From Nasdaq:

In the world of cryptocurrency, tokenization has been widely discussed as the next big thing, especially when it comes to real world assets. However, experts warn that tokenization is not a new concept and it is often oversold. The CEO of Vertalo, Dave Hendricks, believes that the hype around tokenization is largely misunderstood by both supporters and critics. Many influential figures in traditional finance, such as Larry Fink and Jamie Dimon, see tokenization as a natural evolution in finance, but the process is much more complicated than it appears.

The market for the tokenization of real-world assets has grown significantly since its inception in 2017. This has resulted in a pivot for many companies, including Vertalo, which has transitioned from being a tokenization issuer to a software company connecting the digital asset ecosystem. Non-fungible tokens and DeFi have experienced a massive rise and subsequent decline, with projects now focusing on real-world assets and forming partnerships with traditional financial institutions.

DeFi founders and engineers who were early adopters of tokenization saw the decline of DeFi and NFTs coming and started rebranding and focusing on real-world asset tokenization. This has resulted in the mass migration of the DeFi movement towards tokenization of real-world assets. Despite the surge in tokenization, there are concerns about the quality and regulation of collateral being used in many tokenization projects.

Tokenization of real-world assets is a valuable concept, especially in terms of tracking ownership of private assets that are currently recorded in spreadsheets and centralized databases. However, while tokenization can improve data management, it also introduces new challenges and does not solve liquidity or legality problems. Reclassifying collateral as tokenized real-world assets does not necessarily bring stability or regulation to the assets being tokenized.

Financial asset tokenization is a complex process that involves more than just tokenization. While tokenization is an important part of the process, it is not a profitable business in itself. Alongside tokenization, distributed ledgers play a crucial role in ensuring the trust and security of financial assets being tokenized. Without a reliable ledger system, the finance industry cannot fully embrace the tokenization of real-world assets.

As the hype around the tokenization of real-world assets continues to grow, it is crucial to look beyond the surface and understand the complexities involved. Without a solid foundation, the tokenization of real-world assets may lead to similar pitfalls experienced by NFTs and DeFi. The development of a reliable and trustworthy ledger is a key factor in the success of financial asset tokenization.



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