This article was written exclusively for Investing.com
- Cryptos face regulation, taxation, and government interference
- Blockchain, everyone agrees, is the evolution of the fintech revolution
- Tokenization improves record-keeping and efficiency in all markets
- 3 reasons commodities are ideally suited for the Blockchain; Atomyze is a company to watch
The cryptocurrency market term 'token' took on a whole new meaning in recent years as Bitcoin rose from five cents in 2010 to nearly $70,000 in late 2021. These days, tokens are synonymous with digital currencies. Over the coming years, the evolution of the fintech revolution that is spearheading a long-overdue overhaul on the finance arena will make tokenization the instrument of efficiencies in an array of markets that need updating.
While cryptocurrencies have supporters and detractors, there is widespread acceptance and excitement over Blockchain. Tokenization is at the heart of Blockchain advances, revolutionizing markets across all asset classes.
Blockchain is a promising technology that will advance and improve hedging, trading, and investing for producers, consumers, investors, and speculators in the world of commodities. Blockchain is the most significant technology since the advent of futures and derivative instruments.
When you think of tokenization, consider the possibilities that transcend Bitcoin and the other nearly 17,350 cryptocurrencies out there right now. Blockchain’s potential is vast and has applications in markets across all asset classes. Blockchain methodology will change the way individuals and businesses buy and sell assets and all products, as the technology simplifies transactions and record keeping.
Cryptos face regulation, taxation, and government interference
Regulators are taking an increasingly tough stance against cryptocurrencies. The International Monetary Fund recently warned El Salvador to do away with its Bitcoin-as-legal-tender policy. The Russian and Chinese governments have curtailed Bitcoin and other cryptocurrency activities within their borders.
The Biden administration is developing a digital securities strategy and will likely issue it via an Executive Order in the US. The policy will use taxation and regulation to rein in the asset class. One of the situations the US administration will address and regulate is the energy requirements for mining Bitcoin and other cryptocurrencies. The substantial amount of energy required does not fit the administration’s greener path for alternative and renewable energy production and consumption.
As we've noted previously, the US and other world governments use the control of the money supply as a basis for power. The fiat currency system allows governments to increase the level of dollars, euros, pounds, and other currencies to stimulate and add liquidity to the economy.
They can also withdraw currency for economic and political purposes. While governments are not overtly mentioning their desire to remain in control of the purse strings, it may be a far more significant factor for regulation than “protecting the public.”
Blockchain, everyone agrees, is the evolution of the fintech revolution
Blockchain, the ledger of transactions that chains together blocks of data using digital cryptography, has widespread support and numerous applications, including for:
- Transferring currency
- Financial transactions
- Lending and borrowing
- Insurance
- Real estate ownership and transfers
- Secure personal information
- Secure voting
- Benefits from government programs
- Royalties
- Non-fungible tokens
- The supply chain and logistics
- Securing the internet
- Storing data
- Gambling
As Blockchain technology gains wider acceptance, its applications will likely expand to additional areas. While there is debate about the future of cryptocurrency, there is broad consensus that Blockchain is revolutionary and reflects the progress of fintech.
Tokens representing assets are a clean way to keep track of the chain of ownership from production or creation to consumption. The Blockchain can document idiosyncratic factors regarding the asset and the ownership chain.
Instantaneous transactions improve efficiency, and tokenization can expand the addressable market for many assets and goods. It creates fungibility, the ability to replace or be replaced by another identical item. Each Bitcoin or Ether token is the same, leading to fungibility.
Each share of a company’s stock has the same value and characteristics. Tokenization can foster efficiencies in many markets across all asset classes.
Indeed, commodities offer one of the most exciting potential areas for tokenization as a token representing a raw material is a direct investment in the physical item while futures, options, and other current forms of ownership or exposure are derivatives.
3 reasons commodities ideally suited for Blockchain technology; Atomyze a company to watch
Three factors make standardized commodities ideally suited for tokenization:
- Liquidity – Tokens can be exchanged for and represent an underlying asset
- Availability – Tokens can represent a raw material in a specific location and can be exchanged for the physical asset
- Efficiency – Blockchain technology and tokenization create efficient record-keeping and clear chain of ownership
A new company, Atomyze, is working with market participants to tokenize and digitalize physical assets so users can source, trade, and track commodities. In a recent interview, CEO Jeanine Hightower-Sellitto explained the benefits of digitalization and how Atomyze brings access to commodities through Blockchain technology.
Atomyze is a privately held company worth watching. It's one of many technology firms spreading Blockchain’s benefits through traditional businesses and asset classes.
Blockchain will not only increase speed and efficiency, it will also expand the addressable market for a host of assets, and commodities are no exception. Successful tokenization goes hand-in-hand with an effective, improved supply chain that can interface with Blockchain technology. Tokenization clearly has far-reaching applications that go beyond the cryptocurrency arena.