Why tokenization on public blockchains is important.
For those outside the crypto industry, tokenization and blockchain are jargon that tends to be hype and hard to grasp. Still, once you get the background, it becomes much easier to understand, so I’ve summarized why it’s crucial.
TLDR: Tokenizing value on a public blockchain has much more impact than just going digital. That’s what a digitally advanced future will look like. Eventually, a digital economic sphere that looks like a virtual state with all kinds of value circulating as tokens will emerge.
Slow digital transformation in traditional sectors
As of 2020, public services provided by the state and public administration, as well as those offered by regulated industries, are not sufficiently digitized, despite being necessary for everyone and needing universal access.
This might be because those public and regulated industries have already matured or are capable of earning sufficient wealth without having to deal with digital technology, and/or they are controlled by people who would lose power once the industry was digitalized.
When these services are genuinely delivered digitally, a variety of welfare services will be provided online for many more people. This might look like digital states.
The emergence of public blockchains
Since the advent of Bitcoin and Ethereum, the foundation of the digital economic field has been laid for the first time to make it possible to digitally implement financial and other public functions that were previously difficult to achieve without relying on government or institutions.
I call those global, open, and immutable systems public blockchains later in this post.
It is still developing, but many exciting projects are realizing the foundational functions for the digital economies on public blockchains. Those functions have been seen as difficult to realize without law or government. Let’s look at examples.
Smart Contracts
Contracts in a digital environment should be governed by code rather than by paper. Smart contracts are automatically executed by computers with digital signatures if the signing parties have agreed to do it. This is made possible by a public blockchain with a trustworthy computational environment and immutable data.
Money
Money is just data. The exchange of money is a kind of contract. Money has previously been challenging to exist digitally without a reliable data source on a third party’s server. First time in human history, digital money has been made possible over p2p by Bitcoin. Bitcoin is a blockchain with a built-in smart contract for money. Ethereum has developed this concept a step further, allowing all types of smart contracts to be realized, with tokens such as USD correlated coin USDT and DAI circulating on Ethereum.
Bank
On Ethereum and Bitcoin, the account can be created in seconds using a pair of private and public keys. Also, Ethereum can incorporate a variety of functions such as deposits, money transfers, investments, and currency exchange into its applications, which are open and can be freely configured. If you want to try it out, try a smart mobile wallet Argent.
Company
You need an organization like a company to get multiple people together, manage money, and do activities. Companies are governed by the Companies Act with various rights and obligations, and the management of money and decisions made in the company are secured for enforcement by that law. As we’ve already mentioned, contracts can be achieved with smart contracts. While there are still many obstacles, some of them may be feasible for a company on a smart contract when dealing with a product that only deals with data. Such a concept is called DAC (Decentralized autonomous company).
DAO (Decentralized autonomous organization) is a concept that has been further developed. Once deployed to a blockchain, the code runs without an administrator. You can try one with a decentralized exchange called Uniswap. The public blockchain has the power to change the way businesses and companies work as a team.
Fundraising
Funding projects can be done without VCs or banks on public blockchains.
Some ambitious initiatives, such as the so-called ICO, raise funds directly from the market. Also, Bitcoin invented PoW, which rewards BTC for miners who maintain the network. PoW is one of the ideas that has the power to promote the project without fundraising because it can encourage the participation of projects in the future market price.
The fundamental value of public blockchains as social infrastructure is that it makes foundational functions that every business needs entirely digitally available to everyone, without any human interactions. Once we have the essential services that I have already mentioned, we will be able to build a diverse economy on top of that.
Tokenization on public blockchains
On public blockchains, money, stocks, commodities, and various other rights can be represented as tokens. What’s revolutionary about the public blockchain is that its tokens are circulated under common data standards and rules. They can be easily linked to a variety of services to each other. Also, once many values are tokenized, there will be various applications on top of tokens.
I expect the tokenization to progress from digital services and rights first.
For example, the following would be tokenized on a public blockchain.
- Virtual items in digital services such as games
- Share of decentralized companies on a blockchain
- Copyright system for the digital world
Besides this, physical rights will gradually become tokens as the rules are developed on which data to be the truth.
So far, you would say that “digitalization is already progressing on an individual basis. Isn’t it unnecessary to use public blockchains?”
I assume you are probably already living in a developed country and have a certain Internet literacy level.
I will explain why public blockchains are important by using a metaphor of the Internet.
Thanks to the Internet’s openness, various exotic ideas, and information that had not been distributed have been distributed at a low cost.
That probably means that public blockchains will go beyond the context of banks and governments going digital, just like the Internet went beyond the digitalization of information networks.
Without Youtube, many videos would not have existed on the Internet, and without SNS, much information would not have been as widely distributed as it is today. And both of these wouldn’t exist without the Internet.
There will be many tokens on Ethereum
I recently announced a product called Yiedl on Ethereum, the largest public blockchain as of 2020.
With Yiedl, users can do the following with NFT tokens, which every token has the unique ID.
• NFT owners can rent out their NFTs and earn passive income.
• NFT owners can take out a mortgage by collateralizing their NFTs and leveraging the value of NFTs.
• People who have money can earn interest by lending out their money.
• People can lease NFTs, and they can enjoy short term ownership.
Of course, various applications on Ethereum can integrate Yiedl. So it’s possible to incorporate it into your own app on your smartphone or create a decentralized company to integrate the features.
Ethereum will further evolve as a social and application platform as the number of transaction capacity increases tens of times through future upgrades. As a result, the scope of services and tokens will continue to expand.
Conclusion
It’s a long story, but I think that when the digital transformation of the society has accomplished on the public blockchain, it will ultimately lead to the emergence of a new social sphere online that is a more diverse and inclusive world. Although many of the projects are still experimental, I am sure that the foundation of the future digital society will be born from the trial and error of a public blockchain system.
“The future is already here — it’s just not evenly distributed.”
The Economist, December 4, 2003.”
- William Gibson
If you’re interested in tokenization, building applications with Yiedl, or collaboration, we’d love to hear from you. Email: kohshi@yiedl.com
