The democratization of access to investment vehicles will transform entire
economies, and the effect will be transformative in developing countries.
All too often, ambiguities and irregularities in antiquated, paper-based
recordkeeping systems still in use mean that inheritances and bequests
go unclaimed. The transition to blockchain-based DLT will provide
immediate benefits through improved recordkeeping for ownership
claims, while at the same time, establishing the necessary foundation for
tokenization of assets will spur rapid economic growth.
A historical precedent for tokenization can be found in the
electronification of financial markets in the late 20th century. From 1970
to 2000, virtually every financial market in the world transitioned from
paper to electronic recordkeeping. Those organizations are still with
us today, such that if you want to own a share of just about any widely
traded financial asset, you’re required to go through many of the same
intermediaries who had made the early transition from paper to electronic
records.
With tokenization, we expect an equally widespread transition, except
that this time, a new class of low-cost, consortium-based utilities will
enable the largest possible pool of investors to participate directly in
high-quality investible assets with the lowest possible friction.
Moreover, tokenization of assets leads the way toward “smart contracts”
that will replace expensive and time-consuming business processes
such as property transfers and bequests. (We’ll talk more about smart
contracts in a future issue.)
We are at the beginning of an entirely new cycle in economic
history. As we look ahead to how financial assets will created,
held, bought and sold, the future will be tokenized.
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