Exploring Ethereum’s Future: Tokenization Use Cases

Ethereum
(ETH)
continues
to
be
a
cornerstone
in
the
blockchain
ecosystem,
and
its
future
is
increasingly
tied
to
diverse
use
cases.
In
a
recent
article
by
CoinShares,
the
second
part
of
their
series
delves
into
the
concept
of
tokenization,
exploring
how
various
assets
can
be
represented
on
the
Ethereum
blockchain.

What
is
Tokenization?

Tokenization
broadly
refers
to
the
idea
of
representing
real-world
or
already
digital
assets
on
Ethereum.
This
includes
subcategories
such
as
Treasury/Yield
Products,
Debt,
Private
Equity,
Crowdfunding,
NFTs,
Utility
NFTs,
and
Digital
Collectibles.

Treasury/Yield
Products,
Debt,
and
Private
Equity

Tokenization
of
traditional
financial
instruments
like
treasury
products,
debt,
and
private
equity
aims
to
bring
these
assets
on-chain.
Digital
tokens
representing
ownership
or
claims
to
these
assets
can
be
traded
on
decentralized
exchanges
(DEXs)
or
specific
venues.
Smart
contracts
automate
interest
payments
and
principal
repayments,
enhancing
efficiency
and
transparency.

The
benefits
of
tokenizing
these
products
include
improved
liquidity,
lower
investment
minimums,
increased
transparency,
and
quicker
settlement
times.
For
instance,
Hamilton
Lane
has
already
reduced
investment
minimums
from
$5
million
to
$20,000
through
tokenization.

Equities

Tokenizing
equities
presents
more
complexities
but
offers
significant
potential.
Platforms
like
Dinari,
built
on
Ethereum
Layer
2
Arbitrum,
provide
compliant
tokenized
versions
of
popular
stocks.
However,
the
ultimate
vision
is
for
companies
to
issue
equity
directly
as
digital
tokens,
rather
than
just
representing
existing
shares.

Swiss
startup
Vidby
raised
$10
million
through
a
purely
tokenized
equity
offering
on
Ethereum,
showcasing
the
potential
for
startups
to
leverage
this
method
for
fundraising.
This
approach
can
offer
global
participation,
improved
capital
efficiency,
and
reduced
fraud
risk.

Crowdfunding

Crowdfunding
platforms
like
GoFundMe
and
CrowdCube
have
democratized
investment
opportunities.
Transitioning
these
models
to
Ethereum
can
lower
transaction
costs,
increase
global
participation,
and
offer
tokenized
ownership
with
voting
rights
or
automated
payouts.
This
can
lead
to
a
more
efficient
and
transparent
crowdfunding
ecosystem.

NFTs
—
Utility
NFTs
and
Digital
Collectibles

While
many
NFTs
have
lost
value,
the
underlying
technology
remains
promising.
Utility
NFTs
can
represent
ownership
of
assets
that
generate
cash
flows,
such
as
music
royalties
or
real
estate.
Digital
Collectibles,
on
the
other
hand,
cater
to
speculative
investors
and
collectors,
potentially
capturing
a
share
of
the
global
art
and
collectibles
market.

Summary

Tokenization
is
poised
to
play
a
fundamental
role
in
Ethereum’s
future,
offering
enhanced
liquidity,
transparency,
and
efficiency
across
various
asset
classes.
As
traditional
asset
managers
and
banks
explore
these
benefits,
the
sector
is
expected
to
grow
significantly.
The
next
part
of
the
series
will
cover
Governance
and
DAOs,
and
Digital
Identity/Credentials.

For
more
detailed
insights,
the
original
article
by
CoinShares
can
be
accessed

here.

Image
source:
Shutterstock