Crypto isn't "real"

A wakeup call for RWA and NFTs, and the true nature of tokenization and why most real-world asset projects are doomed to fail.

The fad of the day is “real-world assets”. I say day, but it’s going to stick around for a while, this tokenizing everything narrative. What is temporary is the idea that any of that has anything to do with “crypto”.

The problem with tokenized assets in the crypto camp is much the same as the issue around NFTs. The current standards are rubbish. They were made for bored simians and stoned snakes — or whatever other “collectible rubbish” is out there. The morons behind Punks and Apes may have gotten rich on exploiting the credulity of the unwashed, but they also destroyed the image of non-fungible assets (many RWA projects are using NFTs) for years to come.

They also distract from the main problem: NFTs inherit the technical properties of the chain on which they live, and that is unacceptable for real-world assets. If we want to put house deeds and death certificates, passports, and airline tickets on blockchain (which we will, no doubt), we cannot rely on a specific blockchain. It’s like buying a house with a mortgage from Bonkers Bank, and when Bonkers Bank goes under in the next banking crisis, I lose the deed to the house regardless of my mortgage payments.

The same is true for all real-world asset projects. While RWA is quite the rage, I haven’t seen a satisfying solution for chain-agnostic digital representation of anything real. You can’t house them on Ethereum, because gas fees are unstoppable. Much the same is true for Polygon and now Bitcoin, what with inscriptions and BRC-20s and all. I don’t trust Solana with my passport either, nor with my electricity, water, drone landing rights on my rooftop, nor my DNA profile nor my health records nor my ... anything really.

For tokenizing real-world assets we need much more interoperability than we currently have, and even that can’t depend on a single provider like Chainlike or Quant.

What we need is digital independence. We need digital twins of our physical existence that live freely in cyberspace and can dock onto any platform they need to. The government will never embrace Stellar, XRP, Ethereum, or whatever to house citizens’ livelihoods. The tax office, which will want access to as much information as they can lay their hands on, will never run its own validator.

For the real world to merge with cyberspace, we need a whole new toolkit. NFTs that exist autonomously, that can move not just cross-border but across chains without vulnerable bridges, and tokens that are much smarter than the dumb assets we have now. Since crypto projects aren’t companies with proper financial statements but academic think tanks at best and boiler-room scams at worst, we have no way of determining the value of any crypto asset. Using the growth of accounts, transactions, and other ancillary data bears no relationship to the asset whatsoever. It’s like saying Visa stock is worth x dollars because it processed y amount of transactions. That is just nonsense, invented by "blockchain analytics" firms who understand blockchain, but seem to be unaware of the real world, were cash is king and cash flow is tzar. We need cash flow as envisaged by the Actus standard , we need real money flows algorithmically represented in the code, before we can embark on this journey.

Non-fungible digital representations of a house must include the mortgage amount and my payment history. Your passport must include your travel history and be usable on any data network anywhere, not just a select group of nations who fell for Polygon’s marketing machine. And of course, the plain version of blockchain money, whether it be stablecoins, or the illusive CBDC, cannot be “real” unless it exists independent of blockchain run by young developers and engineers motivated mainly by their paycheck or the booze, drugs, and hookups at crypto conferences.

Be very afraid of any project promising “real” utility bound to a specific platform. No single blockchain will dominate the world. The global data infrastructure will not be built on Ethereum or ICP — it will be built on thousands of chains, compatible with legacy networks, that will need to interact seamlessly, be free-to-use (no gas fees, like Koinos), be transportable between platforms safely and instantly, and be 100% under your personal control — and not just in your wallet housed on some dodgy piece of software downloaded from an App Store.

For crypto to become “real” much has to happen technically, ethically, and morally. Many projects claiming to solve the RWA/NFT issue will fail miserably. Yes, there will be development, hype, and price appreciation through the next bull run, but their will also be failures, flops, scams, and more scams, rug pulls, technical incompetence, and most of all hubris and the arrogance of young man gripping a computer keyboard with one hand, a joint with the other, and dreaming of daiquiris in Davos, a beach chair in Barbados, or just code. Pure code. Independent code. Free code.

I dream of code sometimes, especially after a long work session, when my brain tries to organize the information in the nightly cerebral house keeping session. And I dream of better code. Much better code, ethical code, and free code, living in cyberspace without depending on a faulty blockchain with an unsafe consensus mechanism. Code perhaps co-written by artificial intelligence, for that is where the real challenge lies: bending AI to our will before we are run over by self-coding self-replicating AI agents.