Tokenization is the process of converting an asset into a digital asset or token that can be traded, transferred, moved, recorded or stored on a transparent, time-stamped and irreversible Blockchain system.
Unthinkable a couple of decades back, but these days anyone can participate in the financial markets and global trade by simply having a laptop computer, tablet or smartphone and being connected to the internet.
What used to be the exclusive domain of brokers and intermediaries is now available on platforms and apps. Anyone, with a basic knowledge of computing, can transfer money, buy & sell commodities, execute financial transactions and trade the financial markets across the globe with the ease of a couple of clicks.
This all has become possible due to the ever increasing computer power that is continuously being compacted in portable devices such as laptops, tablets and smartphones.
Not only has this "miniaturising" of computing power revolutionised technology, the user-experience has improved along with it, by leaps and bounds.
At the onset of the computing era, knowing and mastering computer language was necessary to be able to use computers, but today, a child can learn how to use a tablet or smartphone within one day, and usually within only a few hours.
In parallel, the superfast proliferation of mobile devices as well as mobile networks has created a global interconnected world that exchanges information at hyper speed and as a result, the world has become "smaller“ but at the same time faster to the point of information overload.
The advent of blockchain has added an entire new dimension to the transfer of information via the world-wide-web, it has created the „internet of value“ and along with this, enabled the tokenisation of just about everything.
Tokenisation of assets enables fractional ownership and allows for secure and borderless transaction of digital assets. This means that anyone can trade anything and anywhere in the world without the need for third-party intermediation.
As a consequence, „analog assets“ that have been converted to "digital assets“ can be traded on global markets and crypto exchanges much easier, faster and at a fraction of the traditional costs associated with global financial transactions and more importantly, without the never-ending paper trail.
According to Anthony Pompliano, founder and partner at Morgan Creek Digital Assets, tokens really represent the “intersection of digital assets and traditional financial offerings and are just a new technology improving old concepts”.
More importantly, as described in an interesting article by Michael Ippolito on LinkedIn, the four key advantages of tokenization are:
Liquidity - The creation of tokens significantly reduces the friction to trade ownership stakes in illiquid assets.
Accessibility - As a result of the way our current financial system is set up, many investment opportunities are not accessible to all participants in the global market. Tokenisation and blockchain changes all of that.
Visibility - Tokens are an interesting answer to one of the most persistent problems with secondary markets, namely how difficult it is to track assets that move through them.
Efficiency - The real selling point for tokens is their ability to drastically reduce the involvement of middlemen in financial transactions. Smart contract code allows for the programming of highly specific ownership clauses in the tokens themselves.
On the other side of the proverbial coin, there are 4 major barriers to the tokenization of everything, namely regulatory framework, blockchain protocol maturity and scalability, as well as the need for more mature marketplaces supported by stablecoins that allow for prices to be consistent. If continued instability and high volatility plague crypto markets around the world, it will not be feasible or even impossible to tokenize a fixed asset and encourage mainstream buy-in.
Tokenization is one of the most significant aspects in the development of blockchain technology and many say it could affect the economy as much as the development of the internet. Traditional financial metrics that represent the health of the economy generally ignore a transfer of value to the consumer.
Previously, seemingly unquantifiable abstract assets such as intellectual property, brands and goodwill as well as documented assets such as copyrights and patents can now be represented in the form of token – that is, as a "digital legal right“ – on blockchain with a unique identifier number and even further parcelled out and sub-divided into fractional tokens or units.
This paradigm shift in the digital value and transferability of assets makes it possible to sell legitimate fractions of almost anything such as art, music, artist or even performers’ future revenues and everything else under the sun that involves money and value.
And as more assets become tokenised, the more liquid the global financial markets will become, the more market participants that enter the global economy fostering a new level of crowd inclusion never seen before.
The only challenges that need to be overcome in blockchain are speed, scalability and stability and this will be of crucial importance in order to achieve mainstream adoption of crypto world-wide.
From the above three, crypto currency stability is by far the biggest challenge and trying to contain crypto volatility will have to include many market participants.
The total market capitalisation of all digital currencies exceeded US $800 billion in early 2018, with blockchain technologies attracting investment exceeding US $930million in 2017. However, at present the wider adoption of crypto currencies is hindered by market volatility and account vulnerability. Gigzi is a revolutionary financial system that addresses these challenges. By harnessing the relative constancy of precious metals and utilising world leading iris recognition technology, Gigzi provides investors with stability, security and wealth protection“
Source: Gigzi – independent wealth management
Asset-backed stable coins – commonly pegged to the mighty US dollar or the "safe-haven“ of gold - are currently the most promising solution to crypto volatility, however many stable coins such Tether, Gemini, Paxos, Circle, Coinbase and Tiberius are still struggling to do what they claim, that is provide stability to cryptos pegged to either USD or Gold. There are many reasons, one of which is market immaturity but also the slow rate of adoption. In simple terms, the more market participants, the greater the adoption, the more stable coins in circulation, the better the stability and overall functionality of stablecoins.
Atomic swaps represent a technical means of exchanging tokens without having to go through a trusted third party such as an exchange.
Source: Samuel Miller on Medium – Aerum blog
In the crypto world, the word “atomic” is simply a fancy computer science term meaning the swap either happened completely or not at all, thus ensuring that both parties received the exchanged tokens on their end.
In order to achieve optimal efficiency, the Aerum protocol uses 2 types of atomic swaps, “on-chain” and “cross-chain”, which entails that both parties have to acknowledge the swap – the instantaneous transfer of assets or tokens – using a cryptographic function that confirms the transaction.
The advantage of atomic swaps is, that as this secure transaction function develops, it will enable the instant and borderless exchange of any digital asset that is tokenized without any intermediary and at a fraction of the cost - or even free - with traditional swaps that involves many third parties, networks and systems.
In tandem with the development of blockchain, the internet as we know it today, will progressively be replaced by blockchain protocol and in the process, will become the “Internet of Value” that enables as well as facilitates the borderless exchange of value.
The beauty of blockchain is that everything is transparent and all data as well as all transactions are public record and traceable for each block on the blockchain.
Peer-to-Peer has been reinvented. Blockchain technology disrupts many traditional industries by offering a faster, cheaper, more secure, and more effective transactions between peers. What used to require expensive intermediaries or third-parties can be now carried out easily through blockchain thanks to the implementation of smart contracts. It is this inherent feature of trust that makes blockchain a radical disruptor of FinTech and P2P applications.
Source: Samuel Miller on Medium – Aerum blog
Aerum – a hot blockchain startup based in Prague that has been selected for the “Most Innovative Blockchain Award” at the “Unicorn Blockchain Awards 2018” in Hong Kong is taking the lead in developing the nextgen blockchain infrastructure upon which enterprise-grade, ultra-fast and scalable P2P applications can be build that will transform and disrupt the P2P industry fundamentally and completely.
Peer-to-peer money transfer and lending is currently a high growth industry that is penetrating all aspects of banking and finance as it serves the purpose of making money available to trustworthy customers on base of objective and unbiased review of the applicant’s financial situation, credit records, repayment history and sometimes by the “unorthodox” method of social media research and review.
By reviewing applicants’ creditworthiness using different valuation parameters as the case may be in traditional banking and lending, many more consumers are eligible to apply for credit and subsequently be approved thus expanding the credit and lending markets exponentially.
Speed issues and scalability hurdles are currently being tackled by blockchain developers at every level and in the near future, banking and the entire financial industry will be compelled to use the advanced, ultra-fast and cyber-secured technology of blockchain for all financial transactions as it will simply mean more business at a fraction of the costs currently associated with payment transfer, credit, lending and banking in general.
Fetch is a decentralized digital world in which useful economic activity takes place. This activity is performed by Autonomous Economic Agents (AEAs). These are digital entities that can transact independently of human intervention and can represent themselves, devices, services or individuals. Agents can work alone or together to construct solutions to today’s complex problems. Fetch.ai is the missing critical infrastructure at the convergence of blockchain powered by artificial intelligence, the internet of things and robotics for tomorrow’s digital economy.
Source – Fetch.ai powered by Outlier Ventures
“Autonomous Economic Agents” are by definition independent from human interaction. It follows then that all human elements of thought and emotions - such as fear and greed - are removed from the transactional equation and thus trade becomes devoid of human error and risk. This is ground-breaking and revolutionary technology at “Star Trek” levels is the equivalent of rocket science in commerce.
Today, there’s an estimated but mind-boggling $256 trillion dollars worth of real-world assets that are “documented” on a paper trail but highly illiquid. These assets will in due time be tokenised but the time frame is not yet known as many factors come in to play such as regulatory and legal status which keep these assets “frozen” in time and value.
Blockchain technology will provide the regulatory and legal framework to transform these real-world assets into new forms of fractional ownership represented by digital tokens on blockchain that can be traded, transacted and stored without borders or boundaries across the world.
This fundamental transformation of assets from analog to digital will result in unprecedented liquidity in the global market of traditionally illiquid assets.
Unleashing AEAs that are autonomous as well as independent legal entities, empowered to trade and transact with limited or no liability (depending on regulation and jurisdiction), is a game changer of mind-bending magnitude.
AEAs will be roaming blockchain to discover information asymmetries, detect oversupplies, dispose of surplus, seek or create demand and aggressively exploit market inefficiencies on a global scale.
In short, AEAs will engage in instant and global “commercial arbitrage” without the cost of expensive labour or third-party intermediacy through legacy networks and systems.
One cannot even fathom the depth and disruptive impact this will have on global trade and the labour market in general. It’s “the good, the bad and the ugly” of merciless technology in full effect. And in the process, it will make the few early adopters and their owners incredibly wealthy beyond belief.
It will be comparable to Jeff Bezos’ Amazon retail empire of today, but instead, a decentralised global industry of commerce and trade, times a million or more.
Global trade, transport and commerce will never be the same again.
Tokenisation will create a more liquid world and entirely new markets that will radically change the dynamics of global trade for the better. This is a paradigm shift in the global economy that will lead to an economic expansion that no one could have previously imagined.
Currently, the global economy is ruled by tech companies using apps and platforms that provide an overall better customer experience at a much lower cost. Tech giants such as Amazon and Alibaba are encroaching the entire online commerce and retail industry and in the process, pushing complacent, legacy and traditional "bricks-and-mortar“ store chains out-of-business. Recent victims include the once mighty American retail giant "Sears“ and "Toys-R-Us“ and many more are sure to follow in the months to come.
And even that the retail battlefield has not yet been cleared of its victims, these tech giants are already targeting “Main Street” and “High Street” across the world, one street at a time. The victims of collateral damage in retail, that is, the hardest hit shopping centres, malls and streets, the ones on the fringes of big cities, suburban areas or near small towns, are those that don’t enjoy the luxury of buyers or consumers with significant spending power.
The irony of corporate "buy more, save more“ through increased sales volumes and incremental product supply via online stores and apps, has resulted in that your local shop or retail store is slowly but surely disappearing in every corner of the world. America is the leading example when it first started building shopping malls and superstores, followed by online retail platforms that have all but decimated local retail in many parts of the country and this predatory trend continues uninterrupted.
Blockchain and the tokenisation of assets will disrupt global commerce, trade and finance because it will allow for the masses to participate instead of just being on the receiving end of the global economy.
This is a paradigm shift in the global economy that will lead to an economic expansion that we could not have previously imagined. The extractive nature of our existing economy makes it such that to be a market participant, you must live and consume in the same geographic region as many corporations. Blockchains or inclusive networks create a means of borderless wealth creation, thereby removing the most significant barrier to an increase in global GDP. The future is here, log onto Github, grab your picks and shovels and lets start building.
Source: Mason on Medium – CEO of Tokensoft.io
Advancing technology, inclusion and borderless participation by the average person will facilitate unprecedented wealth creation and financial independence at a much more rapid rate than is currently possible. And this will profoundly impact the global economy and the world as we know it today.
Jerry is the CEO of MoneyDrome, a hybrid investment & trading platform enhanced by analytics, machine learning and artificial intelligence. He is also an entrepreneur, writer and speaker with a 30 year diversified background in finance, engineering and maritime. His main areas of interest are FinTech and digital disruptions, which profoundly impact the global economy as well as our personal lives. Mr Floros graduated from the University of Oxford and the Wharton School of the University of Pennsylvania.