Just like anything else in this world, fiat is tied to a generation. Fiat money has not been there forever, and it will not last forever. This article will explain how an economy has always been tokenizing from accepted mainstream assets to new assets, and how we’re currently in the middle of a new tokenization taking place. For this I have used the talk of Jun Hasegawa (OmiseGO) during Edcon on May 3, 2018 about “OMG World Exchange” as a main reference.

We are tokenizing significant value in a short period of time.

On January 7, 2018, the total market cap of cryptocurrencies reached its peak of >$813B. Knowing that in December 2016 the total cap was only $14B, one cannot disagree that we are tokenizing significant value in a short period of time.

But has the token economy market size reached its maximum yet? To answer this question, let’s look at the total asset value worldwide.

Crypto makes up only <0.1% of the total asset value.

If we look at the chart below, we see that the crypto market cap is currently fluctuating around $400B, while there is $7.6T in fiat money and $73T in stocks. Gold and silver metals are not included in this chart.

That means that the crypto market makes up only <0.1% of the total asset value today, and so we still have a long way to go, and a long way to grow.

Assuming that the cryptocurrency market could easily reach over $5T over the next 5 years without even disrupting the other markets too much, we can say that we’re still hovering around within the innovators phase and we have not yet reached the early adopters phase yet. Right now, the main problem in this market is that we still care too much about the fiat value that backs these crypto assets (e.g. ETH in USD). But how much will we care about fiat in the future? Once cryptocurrency becomes an asset that’s mainstream accepted, there will be no need anymore to measure it against fiat money. Historically, this happened with every new asset. First fiat was backed by metals (e.g. The Gold Standard), but once fiat was mainstream accepted and somewhat stable, nobody cared about the metal counterpart anymore.

How does tokenized value become an asset in itself?

Tokenization can be seen as the transitioning from an accepted, mainstream asset to a new, more useable and applicable asset within current existing environments.

Once the new asset has grown a solid foundation and it’s being used worldwide, it becomes an accepted mainstream asset.

Valued Asset (x) (accepted, mainstream asset) Y = Tokenized Asset (x) ??? Valued Asset (y) (new, mainstream asset)

First, stone was tokenized to jewelry. Jewelry found its existence 75,000 years ago, when the first pieces of jewelry have been found. The earliest pieces of jewelry were made of leather or animal hide, but when we think of jewelry today we think of gold, silver, and platinum for instance. Early jewelry was a means to symbolize people’s status and wealth. In the 20th century, gold and silver was replaced by metal alloy, and imitation stones were used to create jewelry to create a whole new market. Despite the fact that jewelry made it possible to show status, it was not a perfect fit to use as a mass trading medium.

Later, gold found its use as a trading asset. Gold has always had some important characteristics, such as beauty, scarcity and unique density. Because gold was easy to melt, form and measure, it was a perfect fit to use as a natural trading asset.

After that, gold gave rise to the concept of money itself. Gold is owned by someone, it’s transportable, and it’s permanent. These factors led to the shift from the metals itself to standardized gold and silver coins, and later bronze. Today we have copper coins and other non-precious metals as well. Because an individual accepting the coin is guaranteed a certain weight of a precious metal, these coins made trading a lot easier during the Classic period.

Next, we had fiat money (cash). Fiat currencies gradually took over in the 20th century. In the early 1970s, important changes led to the breakup of the Bretton Woods system and the growth of international currency markets. Multinational banks came into the game, not only for investment purposes, but also for speculation against fluctuations within exchange rates. There was no need for money to have its intrinsic value anymore and that’s why fiat money became an alternative to commodity money (whose value is derived from a commodity from which it is made, such as gold). Fiat money only has value because governments give it value.

Then, we transitioned (let’s say at least partly) from fiat currencies (cash) to digital currencies (virtual credit cards, internet banking, etc.). We all know what the advantages and disadvantages of online banking are. It gave rise to a lot of international cross-border trading possibilities, but the dependence on one or more third parties, the high exchange fees, and the technical limitations to address massive scalability, super speed transactions and growing AI needs are inevitable.

And finally, we’re now aiming to transition from digital currencies to cryptocurrencies. Or one could say that we’re starting the second phase of the shift to digital currencies. And one thinking that in 10 years from now, there will be only one cryptocurrency coin that has won the game is definitely wrong. We’re gradually moving from a past in which money was shaped by its intrinsic value (think of gold) to a future in which money will be shaped by its specific use case. And the range of use cases is enormous. There will be chains and tokens for all kinds of use cases: developer tools, decentralized storage, fintech, social networking, lending, gaming industry, and so on.

And that’s where decentralized networks and currency agnostic DEXs such as OmiseGO come into the picture. Because no vendor will ever hire a dedicated IT team in order to make sure they integrate every possible blockchain or wallet that enters the market every 10 seconds, nor will they care which tokens will eventually win the race and make it to the mainstream adoption phase. What vendors need is one technology that does it all. An interoperable technology that makes sure people can pay with whatever tokenized currency they want, and people can accept money in whatever currency they want (basically, any digital asset). A technology that satisfies growing scalability needs and can process as many simultaneous transactions as the vendor needs. A technology that charges no fees except those fees necessary to keep the network running (e.g. validator fees). A network that is fully secure so both vendors and clients can use it without the need to trust a third party.

However, a lot of cryptocurrencies on the market today do not yet satisfy yet the conditions for an ideal asset. According to Jun Hasegawa of OmiseGO, the ideal exchangeable asset satisfies the following conditions:

Versatility: The asset provides the ability to exchange anything. Receptivity: The asset is widely accepted and accessible. Security: The asset has a proven authenticity and proof of ownership. Completeness: Transactions are considered immutable. This is sometimes referred to as transaction “finality”. Finality is the guarantee that past transactions can never be changed. Privacy: The asset preserves the information on Who / Why. Stability: The value of the asset is somewhat stable against other accepted mainstream assets so its price is predictable and the perceived level of risk is minimal. Scalability: The asset brings the ability to serve a mass audience.

OmiseGO is aiming to address those properties by bringing together proven technologies such as Ethereum and developing new infrastructure to fill in the missing gaps.

Versatility: Ethereum offers use as a cryptocurrency but even more as a platform to run applications. The smart contracts and dApps bring a new level of versatility to the currency as it can be used to build applications on top of it. OmiseGO adds versatility on top of that by means of interoperability with other currencies and scalability for a large number of transactions. Receptivity: OmiseGO makes assets accessible to a broader audience through its open-source Wallet SDK library which dApps can use to let the end user take advantage of Ethereum’s immense potential without having to leave their comfort zone. The OmiseGo wallet SDK and network makes interoperability between various currencies and assets possible. Security: Ethereum as root chain provides a high security to safely enable unprecedented transaction and on-chain exchange processing speed and scale. Completeness: Adding finality to the Ethereum blockchain adds an additional layer of security to the environment, which is often lacking in other blockchain implementations. Privacy: Ethereum is currently addressing privacy concerns with protocol improvements such as Zk-SNARKS. Stability: OmiseGO is building a network and a currency agnostic DEX, which will enable transparent, peer-to-peer trading transactions from any digital asset to any other digital asset in real-time. Accepted stable currencies will play a critical role in this financial ecosystem. Therefore, stablecoins such as DAI will be available on the OMG network. This makes sure that participants must not subject themselves to the volatility of the crypto markets or face the expensive and inefficient process of converting their crypto to fiat. Scalability: Finally, using Ethereum as a root chain and Plasma a scaling solution, OmiseGO is looking to build the technology to enable this for billions of people simultaneously.

OmiseGO is not building a currency in itself. Instead, it’s looking to accomplish the spirit of the original Nakamoto vision of Bitcoin, the original Ripple vision (pre-blockchain Ripplepay), the original Paypal vision. They’re building a massive scalable, decentralized exchange uniting all fiat and crypto that will be freely available to regular end users via widely deployed digital wallet infrastructure. OmiseGO is looking to build a decentralized exchange for the whole world, and once it’s up, it won’t be stoppable.

“OmiseGO: Bridging the Gap between Vitalik’s Mind and Your Grandma.” (Jun Hasegawa, OmiseGO)

Disclaimer: this is no financial advise in any way. Always do your own research.