The Tokenisation of Everything
The tokenisation of art in the form of NFTs (Non-Fungible Tokens) was one of the leading onchain use cases in 2021. It introduced improvements to verification, storage, logistics and trade. While NFTs may serve as the right vehicle for luxury goods, their inherent lack of fungibility makes them inferior to fungible tokens for many asset types. Tokenisation of assets both traditional (bonds and treasuries), non-traditional (digital commodities) and non-defined (culture and attention) is set to re-shape markets as they exist today.
Tokenisation
Tokenisation is an application that converts ‘assets’ into digital tokens onchain. It allows enhanced liquidity, access, security and transparency. The promise of near-instant liquidity means investors can swiftly exit positions and convert their holdings into cash or cash equivalents as needed. This fluidity reduces risk and aligns perfectly with the ever increasing demands of investors. The rise of AMMs in onchain finance have allowed ‘instant’ buy / sell of fungible tokens LP pools. Protocols like Blur did this too for non-fungible tokens.
Tokenisation of Real-World-Assets (RWAs)
In 2023, Blackrock launched it’s BUIDL fund. This is a tokenised fund backed by U.S. Treasuries, cash, and repo agreements. It is designed to offer institutional investors a stable, yield-generating product with the benefits of being ‘onchain’ as outlined above.
Adoption has been significant with >$500 million in assets under management just months after its launch. The fund operates on the Ethereum blockchain and was developed in partnership with Securitize, a digital securities platform. Like securitize, other institutional-ready protocols are emerging to tokenise more ‘real world assets’. Superstate is one of these. They offer easier access and better management of traditional financial products through blockchain technology, bridging the gap between traditional finance and the crypto world. One of their first products are tokenised treasury bills.
Despite the industry having a compound annual growth rate (CAGR) of approximately 640%, tokenised assets still represent less than 0.5% of traditional financial assets. The potential for tokenisation to encompass not only traditional assets like financial products, luxury goods, private equity, property, intellectual property rights etc, but also the creation of new asset classes such as digital commodities, culture and attention.
Tokenisation of Digital-Native Assets.
As we move up the spectrum from traditional assets, we find ‘non-traditional’ assets such as digital commodities. My definition for digital commodities is simply consumables that exist in a digital form only i.e. network tokens (gas) or tokenised derivatives of real-world-assets i.e. unutilised computation or bandwidth. A primary driver of the creation and value-accrual of digital commodities are DePIN business models. This article dives much deeper into DePIN and Digital Commodities.
Tokenisation of New-to-World Assets.
Memecoins are an interesting use case of tokenising non-traditional asset types. They’re polarising for many people because they break our fundamental assessment of ‘value’. How could tokenising a meme i.e. PEPE be worth $7B? The mid-curve take is ‘scam’. The left-curve is ‘speculation’. The right curve is ‘tokenised attention’. I think a little bit of left and right-curve is right here with a bias toward the right (despite memecoin enjoyers subscribing to the left - which is a meme in itself).
My formula for valuing ‘tokenised attention’ is simply: Relevance x Affinity x Virality. Relevance in driven by current affairs / meta, or re-enforced through affinity to a persisting meme or narrative.
An example of something that has current meta, without proven affinity is memecoin PNUT. It’s a token that represents Peanut the Squirrel, a rescue turn domesticated squirrel whose tiktok videos raised funds for the refuge. An example of a persisting meme with proven affinity is DOGE. This token has lasted many cycles. Affinity tokens might also be referred to as cult tokens. They typically have a figure-head or driver, dedicated contributors who churn out content and / or product and a rabid community of believers.
Regardless of whether something has current or persisting relevance typically drives the value people are willing to pay to ‘own’ a piece of the movement. By buying these tokens, we get a proxy for how powerful the meme is in capturing attention at this very point in time. This approach essentially replaces other less accurate versions of attention such as google search / twitter impressions which can be gamed through various mechanisms. Memecoin value are the purest form of attention valuation.
