Opinion: Directing attention towards tangible assets, not the price of Bitcoin
Disclaimer: The opinions expressed in this article are solely those of the author and do not reflect the views and opinions of crypto.news’ editorial team.
The recent surge in Bitcoin’s price has brought great joy to the market. For the past two years, the market has pleasantly surprised us with an unexpected rally at the beginning of the year. Traders and investors are hopeful that this will become an annual tradition. While this development is undeniably positive for the digital asset sector, there are other areas that offer even greater disruptive potential.
RWA tokenization growth is a game-changer in how we perceive all types of assets, compared to Bitcoin’s positive price movement. This opportunity extends beyond blockchain participants and benefits both traditional finance and decentralized finance equally. It is projected that over 2% of the global money supply will be in web3 through stablecoins by 2028.
However, stablecoins are just the tip of the iceberg when it comes to real-world asset tokenization. As the market becomes more accepting of different forms of tokenization, we will witness the onboarding of various real-world assets onto blockchain. This process will ignite a new wave of innovation in decentralized finance (defi) and create new markets for traditional finance (TradFi).
It is important to recognize that crypto assets are just the beginning of what can be achieved with digitally represented value. There are no limitations to the types of value that can be represented on the blockchain. Tokenized assets offer faster settlements, increased accessibility, and lower transaction costs.
Tokenized treasury bills are a prime example of this emerging trend. This market has rapidly grown to approximately $850 million, with TradFi firms like Franklin Templeton leading the way with a $332 million share. Defi projects like Ondo Finance have also made significant progress with a $153 million short-term US government bond fund. This shift occurred partly due to declining defi yields and increased investor interest in traditional financial instruments such as bonds.
While some may find this aspect of defi boring, it is nonetheless crucial. Digital assets, at their best, can cater to a wide range of investors, including those in more conservative sectors. Treasury bills are just the beginning.
Tokenization offers numerous benefits for real-world assets. By digitally representing value on the blockchain, these assets become more accessible to investors through various channels, including traditional brokers, peer-to-peer exchanges, and crypto exchanges. Fractionalization allows assets to be divided into smaller, more affordable pieces, increasing liquidity for retail investors.
Tokenizing real-world assets also enables them to benefit from the infinite composability of defi. They can be combined creatively as part of an open, programmable financial system, similar to how native crypto assets like utility tokens, stablecoins, and NFTs have been utilized in the past.
As more assets are tokenized, improved distribution and composability will pave the way for new onchain financial instruments. This will also drive the development of defi protocols backed by real-world assets, potentially eliminating the need for over-collateralization.
The possibilities are endless and incredibly exciting. The only limitation now is the imagination of developers. Tokenization opens up opportunities for creative defi combinations with real-world assets, fostering the creation of new financial instruments and innovative protocols.
The digitization and reimagining of real-world assets will expand opportunities for both TradFi and defi market participants. Protocols can be developed to unlock financial possibilities for stocks, bonds, real estate, and even carbon credits in ways that were previously unimaginable for traditional financial institutions.
The onchain representation of an increasing number of real-world assets will have a profound impact on financial markets as a whole. TradFi will experience greater liquidity, accessibility, and programmability of assets, while defi will benefit from the availability of new and more reliable assets, as well as significant enhancements to decentralized applications.
Ultimately, this will result in a more open and accessible financial system, which has been the industry’s long-awaited goal over the past decade.
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