The potential for tokenizing assets on Bitcoin’s Blockchain could soon reach a staggering $15 trillion, driven by gains in efficiency, transparency, and capital formation. Outlier Ventures, a Web3 accelerator, foresees asset tokenization emerging as a key growth area from 2024, potentially becoming blockchain’s “killer app” with a valuation between US$10-15 trillion within ten years.
In a conversation with Yahoo Finance Future Focus, Outlier Ventures Analyst Jasper De Maere highlighted the significant role blockchain could play in financial markets. This includes improvements in transaction efficiency and the novel concept of “fractionalizing” ownership of substantial tangible assets into more accessible shares.
Dr. Craig S. Wright, the creator of Bitcoin, has consistently advocated for the tokenization of real-world assets on the Bitcoin SV (BSV) blockchain. He contrasts this with the speculative trading of digital assets, likening the latter to casino gambling where bets are placed on the volatile prices of tokens with little real-world utility or economic value. In contrast, tangible assets like real estate and bonds offer practical value and utility in the physical world.
However, blockchain’s integration into mainstream finance has been gradual. As illustrated in the Yahoo Finance interview, a general lack of understanding still prevails, with host Brian McGleenon asking De Maere to explain basic concepts such as “tokenization” and “trustlessness.” De Maere described “trustlessness” as a system where no central entity governs the database, eliminating the need for centralized trust to ensure data accuracy and management.
Governments and banks in Asia, including the Philippines, Singapore, and Hong Kong, have dabbled in bond tokenization, although these initiatives remain in the proof-of-concept stage.
De Maere pointed out that tokenizing real estate allows for fractionalization, dividing a property into many small units. This opens up investment opportunities in real estate to those who might not typically participate in this market, aiding in capital formation.
Currently, major financial institutions have only explored blockchain technology through pilot programs. De Maere mentioned firms like Franklin Templeton, WisdomTree, and Brevan Howard, who have experimented with tokenizing funds and debts.
An often-overlooked aspect in mainstream media is the specific blockchain on which these tokenization platforms operate. This could indicate that the particular blockchain used is not a primary concern for investors, or it might suggest that Ethereum/ERC20 tokens have become the default choice for asset tokenization.
Ethereum, despite its early advantage in smart contracts and tokenization standards, struggles with network congestion and high transaction fees during peak times. These issues cast a shadow over its efficiency. Bitcoin, in its original form, also had the capability for contracts and higher data throughput. Had it not been constrained by artificial limitations, it might have retained the developer talent that eventually left due to these restrictions.
Due to similar limitations with Ethereum, several projects have shifted to the BSV blockchain and its BSV20 token protocol. BSV offers scalability at lower costs. As blockchain technology is still a relatively untapped niche in finance, there remains significant potential for a shift in traffic and talent towards the most effective networks in the future.
