On this week's episode of Yahoo Finance Future Focus, host Brian McGleenon explores the expected growth in the tokenization of real-world assets with Jasper De Maere, research lead at Outlier Ventures. This includes sovereign bonds, bank-issued bonds, and real estate on the blockchain. According to Outlier Ventures, the estimated market cap that can accommodate real-world asset tokenization is projected to reach between $10 trillion and $15 trillion by the end of this decade. His 2024 paper on tokenization of real-world assets. De Meere emphasized that this technology will have a transformative impact on industries such as financial markets, manufacturing, healthcare and infrastructure over the next decade. He highlighted the benefits of tokenization, including increased accessibility and liquidity for financial products, real estate, and artwork, as well as improved transparency and security through blockchain capabilities.
video transcript
[AUDIO LOGO]
Brian McGleenon: Tokenization of real-world assets such as sovereign debt, bank-issued bonds, and even real estate on blockchain is expected to be a growth area in 2024. Now, joining us in the studio to discuss this exciting new development is Jasper de Meere. Research leader at Outlier Ventures. Jasper, welcome to the show.
Jasper de Mer: Thank you, Brian.
Brian McGleenon: So Jasper, let's get started. What are real-world assets?
Jasper de Mer: This is very interesting, but I think it's an important question to answer first. Real world assets are your everyday assets. The assets that we come into contact with in our daily lives. These assets can be tangible or intangible. A tangible asset can be anything from a chair to anything you can actually touch in the physical world. And intangible assets are assets that are generally represented in digital form.
Brian McGleenon: Tokenize these real-world assets. What does the term tokenization mean?
Jasper de Mer: Yeah. So tokenization is actually a very fancy word that says you're creating digital copies of these real-world assets. So we're going to take these real-world assets. Create digital copies of these. And we put them on the blockchain. So, in reality, there is a digital representation of these assets on a database (in this case, blockchain).
Brian McGleenon: got it. So if you're going to go through all this trouble, there has to be some benefit.
Jasper de Mer: Yes, that's right. Therefore, by placing these digital copies or tokens representing real-world assets on the blockchain, we can take advantage of the benefits of storing data in a particular way. Therefore, blockchain allows data to be stored trustlessly, immutably, and with a high degree of transparency. And all of this can be leveraged for new use cases.
Brian McGleenon: So what do we mean when we say things like trustless?
Jasper de Mer: Trustlessness is the idea that because there is no central entity overseeing the governance of the database, there is no need to place trust in the central entity to ensure that the data is accurate, managed in a timely manner, etc.
Brian McGleenon: got it. So what are the benefits for financial markets and things like that, traditional markets? How does this change and make these markets adapt?
Jasper de Mer: Yeah. In fact, financial markets are touted as one of the strongest industries to adopt blockchain tokenization. And there are multiple aspects of benefits here. It depends on which area you focus on. In general, outliers are considered to have two major advantages. First of all, there is an increase in efficiency. So adding more and more real-world assets onto the blockchain actually increases efficiency. Therefore, financial markets themselves will become more efficient.
Brian McGleenon: got it. So with these kinds of developments, are some of the larger incumbents in the financial system recognizing the value and participating in this?
Jasper de Mer: Yes, that's true. And indeed, you can see this if you look at a number of the headlines about large financial companies over the past couple of years. These are banks, asset managers and some institutional investors, all of whom are investigating this through pilots. And there are multiple ways to see how these play out in practice.
For example, there are people like Franklin Templeton. They are tokenizing debt and treasuries and putting them on-chain for purposes such as improving execution efficiency and transparency. Other asset managers like WisdomTree and more recently Brevan Howard are also considering tokenizing their funds. So what they do is they create a representation of funds on the blockchain to facilitate distribution and increase transparency. There are many different examples.
Brian McGleenon: Therefore, there are also other types of intangible financial assets. Are there any examples of tangible assets, perhaps real estate, being tokenized?
Jasper de Mer: Real estate is a very interesting example. And that is what we have already considered in this field in 2016-2017. However, at that time, infrastructure development was difficult. And when it comes to the idea of real estate, I think there are multiple ways to increase the efficiency of real estate. But what's really interesting to me is around capital formation.
By representing assets on a blockchain, we can achieve what is called fragmentation. And in practice, he divides the ownership of the asset, the house, into several parts, which are usually owned by one person. This allows you to sell a certain percentage of your home to someone else.
Brian McGleenon: What areas does Outlier Ventures focus on when it comes to tokenizing real-world assets?
Jasper de Mer: Yeah. In fact, this is an area that we have been passionate about for many years. We experienced the acceleration of companies like Boson Protocol and OraBase and still work closely with them. And we recognized that tokenization of real-world assets is a very exciting trend for the next cycle. So ultimately, our job here is to really help these companies grow and accelerate to the next stage and run pilots with existing large companies to see what they can do. It's about being able to do it.
Brian McGleenon: got it. Jasper, thank you so much for joining us on this week's episode of Yahoo Finance Future Focus.
Jasper de Mer: Thank you, Brian.
