In this week's episode of Yahoo Finance Future Focus, our host Brian McGleenon explored the anticipated growth in the tokenization of real-world assets with Outlier Ventures Research Lead Jasper De Maere. This includes sovereign bonds, bank-issued debt, and real estate on the blockchain.The estimated total addressable market for real-world asset tokenisation is projected to reach between $10 trillion to $15 trillion by the end of the decade, according to Outlier Ventures' Tokenising Real World Assets 2024 Thesis. De Maere highlighted the transformative impact this technology will have on industries like financial markets, manufacturing, healthcare, and infrastructure over the next decade. He emphasised the benefits of tokenisation, including increased accessibility and liquidity for financial products, real estate, and art, along with improved transparency and security through blockchain features.
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00:00 The tokenization of real-world assets like sovereign bonds, bank-issued debt and even
00:09 real estate on the blockchain is reckoned to be a growth sector for 2024.
00:14 Now, joining us in the studio to discuss this exciting new development is Jasper de Mare,
00:19 Research Lead at Outlier Ventures.
00:21 Jasper, welcome to the show.
00:22 Thank you, Brian.
00:23 So Jasper, let's begin.
00:25 What is a real-world asset?
00:26 I think it's a very interesting but critical question to answer at the very beginning.
00:31 Real-world assets are your everyday assets.
00:33 It's assets which we touch in our daily lives.
00:36 These assets can be tangible or intangible.
00:39 Tangible assets can be these chairs, can be anything really we touch in the physical world.
00:43 And the intangible assets are assets which are generally represented in a digital version.
00:48 These real-world assets, we're going to tokenize them.
00:51 What is meant by the word tokenization?
00:52 Yeah, so tokenization is actually a very fancy word of saying we're creating a digital copy
00:57 of these real-world assets.
00:59 So we're taking these real-world assets, we create a digital copy of these and we're putting
01:03 them on the blockchain.
01:05 So you actually have a digital representation of these assets on a database, which is the
01:09 blockchain in this case.
01:10 Okay, so to go to all this sort of bother of doing this, there must be a benefit.
01:14 Yeah, exactly.
01:15 So by having these digital copies or these tokens representing the real-world assets
01:20 on the blockchain, you leverage the benefits of having data stored in a specific way.
01:25 So with a blockchain, you're storing data trustless, immutable, with a high degree of
01:29 transparency and these can all be leveraged into new use cases.
01:33 So when we say trustless and stuff like that, what is meant by that?
01:38 Trustlessness is the idea that there's no central entity which oversees the governance
01:42 of the database.
01:43 So there's no trust that needs to be put into the central entity in order to make sure that
01:47 the data is accurate, timely managed and all that stuff.
01:50 Okay, so for financial markets and things like that, for the shell markets, do you see,
01:55 you know, what are the benefits?
01:57 How is this going to change and make these markets adapt?
02:01 Yeah, financial markets are actually like touted as one of the strongest industries
02:06 which will adopt blockchain tokenization.
02:09 And there's multiple facets of benefits here.
02:12 It depends on like which verticals you look at.
02:15 Generally, we believe at Outlier that there's two big benefits.
02:19 First of all, there's the efficiency gains.
02:22 So by having increasingly like real world assets populated on the blockchain, you'll
02:27 actually unlock efficiency.
02:29 So the financial market itself will become more efficient.
02:31 Okay, so as this sort of progresses, are some of the big incumbent players in the financial
02:36 system recognizing the value in this and are taking this on board?
02:40 Yeah, very much so.
02:41 And we actually see this by the slew of headlines we've seen over the past two, three years
02:45 of big financial players.
02:47 These are banks, asset managers, some of the institutional players, all exploring this
02:52 through pilots.
02:53 And there's multiple ways on how these actually play out.
02:56 You have the likes of Franklin Templeton, for example, they're tokenizing debts and
03:01 treasury and they're putting them on chain for like execution efficiencies and transparency
03:05 gains.
03:06 You have other asset managers like Wisdom Tree and recently Brevin Howard as well, who
03:10 are looking to tokenize their funds.
03:12 So what they are doing, they create a representation of their funds on the blockchain for easy
03:17 distribution and transparency.
03:18 So loads of different examples.
03:20 So there are other kind of intangible financial assets.
03:23 Are there any examples of tangible assets, possibly real estate, being tokenized?
03:29 Real estate is a very interesting example.
03:31 And it's something we've already explored with the space in like 2016, 17.
03:35 Back then the infrastructure was difficult.
03:37 And the idea of real estate, I think there's multiple ways you can increase efficiency
03:43 in real estate.
03:44 But one that excites me a lot is around capital formation.
03:48 By having your assets represented on the blockchain, you can have something which is called fractionalization.
03:54 And you actually split up the asset ownership of your asset, which is a house which usually
03:59 belongs to one person, into multiple pieces, which allows you to sell off specific percentage
04:05 points of your house to other people.
04:07 At Outlier Ventures, what areas are you focusing on when it comes to the tokenization of real
04:12 world assets?
04:13 Yeah, it's actually an area which we've been excited about for many years.
04:17 We have experience accelerating companies like Boson Protocol and Darabase, which we
04:22 still work with very closely.
04:24 And we've identified the tokenization of real world assets as a very exciting trend into
04:28 the next cycle as well.
04:30 So ultimately our job here is to really help grow and accelerate these companies to the
04:34 next stage for them to potentially run pilots with the large incumbents to see what they
04:39 can do.
04:40 Okay, so Jasper, thank you very much for coming on this week's episode of Yahoo Finance Future
04:44 Focus.
04:45 Thank you.
04:45 Thank you, guys.
04:45 (upbeat music)
04:48 (chimes)