Can fast markets secure slow markets? Questioning RWA tokenization

Some people have come to the conclusion that tokenization of real world assets is a beautiful scam and that doing so doesn't secure said assets.

To understand this conclusion, we have to first understand what people think “tokenization” is about.

Let's assume that we've gone deep into the future and every physical asset and probably all items, have a digital representation, what would that really mean?

In a general sense, that just means traceability. If everything has a digital representation, that just means that everything has a digital ID for tracking.

But we want to focus on “markets” so that we'd set apart items whose digital representations are NFTs and those whose digital representations are fungible tokens with active markets for trade.

To tokenize a real estate business, you're mostly looking at selling ownership as tokens instead of going the traditional way of launching a stock. It's the same thing judging by the purpose, the only thing that's different is the financial layer.

One is designed to be decentralized and open to all, whereas the other is not.

So if someone says that tokenizing real world assets such as a real estate business doesn't secure the business, what exactly do they mean?

I'll tell you.

It's mostly a misunderstanding of what tokenization does.

Because, they are mostly thinking about NFTs and judging that against current laws, which isn't a fair judgement.

What I mean by this is that they are mostly thinking:

Owning a piece of JPEG that is claimed to be a representation of a property isn't going to hold up in court, so tokenization is a scam.

To be honest, they are right. Your JPEG may not hold up in court as a valid representation of ownership but the thing is, this is a temporary situation that anyone who cares about this technology ought to understand that it will take a while for the law to recognize and adjust to make such tech applicable for property ownership protection.

The same thing can be said about ownership of companies based on crypto tokens rather than stocks. The question of if fast markets can secure slow markets becomes slightly flawed because if the law recognizes this, then tokenization moves said slow markets to a faster financial layer.

It doesn't really matter if the tokenized assets markets respond faster or slower to real world events around their underlying assets of representation, the situations would not be any much different if ownership was based on stocks.

People might think that tokenization has to just come down to fix everything about the real world to not be a scam but that is a big ask and frankly not within the scope of its existence. Tokenization is about inclusion, opening access to a global market, reducing costs, enabling the deployment of stacks of incentives and bringing about greater liquidity flow.

Everything else is a governance problem, that we honestly hope that by taking finance on-chain, we can adjust the spread of power and influence political decisions for more positive outcomes.

Posted Using INLEO