Tokenization: $400 Trillion Worth Of Assets Out There
In the cryptocurrency industry, there is a lot of talk about the establishing of a new financial system. The present system has excelled in growth yet did a poor job at distribution.
There is little doubt we are seeing a global asset base that is exploding. Numbers use to be discussed in denominations of billions. Today, we talk about trillions.
As this progresses, the world is debating who will become the "first trillion dollar man".
Of course, all this is taking place at a time when billions in the world are living on what amounts to a few dollars a day (if that much). Here we see where cryptocurrency is starting to fill the void.
That said, how much potential is out there? This is a question that many attempt to answer and simply looking at the existing financial system might help.
According to Statista, as of 2018, the assets held by all global financial institutions was near $400 trillion.
That is an astounding number. What is even more impressive is the growth rate over the time of this chart. Their holdings started at $127.8 trillion before tripling in a decade and a half.
Simply put, here is the crux of your wealth inequality. Those who are closest to the central banks are the ones who benefited the most.
To realize how big a number this is, there was a study in 2016 that determined the total value of global real estate was $217 trillion. Certainly, it grew since then but the point is clear: these financial institutions are sitting upon a lot of wealth in terms of the assets they hold.
Even after the strong run up in cryptocurrency, the total market cap of all that is listed on Coingecko is still under $600 billion. This means the assets held by the global system is about 645 times larger than the total cryptocurrency market cap. Of course, this is probably skewed since we are all aware that the financial entities are starting to get involved in cryptocurrency.
Therefore, even this vehicle to freedom is being eaten up by the global entities we all know and have come to despise.
Many believe we are going to see the tokenization of everything. This is a crucial point going forward. When assets are tokenized and put on the open market, more people have access to them. This is really helpful if more people are starting to get rewarded in cryptocurrency, thus providing them with some resources to get involved. One of the biggest factors of the present financial system is exclusion. Tokenization is a process of inclusion.
We still have some issues before we can get there. The present system wants to maintain control. Thus, we have to deal with the regulators on subjects pertaining to ICOs and what is a security. One of the reasons the financial system is so wealthy is because they create financial products "out of thin air". This is something that would land the rest of us in jail.
However, with cryptocurrency, anyone can create a token. This can represent anything one wants it to. We see projects that are being developed with the intent of replicating what exists in the present financial system. Therefore, hundreds of millions of people will be given the opportunity to profit in the same way these giant companies have.
Consider for a moment how the wealth and income structure of the world would be if this $400 trillion in assets was spread out over the global population. This is exactly what cryptocurrency and tokenization can do.
The opportunity for outsized returns exists. It is very common in the traditional financial system. The only problem is that we are not the ones who share in it. Instead, it is venture capitalist, large banks, and hedge funds that can get involved in projects that net great windfalls. They also have the opportunity to put their money to work in ways that the rest of us do not.
Thus, we believe that a 7% annual return is amazing. This is a drop in the bucket in many private equity deals.
A great advantage that cryptocurrency presently has is that enormous returns are possible when dealing with smaller markets. For example, the likelihood of the United States Equities market having a 400% gain in a year is slim. The market is simply too large to experience that.
Crypto, on the other hand, could easily see a jump like that. Of course, if that happened, the entire market cap would still trail the silver market.
The network effect is going to be a driving force. As more people get involved, innovation can increase greatly. This will drive value through the roof. Here is where we see the major jumps. While Bitcoin can lead the way, even that isn't going to have a 25x move. A lot of other projects could see this.
That is how we close the gap. Instead of the 3% holding all this wealth, we start to involved tens of millions of people. If those people are experiencing outsized returns as project develop and grow, word will quickly spread. This will start to feed on itself, causing exponential results.
Keep this in mind the next time someone mentioned how it is not possible for tokens to be worth this much. When compared to what the global financial institutions are holding, this is literally a rounding error.
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