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Use Cases and Applications

Tokenization: The $100 Trillion Path to Adoption

Song Choi
#build5#tokenization#asset_adoption

As a part of our tech showcase series we recently published a series of articles on how the BUILD.5 platform enables technologies like confidential computing and cloud computing, edge computing, and federated AI to transform entire industries through novel and open amalgamations of existing and emerging technologies. This intersection of old and new is a key feature of BUILD.5, which radically simplifies web3 by adapting it to how modern applications are built.

Today, we continue our journey with a 3-part series on the “killer application” that everyone is talking about, the Tokenization of Real World Assets:

The Inevitability of Tokenized Assets

Larry Fink, the CEO of BlackRock, the world’s largest asset manager ($8.5 trillion under management), recently shared his thesis that tokenization is a transformative use-case that has the potential to disrupt traditional financial markets, by “driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors.”

He is not alone. The general consensus among the top minds in business and finance is that the tokenization of real world assets (RWA) will inevitably impact all global markets.

So, the question becomes “why is this the most imminent of all use cases for digital assets?” The answer is simple, tokenization solves an obvious and pervasive problem. The companies, systems, and processes used to store, validate, and transfer the ownership of RWA, whether its a stock certificate, property title or contract are oftentimes cumbersome, antiquated, and ill equipped to handle the velocity of modern business. They rely on gatekeepers and intermediaries who extract massive fees and cause unnecessary delays for oftentimes doing little more than holding a document in escrow. Something that could easily be addressed through something like a smart contract.

In addition, tokenization increases the liquidity of the assets themselves, allowing fractionalized ownership for everything from fine art to office buildings, enabling vibrant markets to take hold for historically illiquid assets that can fund businesses growth, community engagement, urban centers, and even the work of individual creators.

Now that we’ve defined some of the factors driving the bullish forecasts and outlined the inevitable path that tokenization has towards adoption, the next question we need to ask is who should manage all of these tokenized assets?

Who Do You Trust to Own Everything?

We’ve already experienced the digitization of everyday life. We’re locked in to our mobile phone plans, our social media platforms, and the providers that house our digital goods and services. The centralized models that have propelled us to this moment in time serve as a preview of what can happen if we allow Google, Facebook, or even a small group of companies or government agencies to own this impending innovation.

The answer to the question of “who do you trust to own everything?” must always be “no one”. For tokenization to properly function and serve the global market, the system must be open, decentralized, and completely agnostic. There needs to be room for regulated and unregulated markets. It must be secure, public, yet private when needed. It must work across and within jurisdictions and geography. Serving individual owners and large corporations with equal levels of truth, trust, and transparency.

A few years ago this would have been an impossible set of requirements, but with the progress of open source technology and distributed ledgers the time is here to advance web3 technology to meet the needs of the market.

Leveraging a Feeless L1 and Turnkey Enterprise Platform

Due to the immense effort behind the tokenization of RWA, we believe there will be more than one solution, more than one protocol that will serve the markets of the world. However, we hold strong in the belief that only a feeless base layer can optimally deliver on the promise of tokenization without adding complexity and overhead to the process. Storage deposits and Mana unlock different types of economic models for service providers and participants which we will discuss in greater detail in future use cases and blog posts.

(Existing BUILD.5 APIs and upcoming product features)

Today, we will be delving deeper into some of our existing tools, which were designed to allow our enterprise partners to easily pick and choose which APIs they want to leverage to develop their own tokenized product offerings.

(Sample of existing API functionality utilized in a recent product demo)

For example, we were approached by a Fortune 100 company to use AI to generate digital twins of their products on the Shimmer and IOTA ledgers. The key requirements were that a twin would comprise a hierarchy of different unique components. They would need full control of the digital twin which would have the latest metadata stored as JSON, a critical feature was the ability to update the metadata at any time at no cost.

Conclusion

The reason so many powerful entities and individuals have come to a consensus on the future of tokenization is that an agnostic, public, decentralized, distributed ledger is the only way to guarantee the system supporting the tokenization of RWA is open, resilient, and secure. The opportunity to redefine how RWAs are owned, bought, sold, and transferred is immense and will require a collaborative approach with enterprise partners and web3 providers to collectively realize the potential of this new “killer application”.

By leveraging the power of open source platforms like BUILD.5 we can onboard the next billion users of decentralized technology, which will come from radically simplifying the connection between web2 + web3.

Next we’ll dive even deeper into Data Sovereignty, the Rise of Regional Clouds, and then Transparent, AI powered Supply Chains.

For more information about tokenization, digital twins, or our NFT and other product APIs contact us at [email protected].

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