Tokenization Revolution: The Evolving Landscape of Cryptocurrency in the Post-2021 Era
Summary:
The article discusses the new phase in cryptocurrency that emerged after 2021, where tokenization of everything became prominent due to nonfungible tokens (NFTs). Everything is data, and more of this data started being stored as fungible tokens, NFTs, and timestamps on the blockchain. The tokenization trend seems to be reaching Bitcoin, transforming it into a network for multiple asset types. While not all data needs to be fully stored on chain, layer-2 blockchains will be instrumental in bringing cryptocurrency to the mainstream. Abstraction solutions are key for users and traditional corporations to engage with Web3, providing a less complex and more viable alternative for those who are not inclined towards decentralization.
The year 2021 heralded a new phase in the realm of cryptocurrency, moving the conversation beyond just financial decentralization to the tokenization of everything, largely thanks to nonfungible tokens (NFTs). This transitioning paradigm is set to outline three hypotheses for the upcoming bullish market. To fully comprehend these hypotheses, it is important to recognize that everything translates to data. Cash, your involvement with a brand, your qualifications, even your concert ticket, all equate to data. Post-2021, an extensive portion of this data started being stored in the form of fungible tokens, NFTs, and blockchain timestamps, with the blockchain serving as a data storage site in this context.
Though not all data needs to be on the blockchain, having the capacity to do so revolutionizes the ways we store, distribute and utilize data for automated and secure transactions. This concept of tokenizing everything seems to be encroaching on Bitcoin, leading us to the first hypothesis. Protocols like ordinals are on the rise, transforming Bitcoin into a network for multiple asset types. Case in point, in January 2023, Casey Rodamor unveiled the Ordinals protocol. It allows for the perpetual addition of any file type into the Bitcoin blockchain. In under a year, the community has succeeded in inscribing things like music, artwork, journalism articles, and video games onto the world's leading blockchain.
Not every piece of data needs to be stored 100% on chain though, as it can be costly and inefficient in some cases. Hence, protocols like Taproot Assets that allow creating different assets on the Bitcoin network while keeping most of the information off-chain, will be critical. As storing data on layer-1 blockchains can be costly, layer-2 blockchains are anticipated to become noticeable.
In order for cryptocurrency to effectively reach mainstream populations, layer-2 blockchains, which were designed to scale layer-1 blockchains, will be integral. As the blockchain becomes less noticeable due to less expensive and slower transactions, it will reach the mainstream. Several years back, however, it wasn't believed that neither the market nor these layer-2 blockchains were ready for mainstream adoption due to stability concerns. But now, with enhanced maturity in mentality for building, driven by the lessons learned and the calm infused by the bear market, it's clearer about the roles populous blockchains are expected to play.
To truly bring cryptocurrency to the mainstream, it's not enough for the infrastructure itself to be invisible; people must be able to connect to it and companies must be able to build on it. This is where abstraction solutions come in. They are the key to allowing users and large traditional corporations to engage with Web3. It's not about doing away with decentralization, but offering an alternative to those who don't want it, avoiding the risk of the crypto ecosystem becoming inaccessible. Solutions like these are essential for traditional corporations to effectively engage with Web3.
Ultimately, the next market cycle might view major blockchains less as currencies and more as platforms for multi-asset consensus. Quest for scalability will make the infrastructure more seamless and lessen complexity for users and businesses alike. This signals the next phase for Ethereum and Bitcoin.
Lugui Tillier, the Chief Commercial Officer of Lumx Studios, a Web3 studio backed by BTG Pactual Bank, the leading investment bank in Latin America, throws light on these emerging trends. Lumx Studios have previous Web3 cases with Coca-Cola, AB InBev, Nestlé, and Meta. Although Tillier holds investments related to the Ordinals Protocol, the article doesn't discuss them. This article is purely informational and shouldn't be construed as legal or investment advice. The views expressed herein are the author’s own and do not necessarily mirror the perspectives of Cointelegraph.
Published At
11/10/2023 5:57:59 PM
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