The Trillion Dollar Crypto Opportunity: Real World Asset Tokenization
At what we hope is the end of a bitter crypto winter, history offers foresight that good times will return.
According to the eminent professor Carlota Perez, technology is adopted in predictable waves — exuberant bubbles are followed by seemingly existential crashes prior to long “golden ages” of growth. We saw such a pattern back in 2001 when the so-called dot-com bubble burst and The New York Times declared that “Dot-com Is Dot-Gone and the Dream With It”.
Fast forward to today and we have witnessed over two decades and trillions of dollars of sustained growth, together with the transformation of the old economy. This growth was punctuated, as Perez predicted, by bubbles and crashes approximately every 20 years.
Web3 is another technological revolution, which is undergoing this familiar boom and bust cycle. Until now, Web3 has succeeded in installing a cluster of technologies with enormous potential for economic growth and transformation. DeFi, or decentralized finance, has installed the infrastructure to enable a new financial system which replaces intermediaries with code and replaces trust with the assurance of immutable smart contracts. However, until now, DeFi has mostly transacted magic internet money, in the form of crypto tokens.
Similarly, non-fungible tokens (NFTs) have solved some of the problems of digital scarcity and enabled the democratization of creativity, but their use has mostly been confined to digital art, culture and memes.
In other words DeFi and NFTs may leverage superior technology, but are transacted primarily with volatile, small market cap digital assets.
According to Perez, this is both valuable and normal. New technological infrastructure is laid down in the initial installation period during a frenzy of investment, which is followed inevitably by a failure to meet such high expectations and a financial crash. However, it is this superior technological infrastructure that typically forms the basis of the next phase of growth.