Electric vehicles… 5G… Quantum computing… 3D printing…
You’ve heard all these buzzwords before. And you’re probably bored of them by now. Tesla (NASDAQ: TSLA ) has been around since 2003 and 5G technology was invented almost a decade ago. Meanwhile, quantum computing has been the “next big thing” ever since I can remember. But there’s one Moonshot I bet you’re still wondering about:
That simple concept of turning tradable goods into digital tokens seems to need an explanation every time it’s mentioned. Google search “NFT,” and two-thirds of the results are descriptions of “what are NFTs.”
Imagine how annoying that would get with the word “toaster.”
But tokenization remains one of the most promising technologies of our time. It’s more than just cryptos and NFTs — it’s a path to trading goods and securing data. Carbon credits… private data logs… pictures of bored apes… tokenization allows users to transfer these assets securely and instantaneously between parties.
Today, we’ll take a look at some of the most promising technologies in the tokenization space. And we ‘ll answer once and for all: “what are NFTs?”
Just kidding. I’d rather give you three good investment picks than regurgitate a Google search.
Source: Catalyst Labs / Shutterstock Tokenization 101
To crypto enthusiasts, Bitcoin (CCC: BTC-USD ) might have been both the best and worst thing to ever happen to tokenization.
On the one hand, the world’s first cryptocurrency jumpstarted a trillion-dollar blockchain economy. 46 million Americans — 22% of the country’s adult population — now own Bitcoin, according to the editors at Exploding Topics. And it’s hard to go a day without hearing news about how rich you could have been… if you bought $100 of Bitcoin… back in 2010.
On the other hand, Bitcoin has also sucked most of the oxygen out of the collective crypto room. The world’s “digital gold” accounts for 45% of total cryptocurrency market capitalization and over 90% of the world’s crypto hash rate. Ask any precocious ten-year-old to explain the concept of “blockchain” and most would respond with some version of a digital currency. More than Bitcoin
But the blockchain is more than just cryptocurrencies. It’s an ingenious way to encode data in a secure and public manner. I could publish my social security number or anniversary date (both of which I often forget) on an SHA-256 encoded blockchain, and it would take a supercomputer several centuries to retrieve either number (You’ll find me in the marital doghouse until then). And if anyone were to tamper with the data during those years, everyone would know because the public ledger would have changed.
It’s much like speaking in ancient Egyptian. An observer can hear the words being spoken, but can’t comprehend the encoded meaning — unless they have a copy of the Rosetta Stone handy. It’s a way to keep sensitive data secured in plain sight.
Crypto enthusiasts have used these features to create an entire industry of NFTs, or non-fungible tokens. The most common of these, Ethereum’s (CCC: ETH-USD ) ERC-721 token standard, has helped millions of investors keep track of ownership in digital assets.
These tokens are relatively simple, all things considered. The ERC-721 standard, for instance, only has ten key functions (name, symbol, approve, takeOwnership, etc), and two events (Transfer and Approval). It’s a system that’s only designed to encode the ownership of the piece, not the work itself. It’s the difference between a house deed (represented by a piece of paper) versus the bricks and mortar of the house itself.
Source: Catalyst Labs / Shutterstock More than NFTs?
Tokenization has since moved onto more complex problems. Internet Computer (CCC: ICP-USD ), a much-lauded project by Andreessen Horowitz-backed DFINITY , promises to bring data computation to the blockchain (in other words, it’s digitizing the house as well). In theory, that could create a decentralized cloud service to rival Google (NASDAQ: GOOG , NASDAQ: GOOGL ) and Amazon (NASDAQ: AMZN ).Meanwhile, some applications are tackling more modest issues. Moss Token (CCC: MCO2-USD ) aims to make carbon credits tradable among firms. VEChain (CCC: VET-USD ) is tackling supply chain issues by creating a public record of Radio Frequency Identification (RFID) tags.The issue of course, is that no token is guaranteed to succeed… until it does. The EU Commission could easily crown MCO2’s rival Universal Carbon (CCC: UPCO2-USD ) as its official carbon credit […]