Let the Bitcoin bubble deflate: It’s time to tokenize assets that hold intrinsic value
An unintended consequence of the brutal bear market in Bitcoin has been to focus the blockchain industry’s attention where it is most needed: real-world assets.Both institutional and individual investors want to progress beyond holding speculative cryptocurrencies or stable digital dollars with limited upside. They have ample demand for tokenized bonds, equities, funds, structured products and sovereign assets like the carbon sink in the mangroves and seagrasses of Seychelles.By distributing risks over small parcels, tokens can bring big-ticket investments like private equity, credit and expensive artwork to ordinary people. The rich can exploit the technology for estate planning.
But for demand to be met, supply has to keep pace. To be successful financial products, these digital representations must have robust trading liquidity. And for that, they must convince market makers of the inherent time- and cost-saving advantages of distributed-ledger technologies, such as instantaneous settlement and embedded ‘smart contracts,’ or software that automatically executes action like crediting a coupon or dividend payment into a crypto wallet.
This is yet to take place. What’s currently getting marketed as digital assets is mostly synthetic stuff—traditional products wrapped inside a coin. While the tokens change hands on a public blockchain, the settlement, accounting and reconciliation of the underlying asset ownership is still done manually.
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