Why 2024 will be the year when tokenization really begins?

Everyone from TradFi leaders to crypto experts predicts the tokenization opportunity is in the tens of trillions. While we’ve seen some compelling use cases, these are just a drop in the ocean compared to the vast amount of digitized assets that could be transferred on-chain in the coming years.

When will today’s trickle of tokenization become a torrent? And what’s holding it back?

In October, Forbes delved into this issue with the headline “ Why Tokenization Failed .” The author, Steven Ehrlich, director of research at Digital Assets, provided a list of failed or mediocre digital projects and concluded that the problem hindering adoption was not technology, but trust.

I beg to differ.

The main reasons why the tokenization market has not exploded are technical bottlenecks, limitations of current infrastructure and interoperability - an inevitable fact in a young, nascent field.

However, the last year has seen incredible progress in overcoming these issues. While it’s easy to show projects that don’t deliver, the real story of tokenization in 2023 is laying the foundation for the next wave of tangible on-chain outcomes, driven by the power of major financial players entering the market.

Private equity and credit lead the way

Talk to anyone familiar with the tokenized ecosystem and they will tell you that 2024 holds a lot of promise. First, we are seeing private equity funds take a keen interest in developing new tokenized instruments for their investors, and even further, rushing these ideas into production.

This trend will continue into the new year as TradFi giants such as Hamilton Lane and JP Morgan develop tokenized funds. It is inevitable that we will soon see the development of more structured instruments, including assets built from new revenue sources such as private credit - this is a logical next step for financial products that are inherently digital and relatively easy to migrate on-chain.

Inevitable expansion to other assets

These tools are just the beginning, though. The next generation of tokenized assets will include products like bonds and stocks. Over time, real-world assets like art, cars, commodities, and fine wine will be traded on-chain. In fact, this is already happening, with use cases including fractional ownership of classic artworks.

Tokenized real estate, in particular, could be a major boon to traditionally complex and slow-moving markets, which will not only now become digitally native but also benefit from fractional ownership and near-instant settlement, among other things.

This will make investing easier and bring new liquidity to ossified markets. A new generation of investors will begin to exploit the possibilities of tokenization and breathe new life into traditional markets. New institutions and assets will bring new payment rails, and the need for industry-wide standards that make all these products and markets interoperable.

By 2024, we can be reasonably confident that a new wave of tokenization will have grown from a trickle to a torrent, marking the most profound revolution in financial affairs in centuries.