Tokenizing the World On Ethereum

Throughout the past few months, the market sentiment around Ethereum has been very negative regardless of the future potential of the digital asset. Currently, there are many reasons why Ethereum is the best public blockchain to tokenize securities on. Furthermore, this process has already started as the Ethereum blockchain was recently used by the Austrian government to issue government bonds worth $1.3 billion. Additionally, a $30 million condo in Manhattan was recently tokenized on the Ethereum blockchain. Ryan Serhant brokered the deal in Manhattan and commented in an interview with Forbes,

“The market in New York is always strong, but it can take some time to sell for the right price in a new construction building. With blockchain tokenization, we can remove the unruly pressure of traditional bank financing, which is much healthier for the project and all of the stakeholders. Tokenization is paving the way for a new forefront in real estate development.”

Real estate is not the only asset class which will be tokenized. Along with Austria’s recent move, the European Union has made additional progress by allowing the tokenization of securities.  DESICO is the first EU regulated blockchain project which offers a solution to issue and trade Tokenized Securities. DESICO is an exchange as well as a crowdfunding platform for businesses to issue ICOs. Laimonas Noreika, the CEO of DESICO, commented on Ethereum,

“Ethereum is the only network that is live and working without major disadvantages. Moreover, the network is being developed so we hope to have less and less limitations in the near future.”

Overall, the tokenization of real estate and other real-world assets will provide retail investors with unprecedented levels of investment exposure. Ethereum has a massive first-mover advantage over many other general purpose blockchains due to its massive developer base and existing partnerships. Even if a cryptocurrency project has made great progress, it is still largely dependent on real-world usage and partnerships. Ethereum has both with major governments stepping in to utilize the Ethereum blockchain.

The Enterprise Ethereum Alliance is another example of Ether’s unique first-mover advantage. There are many companies which are already members of the Enterprise Ethereum Alliance. These include massive international corporations such as Shell, BP, and Intel. It is important to understand these members of the EEA will utilize other blockchains aside from Ethereum. Nevertheless, they have an economic incentive to improve and maintain the efficacy of the Ethereum blockchain. This will only further Ethereum’s existing dominance over other projects in the market.

Ethereum’s developers also give the project another key advantage over other decentralized application platforms. According to recent data, the Ethereum development community is said to consist of about 250,000 developers. Some have gone as far as to say Ethereum has 30x as many developers as the next largest blockchain community (aside from BTC). Developers choose Ethereum for a variety of reasons. Ethereum offers many different developer tools which make it easier to build successful decentralized applications. Additionally, Ethereum’s programming language, Solidity, has created a massive amount of existing smart contracts that can be used as references by developers. The sheer power of Ethereum’s development community will dominate the market.

The most important developments for Ethereum are its proposed scaling solutions. An article from ethereumworldnews.com outlines Ethereum’s proposed scaling solutions,

“1. Sharding – allows for nodes and transactions to be divided into smaller groups rather than having the entire network to validate the transaction.

2. Raiden – by scaling it off-chain using state channel technology. Off-chain transactions allow a collection of nodes to establish payment channels between each other to facilitate transactions without involving the Ethereum network.
3. Plasma – uses a series of smart contracts to create hierarchical trees of sidechains. The sidechains can be governed using their own set of rules and only relay information back to the parent chain of Ethereum.”

Previously, Vitalik stated that the mass deployment of Plasma and Sharding could create a synergy that may allow Ethereum to process a million transactions per second.

In the last week of September, Vitalik Buterin posted about Zk-Snarks as a new scaling solution which could increase Ethereum’s speeds to 500 TPS. Zk-Snarks are a technology which was created by Zcash, a cryptocurrency focused on privacy. However, last week Ethereum researchers Barry Whitehat, Alex Gluchowski, Harry R, Yondon Fu and Philippe Castonguay introduced a snark-based side chain, which could scale Ethereum to 17,000 TPS. If Ethereum can achieve this level of scale it will be faster than existing technologies such as Visa.

It is still uncertain as to when these updates will be implemented. Most of these developments are scheduled to be completed around 2020. Nevertheless, Ethereum is currently in a very good position to be the dominant blockchain behind the tokenization of securities and other asset classes.

Disclaimer: I am not a financial advisor. This is not financial advice. Please do your research independently and make objective decisions. This article is intended to educate readers about Ethereum, the tokenization of securities and the stock market 2.0. The author of the article owns cryptocurrency.