Blockchain technology, which is now more than a decade old, received global recognition across the world in 2021. What was once considered a technology of ‘hype’ and ‘scams thanks to crypto has finally entered the mainstream consciousness with real-world use cases. People are now recognising the business value of being able to prove the authenticity and uniqueness of an asset, and take advantage of blockchain’s timestamping, transparency, and security.
Johannes Schweifer is the CEO and Co-Founder of CoreLedger, a company that provides a decentralised, modular and extensible operating system for token economies, designed for all types of assets and services. Schweifer was co-founder of Bitcoin Suisse AG 2013 and created its first backbone infrastructure with banking and accounting, actively serving until 2016. In 2017, he founded CoreLedger AG to pursue blockchain ideas beyond financial and speculative use cases. He is actively using blockchain technology to solve some of the world’s biggest challenges and showcasing the true value of blockchain with practical applications.
Speaking to The Fintech Times, Schweifer examines how blockchain technology will be able to impact new sectors in 2022:
NFTs (non-fungible tokens) became the ‘word of the year’ in the Collins Dictionary, amassing a total of $14.1billion over the last year, up from $65million the year before. This particular use case of blockchain technology provided millions of individuals across the world with the ability to access new realms of finance – many of whom may have been traditionally restricted from wealth generation before.
Play-to-earn games, where users can play to earn “rewards” that can be directly converted to real money, also took the limelight, helping villagers in developing communities break out of vicious cycles of poverty. Both blockchain gaming and blockchain for art led to an increase in adoption of people holding cryptocurrencies, which doubled globally this year to 220 million individuals.
In 2022, the use cases of blockchain technology will only continue to accelerate, well beyond gaming and art. Blockchain has enabled use cases where blockchain integration helps make products and services cheaper, faster, and more globally accessible. The year has already been dubbed as “The Year of Enterprise Blockchain”, so here are five key industries where we will see greater adoption of the tokenisation of digital assets.
- Tokenisation of agricultural and other physical assets
When people think of asset tokenisation, they usually think of the minting of JPEGs as NFTs. But asset tokenisation, which works as a proof of ownership, exists well beyond the use case of art.
Across Latin America, the same concept is being used for a surprisingly different alternative asset – in the form of soybeans, cows, and other agricultural assets.
Tokenisation allows any asset to become accessible or tradeable on the blockchain. They are digital “claims” on real values. Just like investors can now purchase tokenised gold, which represents real gold stored in physical vaults (minus the unnecessary physical transportation of gold from location A to B), investors can choose to invest in farmers’ assets, like soybeans, cattle, or corn.
For countries like Argentina, where the value of the peso is plummeting, tokenising cows or soybeans allows farmers to access both national and international investment. Farmers can seek access to capital, while investors can seek access to stable and liquid assets that won’t drop in value.
The tokenisation of real world assets is still only in its infancy. Some projections state the total tokenised asset market is worth under $20billion, while the total size of the digital asset market is up to $350billion.
In 2022, as the global economy recovers from a pandemic and severe supply chain disruption, we will certainly see more investors discover the ability to invest in other asset classes. Companies will also recognise the ability to easily tokenise their assets on blockchains to seek a global market of investors, whose investments will be connected to real-world assets via smart contracts with a degree of flexibility and accessibility never before seen.
- Intellectual property and digital rights
NFTs have allowed us to offer rights or value in a way that is secure and validatable, without the need for an intermediary. Unlike most cryptocurrencies, individual NFTs exist as unique assets and in 2022, we will see many more use cases of how unique tokens will transform intellectual property rights.
Traditionally, to prove IP rights, you would need to have written contracts, with parties undergoing due diligence to ensure assets are owned by who they say they are owned by. Tokenisation of ‘rights’ removes the need for this, because once the ‘right’ or data is issued, it is validated in a smart contract which is unalterable.
We are already seeing players in the film industry protect the rights to their IP, whether that be an idea, script, character or story validated on blockchains via digital self-executing contracts containing the terms of agreements between buyers and sellers, or simply providing a contract to an individual stream or access to a film.
We’re also seeing this in the music industry, where artists are minting their music with verifiable contracts that state each person who is involved in the copyright, and total royalties applicable to each person involved in production.
Protecting IP is also critical for the transfer of 3D printing, also known as Additive Manufacturing, which can help reduce the need for cross-border trade. The pandemic exposed our global dependency on supply chains. Companies and countries have been forced to urgently manufacture materials, particularly during times of crisis, from medicine to PPE and large machinery.
One challenge is ensuring the IP of 3D printing files isn’t duplicated or leaked. The tokenisation of 3D printing means companies can send one token which represents ‘one right to access’. Token-based infrastructure will encrypt the file with access restricted only to intended recipients.
We saw a successful use case of this in Europe in 2021, where European countries trialled the transfer of 3D IPs to help create more sustainable local manufacturing opportunities and reduce CO2 footprints, reducing the need for cross-border transportation and reliance on other countries for local needs.
- Revenue participation and real estate
Real estate tokenisation has grown in popularity across 2021, which has been an asset class limited to those who are already wealthy. In places like Hong Kong, which has been named the most expensive city in the world to buy a home, tokenised real-estate, where investors can choose to buy-in to a portion of a home, instead of buying its entire value, has sky-rocketed in popularity.
Revenue participation models offer investment into the revenue of an asset via participation tokens. Companies grant the holder the right to a percentage of future profit, a relatively safe bet for profitable businesses. The profit is then paid out to the investor via a “payout token” which can be also sold on third-party exchanges.
This can attract investors internationally, and the ownership transfer of the asset can easily administrate multiple small investments with cost effective payouts. So in the future, we will see investors hold a variety of cryptocurrencies, collectible NFTs, and potentially beach-front villas in South-East Asian countries within their portfolios.
Additionally, tokenisation models are being applied to land registration and documentation. Land registries need to maintain records of land and real estate, recording changes of possession as they happen over the years.
In countries like Haiti, which has suffered from earthquakes that left millions homeless, these unforeseen circumstances destroyed 60 years worth of government archives, including land registrations. Many Haitans lost access to their ability to legally claim their own land, because there was no longer proof.
Tokenisation of land registration would ensure a highly secure and mobile record of ownership that cannot be manipulated. We will see more adaptations of this use case in 2022.
- Stronger asset protection and security
Many businesses are required by law to keep a backup of their data. Other entities, like law firms, have strict policies to maintain the chain of custody on important legal paperwork. These backups and storage systems can’t just be on any random disk, but must use secure, certified, and revision-proof storage systems.
Such systems are usually quite expensive, and the only purpose they fulfil is to make sure nobody tampers with the data, and that an auditor can find the original unmodified backups whenever an audit is needed (e.g. in case of a lawsuit).
Blockchain technology by itself cannot store large quantities of data, but you can create a digital fingerprint of the data, a so-called hash, and store this on the blockchain.
Together with the unforgeable timestamp that is created in tandem, the hash can be used by an auditor to verify the data’s integrity, and ensure that the correct ‘master-copy’ can still be identified, even if someone attempts to modify it. If anything about the data changed, the tampering will be apparent, providing a cheaper solution to the expensive revision proof storage use cases that many banks and insurance companies currently use.
Currently, leading companies such as Iron Mountain; one of the biggest document security companies in North America, have been transitioning from physical document security into digital, pointing to blockchain as a leading technology for the future of the industry.
In addition, established audit firms from the Big Four such as Deloitte are exploring the benefits of harnessing blockchain and unforgeable timestamped data storage systems to improve security, which are all clear indicators that blockchain will play a bigger role in the accounting, legal and financial industry over time.
- Carbon certificate trading and tokenisation of sustainability projects
Our carbon footprint is the next big topic of 2022, and fortunately, blockchain technology can provide solutions to key challenges preventing the reduction of temperatures in an increasing climate.
Blockchain technology has received heat for certain chains’ underlying wasteful infrastructure, namely Bitcoin’s, since it requires thousands of node-runners across the world to execute computing power to validate transactions. In 2021 we saw more energy-efficient chains like Solana and Avalanche increase in popularity for their more energy-efficient validation mechanisms.
In 2022, we will see more rising stars come to the surface, like Sparknet for example, which uses less energy than a TV by using a validation mechanism called ‘proof-of-authority’.
We will also see the tokenisation of carbon certificate trading, as well as the tokenisation of carbon credit sequestration projects. But bringing carbon on-chain, projects like Toucan allow anyone to tokenise their carbon credits and make them available in the emerging world of decentralised finance.
Carbon pools turn tokenised carbon credits into more liquid carbon reference tokens, enabling price discovery for different classes on carbon assets.
Carbon sequestration projects on the blockchain enable anyone to access a token that represents a real, physical project working towards reducing carbon in the air, so instead of buying a token that represents merely the speculative value of an asset, you’re investing in a smart contract that will see greater investment into carbon sequestration projects in the real world.
Beyond these use cases, we will see companies use tokenisation and blockchain technology for a variety of creative cases, like launching loyalty reward programs and gift cards where customers can trade their reward tokens on marketplaces. NFTs will be used beyond art to increase customer and fan engagement and loyalty to build brands; while companies will also use distributed ledger technology to better track accounting and data than any existing systems. By 2023, we will certainly be speaking about even more innovative and helpful use cases that companies may not have even considered yet.