The issuance of traditional or real world assets like stocks and bonds has been growing exponentially in the last couple of months. As at may, it was reportedly on Decrypt that tokenized securities on ethereum, polygon, and gnosis had hit $225M market capitalization but as of today, over $118 million has been added in just 2 months making it $343,280,691 as per dune analysis.
While the largest players in the space are permissioned issuers, Backed finance is permissionless bridge to the capital markets.
What is tokenization?
For those not sure what I mean by tokenization, it is simply the process of replacing sensitive data with a non-sensitive one. For example, instead of having sensitive property documents, an NFT is instead minted on-chain to represent those documents that whoever holds the NFTs holds rights to the properties.
In this case, the individual is not in possession of sensitive data or things generally but has a representation of that raw information. That said, asides documents tokenized as NFTs, assets like stocks and bonds can also be tokenized as "fungible tokens" giving room for so many value opportunities.
What is happening with tokenization and where we're headed
Tokenization is something recently discussed by many banking Giants like the J.P. Morgan Chase following its release of tokenization trains like its onyx blockchain, however, beyond Chase's blockchain where assets may meet absolute centralization, diverse alternatives are actively growing within the ecosystem.
As per an August 8, 2023 report by Decrypt, tokenized Coinbase stocks are coming to Polygon thanks to backed finance.
Backed finance is a DeFi project working in the tokenization and real-world asset sector. This means it’s attempting to onboard popular traditional assets, such as stocks and bonds, onto the blockchain.
The networks included in this launch are BNB Chain, Polygon, Gnosis, Avalanche, Fantom, and Arbitrum. The project was originally launched on Ethereum. The tokenization project has indicated that it will support additional networks in the future.
“It’s about bringing our products directly to these active ecosystems and offering flexibility to users,” Backed Finance co-founder Adam Levi told Decrypt on the move. “We want to remain technology neutral and encourage RWA [real-world asset] adoption across the entire sector, not just a specific blockchain.”.
Last month, Avalanche reportedly launched a $50 million tokenization initiative to spur activities, and platforms like Ondo also offer lending services like Flux, which allows users to put their ERC-20 securities token as collateral for loans. So far, users have added bonds worth more than $41.2 million as collateral.
Where all of this is heading in a decade time is quite predicted to some extent and this is the tokenization of everything which inevitably means the massive expansion of industry and wide-wide economies.
Exchange traded funds(ETFs) are reportedly even being tokenized, so the numbers just keep growing and more layers of value creation are being deployed. One of things that I've noted in the past is that this, in addition to stablecoins growth, would largely take fractional reserve banking to a whole new level.
It's only a matter of time and it is no secret anymore, at least not amongst the governing bodies and this is an absolute fear because so much will not be within reach of control.