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Why DeFi plus asset tokenization will take crypto to new heights

Published 01/17/2021, 08:44 AM
Updated 01/18/2021, 11:00 AM
Why DeFi plus asset tokenization will take crypto to new heights

Why DeFi plus asset tokenization will take crypto to new heights

In previous years, we have seen numerous attempts to bring real-world assets to the crypto market. However, none of them has proven to be massively adopted among retail crypto users and traditional financial players.

So, why hasn’t real-world asset tokenization become a massive trend?

  1. Real-world assets used by the protocol must have a transparent source of pricing available on demand by any user of the protocol. This requires not only selecting an asset capable of fulfilling this requirement but also building a price oracle that will transfer information regarding the collateral. Such an oracle should be connected to a transparent and trusted pricing source, such as Bloomberg Terminal, rather than receiving proprietary data from a centralized party.
  2. Real-world assets used by the protocol should be as less volatile as possible, generate fixed income to provide real cash flows to liquidity pools, and have a certain level of liquidity and market in the real world to be able to process the liquidation event in case it occurs.
  3. The protocol must allow users to borrow money in fiat. For such purposes, there is a need for yet another intermediary to be connected to the protocol, to cover the exchange needs of users who want to borrow money in fiat, and fulfill the role of a payment agent for them.
  4. Real-world assets used by the protocol should have a digital presence, for example, be held on a secure accounting system. To achieve that, there is a need for an intermediary that operates such systems connected to the protocol.
  5. In order to defend the decentralized nature of the protocol and maintain the trust at the highest achievable level, intermediaries connected to the protocol must be regulated, insured, selected and overseen by the community of the protocol under established requirements. In addition, the community will decide any other crucial matters for the protocol’s development and economic sustainability, including selecting assets that may be admitted as collateral.
Artem Tolkachev is the founder and CEO of Tokenomica. For over six years, Artem has been a key blockchain and tokenization opinion leader in the CIS region. Since 2011, he has been an intellectual property and information technology lawyer and entrepreneur. In 2016, Artem founded and headed Deloitte CIS Blockchain Lab. As part of that initiative, he led a range of innovative projects involving the implementation of enterprise blockchain solutions, tokenization of real-world assets, tax and legal structuring of security token offerings, development of cryptocurrency, and blockchain legislation.

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