{"id":156552,"date":"2021-01-17T16:44:00","date_gmt":"2021-01-17T13:44:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/why-defi-plus-asset-tokenization-will-take-crypto-to-new-heights\/"},"modified":"2021-01-17T16:44:00","modified_gmt":"2021-01-17T13:44:00","slug":"why-defi-plus-asset-tokenization-will-take-crypto-to-new-heights","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/why-defi-plus-asset-tokenization-will-take-crypto-to-new-heights\/","title":{"rendered":"# Why DeFi plus asset tokenization will take crypto to new heights"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2c9c3c9b4aa\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2c9c3c9b4aa\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/why-defi-plus-asset-tokenization-will-take-crypto-to-new-heights\/#What_corporations_are_looking_for_while_raising_funds\" >What corporations are looking for while raising funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/why-defi-plus-asset-tokenization-will-take-crypto-to-new-heights\/#Can_current_market_players_operate_like_this\" >Can current market players operate like this?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/why-defi-plus-asset-tokenization-will-take-crypto-to-new-heights\/#What_kind_of_infrastructure_must_be_built_to_bring_traditional_institutions_to_the_DeFi_market\" >What kind of infrastructure must be built to bring traditional institutions to the DeFi market?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/why-defi-plus-asset-tokenization-will-take-crypto-to-new-heights\/#What_should_we_expect_in_the_future\" >What should we expect in the future?<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Why DeFi plus asset tokenization will take crypto to new heights <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDEvYjNhOTQwMDItNGQyMi00MzU3LTg2Y2QtMWExMThiNDVkMTk0LmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-5a136f3a>In previous years, we have seen numerous attempts to bring real-world assets to the crypto market. However, none of them has proven to be massively adopted among retail crypto users and traditional financial players.<\/p>\n<p>So, why hasn\u2019t real-world asset tokenization become a massive trend?<\/p>\n<p>You\u2019ve probably heard how almost anything can be tokenized \u2014 securities, art, real estate, to name a few. And there were so many projects that promised to change the way we invest in assets, no matter the type. At the same time, no projects managed to get massive adoption on the market.<\/p>\n<p>Traditional market professionals haven\u2019t really found proof that tokenization improved current fundraising processes for them. Although, an overview of real-estate tokenization has been already discussed.<\/p>\n<p>You may also struggle to find real retail investors who bought the rights to a famous art piece or a portion of Dracula\u2019s castle. While most successful offerings were focused on private investors, basically nothing has changed in the process for the crypto market, even for the owners of tokenized assets.<\/p>\n<p>Why didn\u2019t these offerings manage to gain mass adoption? While the concept of tokenization promises a better and cheaper way to raise funds for issuers, there are almost no real benefits for the crypto market.<\/p>\n<p>I\u2019ve covered problems of tokenization in the form of security token offering before, but in short, it boils down to regulation (tokenized assets are regulated by the traditional rules) and a lack of a secondary market. Retail crypto investors can\u2019t profit from these two issues, and there is basically no need for them to adapt to something new, especially now with the emergence of DeFi protocols.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_corporations_are_looking_for_while_raising_funds\"><\/span>What corporations are looking for while raising funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Corporate institutions have to exist in a world with complex and outdated rules. Therefore, a clear legal model to attract or borrow funds is vital for them. With over $20 billion <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/defipulse.com\/\">locked<\/a> in decentralized finance at the moment, it might attract some interest from corporate institutions and make them consider entering the market \u2014 especially if we consider that the common <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.investopedia.com\/terms\/a\/apr.asp\">annual percentage rate<\/a> in DeFi protocols is just 2%\u201310% with no additional costs to attract funding.<\/p>\n<p>Yes, there are no ready-to-go legal models built for corporates to attract or borrow funds from DeFi protocols on the market today. But it\u2019s possible to build one with minimal effort, as the benefits of DeFi borrowing easily cover the efforts of building such a system. DeFi might be able to provide borrowing on perfect terms for corporate institutions, which is something that might make them consider entering the market. Meanwhile, corporate institutions will be willing to provide several types of stable assets to be used as collateral for their loans.<\/p>\n<p>However, there is a real need for real-world assets to be used as collateral in DeFi protocols to prevent more market falls in the future, fixing the over-collateralization issue along the way.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Can_current_market_players_operate_like_this\"><\/span>Can current market players operate like this?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Right now, there are several attempts to bring real-world assets to the DeFi market. Most of them seem to accept a wide range of assets, mainly tokenized invoices.<\/p>\n<p>The main issue related to using those assets in a protocol is an absence of publicly available sources for pricing. This relates to the lack of transparency and the need to rely on a centralized party (valuation firms, underwriters, etc.) in order to determine the price of the collateralized asset. There is also no mechanism to monitor the pricing in real-time (as it is done, for instance, when using crypto as collateral). Those assets are <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ly illiquid; they are not traded on any marketplace or digital OTC platforms; and there is no source for periodically updating information on their pricing \u2014 a crucial point to determine the moment in which the collateral will be liquidated.<\/p>\n<p>There is no doubt that some of those assets could be insured, such as payment under invoices, meaning that the insurance company will pay in case of a default of the debtor. But again, the insurance process lacks transparency and lives completely off-chain, providing no real warranties for the investors or real-time knowledge whether or not the insured event has occurred.<\/p>\n<p>Additionally, current solutions allow borrowing strictly in crypto, which won\u2019t suit everyone. It\u2019s not a bad thing, but it reduces the chance of attracting large institutions that need to receive financing in fiat, which is used for their day-to-day operations.<\/p>\n<p>But the main question that arises is the possibility for big protocols to adapt and use real-world assets as collateral. And it will be extremely difficult, as they will have to change the borrowing process, build a system that will update the price of collateral, issue new assets, cooperate with regulated entities, and, generally, receive <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>roval from the majority of current participants. Talks regarding the adoption of such a solution by Aave and Maker have been ongoing for over six months, with no clear date when it will actually go live. <\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_kind_of_infrastructure_must_be_built_to_bring_traditional_institutions_to_the_DeFi_market\"><\/span>What kind of infrastructure must be built to bring traditional institutions to the DeFi market?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>A perfect solution that will allow the tokenization of traditional stable assets and that will be suitable for the DeFi market must meet several criteria.<\/p>\n<ol>\n<li>Real-world assets used by the protocol must have a transparent source of pricing available on demand by any user of the protocol. This requires not only selecting an asset capable of fulfilling this requirement but also building a price oracle that will transfer information regarding the collateral. Such an oracle should be connected to a transparent and trusted pricing source, such as Bloomberg Terminal, rather than receiving proprietary data from a centralized party.<\/li>\n<li>Real-world assets used by the protocol should be as less volatile as possible, generate fixed income to provide real cash flows to liquidity pools, and have a certain level of liquidity and market in the real world to be able to process the liquidation event in case it occurs.<\/li>\n<li>The protocol must allow users to borrow money in fiat. For such purposes, there is a need for yet another inter<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>ry to be connected to the protocol, to cover the exchange needs of users who want to borrow money in fiat, and fulfill the role of a payment agent for them.<\/li>\n<li>Real-world assets used by the protocol should have a digital presence, for example, be held on a secure accounting system. To achieve that, there is a need for an intermediary that operates such systems connected to the protocol.<\/li>\n<li>In order to defend the decentralized nature of the protocol and maintain the trust at the highest achievable level, intermediaries connected to the protocol must be regulated, insured, selected and overseen by the community of the protocol under established requirements. In addition, the community will decide any other crucial matters for the protocol\u2019s development and economic sustainability, including selecting assets that may be admitted as collateral. <\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"What_should_we_expect_in_the_future\"><\/span>What should we expect in the future?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>I expect that we will see several initiatives on building new, real-world, asset-backed protocols in 2021, and hopefully, they will be the ultimate solution to finally connect traditional financial and crypto markets. Existing protocols are more likely to adopt them in their current ecosystems only after new protocols will prove to be operational.<\/p>\n<p>Another area in which real-world asset-based protocols could make an important impact is stablecoins. There is a current trend among regulators mostly in the United States that targets all stablecoins that have centralized issuers \u2014 such as Tether (USDT) or USD Coin (USDC) \u2014 with discussions about the potential need to impose the requirement for any of such issuers to have a banking license. Decentralized stablecoins backed by real-world assets might solve this issue; however, it is a topic for a separate discussion.<\/p>\n<p>But what about other tokenization attempts and STOs? Of course, there have been successful cases before. Large financial institutions are still slightly interested in launching such products, as they may potentially save them money. But most likely, these initiatives will be focused on private offerings due to the aforementioned flaws. <\/p>\n<p>It\u2019s naive to believe that many crypto investors will be willing to make long-term investments in unfamiliar markets. Especially with great investment opportunities in the DeFi space. Until new regimes for the offering of tokenized instruments are built (and there are no bright signs in this direction), I believe real-world assets tokenization in a form of an STO will still be limited to closed offerings with no attention from the global market.<\/p>\n<p class=\"post-content__disclaimer\"><em>The views, thoughts and opinions expressed here are the author\u2019s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.<\/em><\/p>\n<div>\n<div style=\"background: rgb(239, 239, 239); border: 1px solid rgb(204, 204, 204); padding: 10px;\"><strong>Artem Tolkachev<\/strong> is the founder and CEO of Tokenomica. For over six years, Artem has been a key blockchain and tokenization opinion leader in the CIS region. Since 2011, he has been an intellectual property and information <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> lawyer and entrepreneur. In 2016, Artem founded and headed Deloitte CIS Blockchain Lab. As part of that initiative, he led a range of innovative projects involving the implementation of enterprise blockchain solutions, tokenization of real-world assets, tax and legal structuring of security token offerings, development of cryptocurrency, and blockchain legislation.<\/div>\n<\/div>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/why-defi-plus-asset-tokenization-will-take-crypto-to-new-heights\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Why DeFi plus asset tokenization will take crypto to new heights &#8221; In previous years, we have seen numerous attempts to bring real-world assets to the crypto market. However, none of them has proven to be massively adopted among retail crypto users and traditional financial players. So, why hasn\u2019t real-world asset tokenization become a&#8230;<\/p>\n","protected":false},"author":1,"featured_media":156553,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.cointelegraph.com\/uploads\/2021-01\/b3a94002-4d22-4357-86cd-1a118b45d194.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74894,74863,74868,75493,4965,67874],"class_list":["post-156552","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-blockchain","tag-cryptocurrencies","tag-defi","tag-stablecoin","tag-technology","tag-united-states"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/156552","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=156552"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/156552\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/156553"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=156552"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=156552"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=156552"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}