Blockchain to Disrupt Traditional Markets

August 15, 2021

The opportunity of blockchain could be substantial as crypto already has a market capitalization of about US$2.3 trillion. Almost all assets will eventually be tokenized to trade, ranging from stocks to securities to bonds and commodities. That has been the vision of many executives in the crypto space. New-age, mainstream finance will have to eventually run on digital rails and platforms. In other words, on the blockchain.

Blockchain is a record of all transactions that does not require an external or centralized authority to validate the authenticity and integrity of data. This technology is used to create tools to provide many types of financial services in a decentralized, and non-governed way. This is now typically referred to as decentralized finance (DeFi) and Security Token Offering (STO). Blockchains are trying to recreate existing traditional financial services in a decentralized way using blockchain.

On a smart contract platform, it is possible to tokenize almost anything imaginable. This would include things like pictures, music, virtual gaming items, art, wine and much more. This is called a non-fungible token (NFT). These NFT’s are tradeable and are representations of their underlying asset. They are one-of-a-kind digital collectibles and this game changer could have huge repercussions for IP protection and royalty collection in the art and media industry. An NFT was recently sold for US$69m by digital artist Beeple called ‘Everydays: The First 5000 Days’. This made major waves in the NFT scene.

Apart from a representation of a physical asset, an NFT can also be used to represent collateral for loans or accounts receivables. In another real-world use case, an NFT can also be used as digital identity, in lieu of physical cards or certificates. In an ever increasing digitalized world, such digital identification services are becoming more critical. To put NFT’s in perspective, they are as unique as an individual’s identity and can virtually represent any good, service or person and more.

Digital innovation has always disrupted almost every major industry, from retail commerce and media to hospitality and even logistics. Fintech startups have begun to eat into the market shares of traditional financial services providers, the current business and transaction models have not been challenged on a larger scale. Big players in every industry still dominate the competitive landscape and will most probably continue to do so in the short term future, at least.

This is still very early stages for tokenization, it is important to track the developments in the industry. The groundwork for potential disruption of major businesses around savings, payments, investing and capital raising are already being laid. As part of the industry’s growth, there have been big strides and a growing number of companies that enable the tokenizing, trading, managing and storage of digital assets. This could be the start of a major disruption in the industry.


Sources: Robeco, Coindesk