If They Build It, They Will Come: The Role of Infrastructure in the Growth of Tokenized Assets

Benjamin Dean

May 13, 2024

Benjamin is a Director in the Digital Assets team for WisdomTree. He focuses on overall digital asset strategy, research and external relations. Prior to joining the company Ben was Cyber Catastrophe Lead at Hiscox Insurance Group. His prior work experience covered the opportunities and risks presented by emerging technologies for organisations including the OECD and the European Parliament. 
 Ben was a Fellow for Cybersecurity and received a Master of International Affairs from the School of International and Public Affairs at Columbia University. He also graduated with honours from the University of Sydney with a Bachelor of Economic and Social Sciences.

In recent years, tokenized assets have skyrocketed in both popularity and utility, with over US$150 billion in stablecoins and more than $1 billion in tokenized U.S. Treasuries now circulating (see below)—an exponential increase from just a few years ago. But what exactly are these assets, and how and why are they transforming finance? 

Like the technology you’re using to read this post, digital assets are built on a layered framework: from the physical infrastructure, through the protocols that define interactions, to the applications that bring practical value to our everyday lives. This post explores how understanding these layers can help predict where the most significant opportunities for value creation lie, especially as we venture further into blockchain technology adoption. The outcome is an appreciation of why tokenized assets exist and the benefits they can bring.  

Source: rwa.xyz  

Consider the Internet’s architecture: At its base, the infrastructure layer includes physical components like fiber optic cables. Next, the protocol layer encompasses technologies such as TCP/IP and SMTP/Pop3, which dictate how data is transmitted and emails are sent. Finally, the application layer includes the services you use daily, like browsers  and apps.  

This structure is mirrored in digital asset networks. Before we go any further on digital assets, let’s first go over some more technology history. This will help us conceptualize where the digital assets ecosystem is at present and could be in the near future. 

Hotmail / Gmail:  
It used to be difficult to use email. One would have to set up one’s own server, configure the protocol connection, send an email within a contained application. Then Hotmail (Microsoft) came along – so did Gmail (Google). These services made it trivial to use email–no more technical messiness that many people cannot deal with. Who benefited most from these examples? Was it the people who laid down the fiber optic cables, those who developed SMTP/POP3, or the people who created and operated the email applications?  

This narrative parallels the burgeoning digital asset ecosystem. Investors now have platforms like Coinbase which simplify their crypto onboarding and exchange much in the same way as Hotmail and Gmail simplified using email. The difficult ‘private key problem’ for digital assets, where one must store and protect the private keys to ensure one can access one’s account, is now largely solved. As a consequence of this increased usability and reliability, similar to applications built on top of the internet infrastructure and protocols, value accrual is likely to occur at the application level such as WisdomTree Prime and Coinbase. 

What might the future hold?  

This is all very nice –  but could it be done better? Let’s do a thought experiment: What might a better version of this look like? And how would one do it? Once the platform is in place, what are users going to be able to do on the platform? Expanding the options available to users is the logical next step. This is where tokenized assets come into the picture.  

Tokenized assets have advantages: tokenized assets provide the potential for 24/7 exchange, faster settlement times (T+0), and greater accessibility as they could be used by anyone with a cell phone. Talk about accessibility! The proof is in the growth of these assets: tokenized assets. There are over US$150 billion in stablecoins and more than $1 billion in tokenized U.S. Treasuries now circulating. The charts (see above) point to continued growth – especially  as other assets are brought’. ‘on-chain’.  

Future of User Experience in Blockchain:  
As the blockchain technology stack continues to evolve, so too will the way we interact with digital assets. The future is bright and with every update and innovation, blockchain technology becomes easier to interact with, providing apps and users alike with the benefits inherent in the technology. The range of assets available also expands, building on the secure and transparent foundation that this technology provides.  

Download WisdomTree Prime: https://app.wisdomtreeprime.com/owuo/fp4pkhkp 

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