Tokenization Links Digital and Real Worlds Together

By October 12, 2017Bitcoin Business
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tokenization

The hype around blockchain seems to have subsided since 2016, however, it did not die but relocated from media headlines to practical applications.

One of the most prominent trends across multiple industries these days is tokenization, i.e. the method of representing any objects and assets in the form of tokens. While there are not so many companies that use the technology, their number is still growing by the day.

One of the most remarkable features of tokenization is the opportunity to finally make the digital and the real worlds meet. Before that, blockchain generally was the lot of speculators and IT specialists, but with the emergence of smart contracts and tokenization everything has changed.

Surprisingly enough, some governments were among the first to use blockchain in real-life applications: Japan and several post-Soviet nations like Georgia and Ukraine have already rolled out blockchain-powered solutions for land / real estate title registries, or at least have officially announced their intent to do so in a short while.

This makes everything related to land titles and real estate the forefront of the merger between the real and the digital. This might explain why there are so many private companies seeking to develop a blockchain-powered solution aimed at this market.

Tokenization of real estate has certain advantages that could not be implemented on the classic markets. First of all, in most cases the price of a token is incomparably lower than the price of any real estate item. This enables anyone to buy as many tokens as they like or can afford. Given the fact that the tokens represent a real-life object, an apartment or a house in this case, they entitle their holders to own a part of said real estate in proportion to the number of tokens they have purchased.

This also enables contractors to raise funds for the future construction, and generally liberates the entire market from the constraints related to major investors and their rules.

No wonder this concept has attracted lots of up-and-coming entrepreneurs. Companies like XRED, Propy or BitProperty offer a somewhat similar solution, i.e. an investment platform for anyone. Some of them, like XRED, focus on a certain location, while the others, like BitProperty, aim to operate internationally, but most of them have to deal with the prevailing legislation that, in some cases, has run its course and cannot accommodate to the innovations empowered by blockchain.

Thus, while in fact such tokens are shares, and are treated respectively, they cannot be considered as such in legal terms. The business model offered by such projects has not seen anything like it in the past, so it generally doesn’t fit any regulatory model effective nowadays. Finally, certain jurisdictions are more friendly than the others, so making such a platform available internationally is not an easy feat.

This, however, seems to be changing slowly. Japan seems to lead the way again as it has already started adapting its regulatory frameworks to the new reality of blockchain. While this model doesn’t appeal to certain legislations, many others are likely to follow this example.

We are only in the beginning of a long way. However, considering it’s been less than ten years since Satoshi Nakamoto, whoever it is, has published their disruptive white paper, the overwhelming tokenization of everything might be a matter of a few years.

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TheMerkle eBTC ERC20 Clone
TheMerkle eBTC ERC20 Clone

We have seen quite a few versions of Bitcoin introduced throughout the years. Although Bitcoin itself is still a factor, we also have Bitcoin Cash and the rumored Bitcoin Gold to contend with. It is likely we will see yet another chain added to the list, thanks to the SegWit2x hard fork in a few weeks. If that wasn’t enough, we now also have eBTC, which is an ERC20 version of Bitcoin. Whether or not such a token needs to exist in the first place is a different matter altogether.

eBTC is An Unusual Type of Bitcoin

No one will deny tokens issued on top of the Ethereum blockchain can all have their own value in one way or another. Although not all of those tokens will be widely successful in the long run, most of them are seemingly in a good place right now. eBTC is not a token a lot of people will automatically put on this level, but that is only to be expected. A tokenized version of Bitcoin on the Ethereum blockchain is not all that appealing to anyone.

Granted, the Bitcoin we all know and have used is far from perfect. It is still a cumbersome payment method to deal with and the volatile price swings aren’t improving matters whatsoever. Moreover, it can take a lot of time to get network confirmations once transactions are sent. While most payment processors negate this delay at their own risk, it is not the fastest way to move money around right now. That may all change in the future once the Lightning Network becomes a part of Bitcoin, though.

Until that happens, there will always be people who claim they can create a much better Bitcoin. The creators of eBTC are certainly on this list; otherwise, they wouldn’t have brought this ERC20 token into existence in the first place. Unfortunately, we now have a new currency we have to deal with, even though its chances of success appear to be rather limited at this point. That doesn’t mean eBTC won’t succeed, but it will most likely never dethrone whichever version of Bitcoin is leading the charge in a few months from now.

What makes eBTC most appealing – according to its developer, at least – is that it has a transaction time of 24 seconds. That is certainly a lot faster than Bitcoin itself. Additionally, it purports to offer transaction fees of US$0.50 at most. That’s rather on the cheap side, although there is no longer a reason to pay high transaction fees when using the real Bitcoin either. Plus, eBTC can work with smart contracts. Bitcoin will get the same functionality in a few months, rendering this project a bit moot in the process.

As one would expect, there will be plenty of compatible wallets for this ERC20 token. It does not appear eBTC will get its own wallet, but considering it’s an ERC20 token, there is no real need for one either. This token will be compatible with Parity, Mist, Metamask, imToken, MyEtherWallet, and the standard Ethereum client. With a total supply of 21 million eBTC, the tokenized version of Bitcoin certainly copies the real deal to a T in this regard. That won’t make it successful, though.

Speaking of which, eBTC is currently valued at US$0.20. That means the transaction fee for sending one eBTC across the Ethereum network is as high as the value of the token itself. That’s not the most solid business model we have ever seen, but things will presumably change over time. For now, there is seemingly no reason for this token to exist whatsoever, but there will always be people who take a liking to these types of creations.

One of the most prominent trends […]

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