Economist Carlota Perez developed a framework to gauge the long-term dynamics of technological disruption. This \u201cPerezian framework\u201d revolves around the adoption phases of a cycle:<\/p>\n
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- Irruption<\/strong> – New tech emergence that disrupts existing industries.<\/li>\n
- Installation<\/strong> – The economy and society restructures around the new tech, accompanied by new business models and regulatory frameworks.<\/li>\n
- Bubble<\/strong> – Frenzy stage during installation in which investors become overly optimistic, accompanied by speculation and financial bubbles leading to crisis (bubble bursts) and stagnation.<\/li>\n
- Synergy<\/strong> – The post-bubble burst recovery, wherein the surviving investors adopt the new tech more efficiently.<\/li>\n<\/ul>\n
In the golden phase, maturity, the new tech is fully integrated into the social and economic fabric. This typically lasts several decades until the point of diminishing returns or until the next irruption.<\/p>\n
![\"\"](\"https:\/\/cryptoslate.com\/wp-content\/uploads\/2023\/09\/Screenshot-2023-09-25-at-8.58.30-PM.png\")
Image courtesy of “Technological Revolutions and Financial Capital” by Prof. Carlota Perez<\/figcaption><\/figure>\n As one reads through these phases, one can immediately recall the dot-com bubble in the late 1990s, wherein the core \u201cirruption\u201d was the internet itself, as a prerequisite for Bitcoin and tokenization.<\/p>\n
By October 2002, the Nasdaq Composite, representing internet-centered companies, plunged 740% from its peak in March 2000. If we apply the Perezian framework, we have already gone from one irruption (the internet) to the next (blockchain).<\/p>\n
Further, considering the relentless string of bankruptcies in 2022, from Terra and Celsius to FTX, we have reached the bubble burst stage. This is also apparent from a withdrawal of VC capital. According to PitchBook data, the first half of 2023 saw only 814 crypto deals go down, compared to 1,862 in 2022.<\/p>\n
Reminiscent of the dot-com bubble burst, this capital drought translates to only $325 million in investments in crypto startups in Q2 2023 vs. $3.5 billion in the peak of Q1 2021. In other words, RWA tokenization is leaving behind the bubble phase to the synergy phase.<\/p>\n
RWA Tokens: Resilience from Decentralization<\/h2>\n
As previously noted, tokenized RWAs only constitute \u201cirruption\u201d if it is possible to reliably claim an asset without an intermediary. Case in point, let\u2019s say a farmer buys a token to expand operations. This particular tokenized RWA would represent farming equipment like a tractor.<\/p>\n
This token is available on a certain platform. The farmer would pay less for the token\/tractor because he wouldn\u2019t have to deal with an intermediary such as a dealership. But what happens if that platform goes bust for some reason?<\/p>\n
Without the platform that issued the token, how would the farmer redeem the token or claim ownership of the tractor in the future when he intends to sell it?<\/p>\n
The solution comes in the form of smart contracts that are hosted on a large blockchain network, such as Ethereum. One may recall that the US Treasury sanctioned currency mixer Tornado Cash. Yet, even with the sanction, the underlying smart contract continued to be hosted, although without the web interface provided by Infura\/Alchemy.<\/p>\n
Then, it was only a matter of circumventing the block with Interplanetary File Storage<\/a>. This is the kind of decentralized finance (DeFi) resilience investors expect when buying hard assets as tokens. As long as the blockchain network is live, secured by thousands of nodes across the globe, redeemability is independent of trust on any Web3 platform.<\/p>\n
In other words, tokenized RWAs serve as redeemable smart contracts, irreversible to cancellation. We have already seen it with non-fungible tokens (NFTs) which can define the conditions of ownership\/royalties, including fractional ownership. RWA tokens will further expand smart contract logic to cover disputes by decentralized dispute resolvers.<\/p>\n
The Current Landscape of Tokenized RWAs<\/h2>\n
As fiat currency tokenizers, stablecoins have been pushing the RWA market the , while cryptocurrencies can monetize specific projects or serve as scarce commodities. For instance, Bitcoin mimics digital gold. On the other hand, NFTs tokenize general property rights for ebooks, albums and artworks. General RWA tokenization is the natural step forward.<\/p>\n
The first wave will deal with assets that don\u2019t require additional infrastructure, such as the Internet of Things (IoT). After all, hard assets would have to integrate real-time tracking in order for their status (location\/price) to be broadcasted to blockchain networks.<\/p>\n
The earliest form of this technology is present in parcel tracking. For this reason, more abstract RWAs will have priority. Larry Fink, the CEO of the world\u2019s largest asset manager, BlackRock, had hinted that these would be familiar stocks, bonds, and other financial instruments.<\/p>\n
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Blackrock is the world's largest asset manager with $10 trillion in AUM. \ud83d\udcb0\ud83d\udcb0\ud83d\udcb0<\/p>\n
Blackrock CEO Larry Fink:<\/p>\n
“I believe the next generation for markets… for securities, will be tokenization of securities.” pic.twitter.com\/f3MmASXywi<\/a><\/p>\n
\u2014 The Tokenist (@thetokenist) January 20, 2023<\/a><\/p><\/blockquote>\n
- Installation<\/strong> – The economy and society restructures around the new tech, accompanied by new business models and regulatory frameworks.<\/li>\n