Stablecoins are on the rise, and they are filling a void for the burgeoning tokenized economy. A void created by unintended consequences of the cryptocurrency success story; they incentivize trading and investing at the expense of use as a medium of exchange. A common conundrum faced by crypto owners who believe that a price surge is around the corner is – do I hold, or do I spend? The crypto movement has created an active community of holders. As the community feverishly works to resolve the scaling problem and bring transaction volume closer to par with Visa, we are still left with tokens that some are reluctant to use as a medium of exchange. While this may be temporary – as decentralized cryptocurrencies evolve, it certainly poses a challenge for projects that rely upon a stable value token to facilitate transactions today. Stablecoins offer a solution that promises to enable some projects in the tokenized economy to gain traction. These centralized solutions, however, are not without quirks that may render them undesirable under certain circumstances. A stablecoin is essentially a token, such as bitcoin, on a blockchain – but one that is pegged to a state-issued currency such as the U.S. Dollar, where one token equals one dollar. This stable value token can be purchased with fiat currency or cryptocurrency. It can be redeemed at any time for the underlying currency on which it is based. You can think of stablecoin as the tokenization of fiat currency, a digital proxy for cash, or a cash-collateralized token. Tokens offer several benefits over the underlying currency. To name a few: as a proxy for fiat currency – they can be as reliable as the dollar, they are not vulnerable to counterfeit like paper money, they can be used in smart contracts to transfer value without
Yesterday, the suggestion that it might be possible to slash the cost of home ownership by 90%, while creating trillions of dollars in global wealth-building opportunities, and inviting millions of unbanked in developing nations to participate – might have been received as a lofty altruistic figment with no chance of materializing. But that was yesterday. Peer through the lens of tomorrow, and observe how tokenization stands to drastically alter the landscape, and pave roads to new possibilities. Tokenization is the process of assigning a digital proxy for real-world assets. For example, 700 Million digital tokens can be generated to represent fractional ownership of the $700 Million Mona Lisa painting. At $1 per token, just about anyone would be able to invest in a fraction of the Mona Lisa smile. I believe that this burgeoning innovation has enormous potential. Let us consider its application on real estate, in a thought experiment using the city of Toronto. Jack owned a two bedroom bungalow in Toronto which was last appraised at $1 Million. The land – at $900,000 – was substantially more valuable than the $100,000 dwelling building. Jack decided to tokenize his property, which had an outstanding loan of $400,000. In this thought experiment, we make the assumptions that land and building ownership can be separated, and that legal and regulatory frameworks exists for the tokenization of real estate. Jack engaged a security token and custody service to convert the title of his land (excluding the building) into 900,000 digital security tokens – all of which were assigned to Jack. The 900,000 security tokens, which represented 100% of the land, were initially valued at $900,000 or $1 per token. These tokens were stored securely with the custodial service. To unlock the value in his land, Jack logged into his account with the custodial service –