Was Tokenization Failing? - Not so fast!

Tokenization is the process of representing real-world assets like stocks, bonds, real estate, or commodities as digital tokens on a blockchain. Many predict tokenization will be a multi-trillion-dollar opportunity, but current use cases represent just a fraction of this potential. When will tokenization reach critical mass?

In an October 2022 article for Forbes titled "Why Tokenization is Failing," Steven Ehrlich argued lack of trust is hindering adoption more than technical challenges. However, Colin Butler disagrees, asserting in his recent CoinDesk article that the primary obstacle remains technical infrastructure limitations.

Butler contends that 2023 has seen incredible progress on the foundational layers needed to enable the next wave of tangible tokenization results at scale, driven by major financial players entering the market.

Key areas Butler cites as leading tokenization growth are private equity funds and private credit instruments. Many private equity firms actively develop tokenized fund vehicles for investors, with major institutions like Hamilton Lane and JP Morgan following suit. More structured products like tokenized bonds and revenue streams from private credit are logical next steps.

Beyond just funds, Butler believes 2024 will see expansion into other assets like public equities, commodities, real estate, art, and collectibles. Fractionalized ownership models have already emerged in fine art, foreshadowing growth. Real estate is especially ripe for tokenization to increase accessibility and liquidity in traditionally rigid markets.

Bringing new asset classes on-chain will attract whole new generations of investors, provide new payment rails, and require industry-wide interoperability standards. This will demonstrate tokenization's immense utility and build necessary trust.

Butler expresses confidence the current trickle of tokenization will turn into a flood in 2024. Major institutions developing real-world use cases will foster credibility and mainstream adoption. The remaining technical obstacles around infrastructure and interoperability are actively being resolved by both startups and financial incumbents.

In summary, while tokenization has yet to fully deliver on its vast potential, foundations laid in 2023 indicate the space is poised for enormous growth in 2024 and beyond. Areas like private equity, credit, real estate, and fine art will lead the next wave of adoption. Success will breed confidence and trust for even further expansion across the financial sector. The tokenization revolution is imminent.

Source: Article written by Colin Butler for CoinDesk https://www.nasdaq.com/articles/2024-will-be-the-year-tokenization-truly-finally-begins