This is something that is vital for our understanding going forward.
It is easy to fall into being a fanboy and our love for blockchain. When we do this while making over the top claims, it is easy to dismiss. However, that does not mean the sentiment is incorrect.
Certainly, I fell in this category on more than one occasion. That said, it seems as things unfold, many of the affirmations are being supported.
The title of this article is a take on a headline from Decrypt.co. It was spoken by none other than Larry Fink, head of Blackrock.
It is important to highlight that Fink is not a cryptocurrency fanboy. Far from it. In fact, he is one of the noted skeptics of the entire industry. Yet, in spite of this, he sees some of the potential of blockchain. From his perspective, the entire securities industry is going to be utilizing blockchain.
This is a sentiment we expressed repeatedly. We are watching the start of a total transformation that will be taking place. The entire financial system is going to undergo change.
Of course, Fink does not believe that his business will be affected. Perhaps it will not although that view was held by the people leading Blockbuster also. Nevertheless, as we see a shift in the generations, the entire financial system will come under question.
Millennials do not think like their Boomer counterparts. How this will affect things remains to be seen. What we know is there will be a difference.
Future Of Markets Is Tokenization
Starting with markets is a great point in the discussion.
We already see how cryptocurrency and NFTs can factor into the future. While many outside the industry look at crypto through the lens of speculation, there is a solid basis for what is taking place.
Blockchain excels at recording data. At its core, we are talking about a decentralized database. When it comes to financial transactions, it is the ledger that is important.
Cryptocurrency is the way we can store and exchange value. This is nothing more than data. Yet, the data itself has the value, which means it can be sold on markets. The addition of NFTs only implements the uniqueness of an asset. So while a share of stock is no different from any other for a particular company, a piece of art is.
This is a point that was brought up in the above linked article:
This approach enables a different way to trade assets like stocks, bonds, real estate, or even alternative assets like land, wine, or art, allowing the transfers to be visible on a public ledger.
Here again, we embark upon what we covered many time. The idea of a public ledger is something that is just starting to penetrate the psyche of some. Most are not aware of the value of this. Keep this in mind when looking at something like Hive. It is not only a public ledger but also a full fledged text database.
When someone like Larry Fink says the future of markets is tokenization, which follows up on JP Morgan's assessment, we can pretty much take this to the bank (pun intended).
What we are watching the foundation being laid.
Tokenization: New Ownership Model
Where a guy like Fink is limited is the fact that he does not see new ownership models forming. At this point, he grasps the ideas of assets he comprehends being recorded in a different way. Through tokenization, he understands that it can be traded in open markets, more efficiently than the present system. All of this is right up his alley.
His view is cut short by the fact that he really doesn't see new ownership models arising. The lack of understanding pertaining to cryptocurrency is not limited to those outside the industry. Most within it allow the word currency to throw them. Considering most crypto like the USD or EURO is not how things are unfolding.
Cryptocurrency allows for the development of new ownership models. This is easy to see with NFTs. Here is a "virtual deed" to some asset, either digital or physical in nature. The one holding the NFT is the owner of said asset.
It is when we get into the fungible tokens that people get derailed. How often do people ask what can you spend it on? Another way of phrasing it is "what is the use case"? Again, this is looking at it as a currency.
Does it have the ability to operate as a medium of exchange? Certainly. The reality is that it usually falls short in that realm.
Where tokenization excels is in the idea we can have stake, an ownership piece, in an ecosystem. This could be something such as a blockchain, an individual project, or a community. The "ownership" can relate to something social in nature, an area not presently captured by the existing system. It can be of something that nobody is in charge of such as a DAO.
Here is where cryptocurrency acts as a value capture mechanism.
Fink equates that to stocks and bonds. That is something he understands. However, that is just the beginning.
We are going to see the tokenization of everything over the next decade. Value capture is going to occur in every corner of the digital world and much of the physical. Each of us is going to have our piece of the pie.
The difference is the pie will include many things that are not presently quantified and offering ownership value.
Tokenization changes all that. A fact that Fink cannot see at this moment.
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