Digital Assets: Multi Hundred Trillions Of Dollars
How often have we heard people ask if it was too late to get involved in cryptocurrency? People look at where the prices are, compared to where they started and conclude they missed the run. After all, Bitcoin, as an example, already went from $3,000 to over $50,000. Certainly there is no more upside.
This viewpoint is often countered with the mindset that this is still very early in the game. The numbers we see now are a fraction of what they will be. There is much higher side for everything since very few people, as compared to the whole, are actually involved.
Network Effect is going to be the driver to much higher levels. Since there are still near 5 billion people online who are not utilizing digital assets, there is a ton of room for growth.
What is also missing, at this moment, is business people. They are the true drivers of innovation since they bring money to the table. This fosters development which can feed into mass adoption. It is less than a year ago that we saw the first wave of Wall Street money start to filter in. This was the reason for Bitcoin's enormous run.
With a market cap of $1.5 trillion, the cryptocurrency world is just getting started. Raoul Pal, the noted macro-economist and strong Bitcoin advocate, revealed this sentiment in a series of Tweets.
Perhaps this helps to clarify how early in the game we really are. It also shows the opportunity that is confronting humanity at this moment.
Does $1.5 trillion really compare to hundreds of trillions of dollars?
People look at the situation through the lens they know. They often embrace numbers they can comprehend. Billions is hard for most to imagine, let alone trillions. Unless it is something to do with government or national/global stats, we simply do not deal in these volumes.
However, they are lurking out there. The present numbers we see are going to be drastically exceeded. Cryptocurrency is not just adding to the economic pie, it is actually recreating things.
What cryptocurrency brings to the table is the ability to develop a more efficient system. We are seeing the beneficial parts of our present financial world being merged with new models that target the unproductive areas. It is hard to see right now since it is so early but that will change in coming years. As development takes place, we will see the integration into something that can increase productivity a great deal.
Our present monetary and financial system is archaic. It is stuck in the proverbial Stone Age compared to where we are going. We are still trying to operate with tools from a physical world when we are now in the digital, moving towards the virtual.
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Few realize how powerful the "tokenization of everything" really is. They also overlook how much wealth can be created.
The last few days saw news made with Jack Dorsey tokenizing the first Tweet ever sent. This generated bids that entered the millions of dollars. When that deal is completed, Dorsey will have a few million dollars that he did not have before. That is a transaction that only took place because of tokenization.
Obviously Dorsey had the Tweet all these years. What he didn't have is the ability to monetize it. By creating a NFT tied to that Tweet, he was able to put it up for auction, just like any other collectible.
Notice Pal's Tweet and the evolution it covered. He mentioned about people trying to wrap their heads around Bitcoin, then DeFi, and now NFTs. The first one had a bit of a warm up period but the later two burst onto the scene. DeFi exploded in 2020 and, so far this year, NFTs are the rage.
What innovation will be on fire next year or the one after that?
This shows how quickly things are moving. It is also illustrates the expansion of opportunity for individuals. With each new iteration, there are more ways for people to benefit.
As stated earlier, we are still very early in this system. Through tokenization, that removes the middle man. Instead of trusting powerful figures or entities, we deal direct. This means that transaction costs go down which tends to drive the number of transactions up.
Here we see the ability to generate enormous sums of wealth at the individual level.
Many talk about what the future of work will be with the potential disruption to jobs due to automation. The answer to that is we will, for the most part, be compensated through this new system.
Imagine having a system whereby one is able to pay some bills through the tokenization of volunteer work that is done. Or doing the same thing as a result of one's fandom of a particular sports team. In a world where everything is tokenized, this is possible.
It all requires buildout of course. Yet, consider the person who likes to travel. How would things change if this person could pay for his or her coffee using airline miles or hotel points.
Ultimately, compensation will come as a result of all we do. Each day, we are creating two things simply through out operation in this world: energy and data.
Right now, people are not compensated for either of those. Energy that comes of the body is obviously no captured. Nor is it from moving around as we progress through our day. This could all change decades down the road.
As for data, we know this is being collected. We are also well aware that there is no compensation to us as individuals. Tokenization will also create a situation where this is radically altered.
Then we couple this with the ability of our devices to generate data, without our input. This constructs a totally new model whereby each person is effectively a data miner. In this era, the value of data is well known.
With tokenization, there will be a market for all of this to be traded or collateralized. The later allows people to get money to use for other financial purposes without giving up the underlying asset.
Think about that for a second: having the ability to monetize your data without ever giving up control of it or selling it.
Pal is right. We are going to see a few hundred trillion dollars in tokenization over the next couple decades. This is going to generate the greatest amount of economic prosperity, something that dwarfs the results of the Internet. However, unlike that era when on small handful of people benefited, we are now in a time when anyone can be involved.
Hopefully it is becoming clear how we are entering the Age of Abundance.
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