For some reason, tokenization, one of the original promises of the crypto industry, is making headlines again.
“It’s so funny because people coming out of 2018 have all these scars from putting these things and believing in it and nothing happened,” Polygon’s lead tokenization Colin Butler told Polygon. Decrypt.
Tokenization basically refers to the transfer of more traditional financial assets such as stocks and bonds to the blockchain. The transition promises lower overhead costs and increased efficiency. And these days it excites everyone.
Avalanche, for example, recently launched a $50 million initiative to help founders in this area (as long as they do it at Avalanche). Late last year, Blackrock CEO Larry Fink called it “the next generation of markets.”
But why the sudden change of heart?
“I think the short answer for me is culture,” Butler said. “There are really hardcore blockchain believers in all these big TradFi companies right now. It basically took years for them to promote, for it to spread to the top, and for the top to consider it.”
At that time, DeFi also found its legs: Decentralized lending was started, Uniswap was launched, and, of course, yielded farming in 2020.
In line with these developments, CEO of Centrifuge Lucas Vogelsang spoke Decrypt“TradFi is starting to understand what DeFi really means: the idea of having trustless smart contracts that settle these transactions can lead to efficiency gains. This is actually a better back -end infrastructure for what they do.
Centrifuge, like Polygon, has been at the center of the tokenization—or alternatively, the real-world asset—trend for a long time. The project allows businesses of all types to put up their real-world collateral to acquire the decentralized stablecoin DAI. Today, it services over $235 million in assets.
Franklin Templeton, an asset manager with more than $1.4 trillion in assets under management, also launched one of its funds in Polygon earlier this year.
Across Polygon, Ethereum, and the Gnosis Chain, there are over $345 million in tokenized assets on-chain today.
There is clear momentum.
But that’s not enough for the tokenization trend to really hit the mainstream.
“Everyone working in this industry today has to be willing to take a certain amount of risk,” Vogelsang said. “And it takes another year to prove that the risk isn’t really there to get regulation.”
That risk is very different from the food coins of the past.
Riding the entire financial system, a behemoth that represents hundreds of trillions of dollars, is much more complicated than deploying a good weekend contract.
“If you rewire your rails, you’ve done something wrong and you’re BlackRock, you’ve put an $8.5 trillion business at risk,” Butler said. “And everyone has the same challenge.”
But obviously, the money is there.
And it will be more aggressive than AI employment concerns.
“I have a digital head and a large infrastructure provider in Strathclyde model of a 20,000 reduction in the number of people,” the Polygon exec said. “If tokenization really works, that’s right, there will be a quarter of their employees.”
With so much money knocking on the door, regulators are certainly feeling the pressure.