How Will Crypto Finance Evolve in the Near Future as an Emerging Field?
Currently, there are about 1600 cryptocurrencies in the world. Each one of these cryptocurrencies offers a collection of services and operations. The application of some of them goes even beyond the field of cryptocurrencies. Cryptocurrencies have had a lot of achievements. For example, the elimination of middlemen like money order companies and institutes that mediated international transactions are among the benefits and services that they have added to the financial and economic world. Cryptocurrencies do not have a physical form and are able to be transacted in the digital world. This is considered one of their benefits and makes possible tracing financial affairs and transactions. It is obvious that the presence of cryptocurrencies as new actors in the world of economy and financial affairs can create changes and of course, many new challenges. One of the subsidiary and important branches of cryptocurrencies is the advent of crypto finance.
What Is Crypto Finance and How Will It Evolve?
Crypto finance or open investment comprises an important part of the cryptocurrency economy and is growing quickly. Crypto finance operates mostly on applications and financial protocols based on decentralized networks. These applications and protocols want to enter the financial products in the world of economy and financial markets to a more efficient and effective system by implementing systems based on the cryptocurrency mechanism.
To enter the matter of crypto finance, there is a need for awareness of the basis of its activity and infrastructures. Crypto finance is an open and international financial system. With the existence of the Blockchain network and networks similar to it and cryptocurrencies that are able to be transacted and studied with no boundaries or limits in the world, new fields of financial and economic communications are created. In fact, cryptocurrencies and crypto finance give a chance to all the people across the world to participate in economic and financial affairs. In different places of the world, there are still people who do not have banks accounts or cards, and for this reason with the existence of decentralized systems like the Blockchain and the use of tools like cryptocurrencies, they can do their financial activities in a free infrastructure without the need for bank accounts and middlemen.
What Are the Outlook and Benefits of Crypto Fund?
There are many interesting and great benefits in crypto funding. Among them are the followings:
Public Access to the Possibility of Investment
One of the main benefits that can be imagined for the investment in the infrastructure of cryptocurrencies is the possibility of public access to it. Cryptocurrencies are defined in the digital world. The way to access to the services available in this world is the internet, and the worldwide web can be available to most people across the world. Given this possibility, i.e., public access to the internet, there won’t be any boundary or limitation for the investment. Activities carried out on the internet can proceed 24/7 and with no off day in addition to more speed and convenience in transactions, and this means the market of crypto finance does not sleep.
The Cross-Border Nature of the Crypt Fund
Activity in the world of crypto finance does not involve border limitations. From anywhere in the world with no specific boundaries and with no need for middlemen, financial and economic trades, transactions, and economic communications can be furthered. This possibility is very significant and ideal and can greatly decrease the costs of transactions. Since there are no longer any middlemen and fees involved. Also, the speed of financial transfers and communications is very high, and as a result, speed and convenience enter into the world of digital investment. The elimination of third parties like banks from financial trades and communications in the world removes the interference of an outside observer, and everything will go smoother and more efficient.
Freedom in Communications and Lack of Obstacles
In crypto finance, there is a lot of freedom. Because due to the lack of a central element to observe, or in other words, to interfere in people’s activities, there will be no censorship, obstacle, and outside observing. In fact, each person is in charge of observing his/her own investment and activities and makes decisions for his/her economic affairs with no obstacles. No transaction will be blocked, observed, or evaluated by banks or financial institutes.
How Is the Outlook and Evolution of Crypto Fund?
With the growth and development of crypto fund, the markets that form around them also grow and develop, and with respect to the capacity and nature that is considered for them in the infrastructure of the digital world, the cost and entrance access to this type of investment and markets will become much more than before. Liquidity in the crypto finance market is also very good. Many investors in the world are looking into entering the world of cryptocurrencies, and thus, a great capacity for investment in this newfound field can be expected.
What Is Tokenization of Real Assets with Crypto Fund?
There are many assets in the world that can be used in investment; like an investment in the field of real estate, gold, valuable artworks, agriculture products, and different types of physical and tangible items. However, trades and transfers in this type of investments are rather difficult. Investors further the trades of products and physical assets via bureaucratic methods and paperwork. Tracing the trades in this way is costly and time-consuming. Also, depending on the nature of the paper-based transactions, it is rather difficult to trace them and lacks enough transparency and clarity.
What Is Tokenization?
Tokenization is a brilliant process through which real-world assets can be entered into the digital world. By entering a digital system, investors can liquidate them in addition to keeping the nature of their assets. Digitization of the real-world assets takes place in the infrastructure of Blockchain and its similar networks. The entrance of data related to real assets well provides the possibility of transactions and digital trades. In the basis of a network like Blockchain, data cannot be changed, and thus real assets are traded easily between two people in trades that have no middlemen, and everything happens transparently and fast.
The age of tokenization of real assets is not so long, but in this short period, it has had some achievements. In the infrastructure of Blockchain, the possibility of tokenization exists, and real assets can be brought to the world of Blockchain. Such capability, with respect to features like “immutability” in the world of Blockchain, greatly helps the security of data and trades. According to the programs and algorithms that exist in the Blockchain network, no user can tamper with the data in this network. As a result, scam, fraud, and security threats for data are greatly decreased.
With the possibility of tokenizing real assets in the digital world, we will face numerous opportunities for the new markets to be formed in the world of cryptocurrencies. Besides, market liquidity will increase too. World Economic Forum predicts that in the next ten years, 10 percent of GDP will be used in the cryptocurrency assets. Available security tokens in Blockchain infrastructure are the cash form of real assets. These assets can be in the category of tangible assets like the fame and brand name, or they can be accommodated in intangible assets.
Tokens let the investors experience security, speed, and convenience in their trades thanks to new technologies like Blockchain. In order to have a better view of the tokenization process in real assets, you should pay attention to an example in this regard. Suppose that an investor wants to tokenize a luxurious and magnificent hotel and enter it to the digital world. The procedure is creating a tradable security token and delegate the hotel to some other people called trustee through forming a trust. After the hotel finds the liquidation capability, it will have some token owners who collectively are the holders of that asset.
Then the tokens of the hotel are registered in a smart contract in Blockchain and considering that some people are capital owners, all have some authorities in the smart contract.
What Are the Advantages of Tokenization?
With tokenization, the possibility of blooming the trades in the market of the assets which are hard to be liquidated gets much more than in the past. Moreover, for instance, the assets which have weaker markets or tracing their affairs is difficult due to the problems in real trades, will enter various international trades more simply through tokenization. Actually, tokenization causes the increase of liquidity of real goods.
Through increasing the liquidity of different goods and booming various markets which has been made possible through tokenization, the investors who are absorbed to the digital market will greatly grow through tokenizing real assets, and this is an outstanding achievement for a technology (i.e., Blockchain and cryptocurrencies) which are just ten years old.
In addition to liquidity, there is another important issue about tokenizing real assets, and it is the diversity which will be bestowed on the people’s investment portfolio. With different and various goods entering the digital world, the possibility of the users getting engaged in investment in different fields in the world of Blockchain will get much more than before.
Know Successful Cases of Tokenizing Assets
Following the world of cryptocurrencies and the tokens showing the assets of the real world in cryptocurrencies proves that they are growing. The below list refers to some successful examples of tokenization:
1. Tokenizing gold (Royal Mint Bullion)
Royal Mint Bullion (RMB) is a cryptocurrency which works on Blockchain infrastructure, and it is a gold digital representative in the world of cryptocurrencies; that is, the gold traded on Blockchain infrastructure as a real asset will be exchanged through cryptocurrency or RMB. Each cryptocurrency or RMB coin equals to one gram of gold.
2. Tokenizing properties (Propy)
Propy is an international agency wherein there is the possibility of drawing peer-to-peer contract and solves a very big problem on Blockchain infrastructure. The problem is removing limitations which exist for cross-border property trades. This means that with this international agency which works based on Blockchain, the people can address trading properties wherever in the world. Regional rules are applied for buying and selling in Propy.
3. The tokenizing supply chain for the Pharmaceuticals (Mediledger)
The objective of Medildger project is to trace Pharmaceuticals’ route in the supply chain through Blockchain. One of the other important benefits of Pharmaceuticals’ supply chain traced in Blockchain, is the possibility of identifying counterfeit drugs. With tracing Pharmaceuticals anywhere in the supply chain, no inappropriate and counterfeit drug will enter the chain.
4. Tokenizing artworks (CODEX)
The world of trading artwork requires more care and attention. The probability of fraud, inappropriate pricing, and slowness of process are high too. However, tokenizing artworks in a specified infrastructure, all will be informed about the origin of the artworks. Existing data about each artistic work are confirmed and registered in the system by the users before they are bought or sold and the starting point in the movement of the artwork will be specified and traceable in the supply chain. Hence, tokenizing artworks will be another service offered form the world of cryptocurrencies and Blockchain.
How Will the Future of Cryptocurrencies and Crypto Finance Be Like?
Since cryptocurrencies and Blockchain introduce various facilities to the world and different areas and industries, the global economy will be greatly under their effect. It seems that cryptocurrencies will come in the world of investment and through influencing dollar and actual currencies, will be included in different exchange markets and investment funds. The presence of cryptocurrencies in the exchange market or investment funds the public’s participation for investment will increase.
The prevalence of using cryptocurrencies in retails are among the predictions about cryptocurrencies and Blockchain, which should be taken into account. With including these cryptocurrencies to the world of daily trades and the public getting accustomed to them, the world of cryptocurrencies and Blockchain will dramatically grow. The effects of cryptocurrencies on the dollar and important foreign currencies will provide the possibility of using them in the exchange market, trades, and investment funds. Undoubtedly, the future of cryptocurrencies will be very splendid, and we will hear about them more.
Written by Dr. Pooyan Ghamari
Founder of Counos Platform