Are all tokens fundamentally a store of value?

Tokenization is becoming an increasingly discussed topic in the world of traditional finance, from the fractionalization of stocks to the effective tokenization of government bonds and private credits.

This is evident in companies like Tradable, which has been reported to have tokenized up to $1.7 billion of private credit on ZKsync.

As the day passes, the concept of onboarding traditional financial assets onto blockchains is growing past the stage of simply being an idea. Of course, more broadly, these assets are categorized as “real world assets(RWA)” for the purpose of easy inclusion of various illiquid investments like those that fall under physical assets in the traditional markets.

So far, approximately $21.61B in real world assets have been tokenized on blockchains according to data from RWA.xyz.

These movements solidify “tokens” as value placeholders in the traditional markets but the true depth of this seems to go right over most people's heads.

Of course, this is largely due to the fact that most people haven't dug through the rabbit hole of how money works, otherwise, most would have quickly moved to park their wealth in crypto and find suitable ecosystems to build in.

Money, debt and value is becoming private

Certainly, we are heading to a time of true privacy when it comes to how we manage our wealth but the “private” in this context has to do with moving away from government control to individual control.

People talk about money all of the time without really understanding what it is. Of course, most people convince themselves that it doesn't matter how it works and this sentiment is exactly why we've been trapped in the flawed debt system for years.

Money is debt, it has to be, it's the only way it works. It took quite a great deal of deliberating on this before finally accepting it for what it is.

This is something most bitcoiners either don't understand or simply don't want to accept.

Without fiat, Bitcoin wouldn't exist, and if fiat goes away in its every form, bitcoin would die too.

This also shows why it's very stupid when bitcoin maximalists talk about “only bitcoin matters” and should exist. Bitcoin, and everything in the world needs a debt system to exist for it to function properly, without any of it, everything crumbles, quickly.

So when we talk about fiat going away in its every form, we are talking about debt completely being eliminated.

I couldn't think of anything worse for the world.

To understand why, we have to understand what debt is in the first place and how it's related to value.

Money, generally, is not value, it's either just numbers on screens, a piece of code(tokens today) or just a piece of paper. What makes money valuable is that it is debt. Debt = value(owed).

Think about it. If you lend someone something, you actively have it in your head that you have someone owing something of value back to you. And generally, you will only lend something to someone that's competent right? This is usually someone you're confident will manage what you've given him properly and if something went wrong, can also replace it. In traditional finance, a “credit score” is what's used to identify such people.

By lending, you created debt, and that debt is the placeholder of the value you're owed.

Money is exactly the same thing, with a lot more flexibility. Internally, it may seem like it really isn't the same, but when you think beyond virtual or physical borders, we begin to see how it is exactly debt acting as a placeholder of value.

If I hold a dollar, I'm holding debt that I hope to redeem for the value I exchanged for it. It could have been my time — so I expect I can buy back time in the future, or something of value that I sold — so I expect I can buy that back too or something better.

So where does the value in the USD come from that encourages me to make that trade in the first place?

The value comes from the trust I have that the United States will produce enough value internally that the USD I hold will be redeemable for other things of value. I consider the United States competent enough that I accept their debt in exchange for value.

The system works because various countries(essentially beyond the borders of the United States) have their own money(debt) and can form agreements around it that allows value to be traded forward and back and measured against what's produced(their history of competence).

With this, we see how the world would completely collapse if everyone used the same currency, there wouldn't be an effective way to measure what it's worth.

The existence of various currencies(essentially debt systems) ensures that we can effectively measure value across the board.

We need debt to determine who's best to give more valuables to, and money is the system best for tracking this.

Bringing all of this private introduces something very unique. It's real-time fractionalization of power and that turns small-body governments into thousands(if not millions eventually) of competing ecosystems governed by billions of people all at once.

Tokens as store of value

Just as fiat money, all tokens are a store of value fundamentally. It really does not matter how small or how volatile they might be, those are just an indication of poor economic activities and thin liquidities.

If something is an effective way to move value around and is acceptable by two or more, it essentially becomes money — a store of value, and can have a great and sustainable debt system built around it.

Tokenization takes what would require permission and is centralized to government bodies(debt creation) and just hands it to everyone.

Do you think you can build a better debt system that's superior to everyone else?

It will literally cost you nothing to launch the token and go right ahead and build it.

What most people miss about tokenization through crypto tech is that it brings the business of the government to the world, now there's competition and you can't really call it illegal.

What's illegal about a couple of people agreeing to accept some random token in exchange for things they own?

Absolutely nothing. And that is also why regulating any of this will not be possible. The only regulation that will exist will be one that happens on-chain, through various predefined rules in smart contracts.