply the same store metrics. Nor was the traditional model of Nielson ratings of any use.
Hence, net metrics were required.
Image generated by Ideogram
So far, for cryptocurrency, the metric appears to be Bitcoin. Most are asking what that currency is doing. It grabs the headlines on media (as well as social media).
When the price is making a big move, up or down, people are talking about it.
Is this the best thing to focus upon? Isn't that akin to basing the stock market by talking about Nvidia?
Simply looking at the biggest is not going to give a complete picture. This is something that Coinbase is looking to change.
The firm released COIN50 (or Coinbase 50), a crypto index fund.
Here is what it entails:
The investment vehicle pools together 50 different cryptocurrencies. The prices of Bitcoin, Ethereum, and Solana comprise more than 80% of the fund. The COIN50 also includes XRP, Dogecoin, and 45 other coins.
On the surface, this seems like just another way to invest in cryptocurrency. While that is true, there is something else at work.
While Coinbase will receive some revenue from the purchase and sale of the COIN50, the index fund is also a “media play,” Greg Tusar, head of institutional product at Coinbase, told DL News.
In other words, he says he hopes crypto market observers refer to the fund in the same way media outlets referred to Polymarket odds for the US presidential election.
The goal here is to have the talking heads on stations such as CNBC talking about the COIN50 instead of Bitcoin. This is the metric that Coinbase hopes will be the default as a barometer of the moves in the overall cryptocurrency market.
Coinbase’s new fund will be tradeable as a futures contract for institutional investors on Coinbase’s international exchange. It will also be available for retail investors on Coinbase Advanced, which lets users perform more complicated trades.
There are other crypto index funds out there. The difference is Coinbase is a publicly traded company (i.e. part of Wall Street) and it has a large customer base. For the United States, it is the leading crypto exchange.
When people hear tokenization, the common conclusion is to think about cryptocurrency such as Bitcoin or Ethereum. The reality tokens are more diverse than that. In fact, we could say that is just a minor piece to the entire spectrum.
Tokenization is, at its core, a computer attribute. Hence, when looking at transactions, it is crucial to understand the characteristics.
Tokenized transactions are considered more secure and are less known to The general public. Visa reports that tokenized operations have a fraud rate five times lower than non-tokenized transactions. This makes tokenization a critical pillar of security for entities processing large volumes of transactions, such as banks and retailers.
This has nothing to do with the price go up crowd. It is, however, applicable to trillions of transactions, something that dwarfs the cryptocurrency market.
Visa is one of the largest payment processors globally. This is something they are very interested in. Actually, the company is already immersed in it.
Visa has recently achieved the significant milestone of issuing ten billion tokens globally, marking a major step in the adoption of digital payment security measures. In Brazil, the payment giant has issued 400 million tokens, where 63% of the platform’s online transactions are nOowtokenized. This includes credentials for credit, debit, and prepaid cards, significantly enhancing the security and innovation of digital financial transactions.
In other words, Visa is reworking their entire network.
“These results demonstrate how Visa tokens help issuers and merchants manage large payment flows in a secure, reliable manner, and in compliance with accountability guidelines. The increase in the adoption of technology improves the consumer experience and enhances their security when shopping online,” explains Leandro Garcia, executive director of Digital Payment Solutions at Visa.
Visa is not alone in this. JPMorgan started testing the JPM token a number of years ago. This was designed to facilitate transactions between a number of banks that were tied to the network it set up.
When it comes to these institutions, speed and fraud are two major concerns. By increasing the settlement times, friction is reduced within the financial system. At the same time, since tokenization is more secure, fraud is reduced. According to the linked article, Visa saw $650 million fraud losses prevented.
Obviously, what is being discussed here are centralized entities. There is little debate about the intentions of banks as financial intermediaries in the financial system.
While the tenets are cryptocurrency are accurate, the fact that DeFi has not been built out to the degree that is required provided opportunity to the centralized system.
It is interesting to view how decentralized networks became the test case. Banks and other financial institutions were slow to adopt the technology. The petri dish was DeFi and the transactions that were handled on different networks.
As these institutions saw the success (and threat?), they decided to get involved.
We are presently confronted with the fact that things are slipping away. Fortunately, the online world is growing at a rapid pace, with AI starting to take over. This means that crypto is going to be a central component as we move forward.
The key will be the establishment of networks with digital platforms built on top. Here is where the shift can occur. Users shift to what interests them. As more tools become available, the underlying layer will be cryptocurrency.
Of course, we are rapidly moving to a point where the established financial system will operate on top of tokenization.
Visa is already proving that.
By the middle of next year, this will not be a story. We will likely see most institutions following in Visa's footsteps. After all, it is not news when a company sets up a website. It was a different story 30 years ago when only a few companies had that.
The decentralized world can step up. Buildout continues to be where focus is required. People are still living on centralized system. As technology gets more powerful, this is only handing more control over the major corporations behind the platforms we use.
Either way, tokenization is going mainstream.
