Real-world assets need real-world utility | Opinion

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As a researcher with a background in blockchain technology and experience working with decentralized applications, I wholeheartedly agree that real-world assets will play a significant role in the next bull run. However, it’s crucial to go beyond just tokenizing these assets and focus on creating real utility for them.

In simple terms, when you ask people or check Twitter polls, there’s a widespread belief that “real-world assets” will trigger the next cryptocurrency bull market. I concur with this perspective, but it’s essential to remember that most assets currently serve limited practical purposes beyond speculation. To expand their reach and gain wider acceptance, we need to shift focus from mere speculation towards creating real-world utility.

As a utility analyst, I strongly believe that enhancing the functionality and value of tokens can significantly boost user adoption. The more people discover the practical advantages of integrating tokens into their daily lives, the more indispensable they become. Consequently, when the next cryptocurrency bull market arises, we must not overlook the importance of real-world utility in driving this growth. Thus, it’s essential to focus on tokenizing tangible assets and implementing use cases that provide tangible benefits for users.

Beyond dApps to self-referential tokens

In a decentralized applications (dApp) context, the perspective should be reversed: instead of viewing dApps as centralized with decentralized backends, consider them as applications built on decentralized technologies where tokens are the primary focus rather than just a means to an end. In essence, tokens assume a more significant role, providing utility and value beyond monetary aspects, while the application serves as the interface that facilitates access to these functionalities.

To achieve practical application in the real world, we need to go beyond just using apps and instead embed utility within the tokens themselves. With only a digital wallet necessary, these tokens serve as mini decentralized applications (dApps), carrying their inherent usefulness with them anywhere they travel.

As an analyst, I would describe it this way: The token acts as the bridge linking the issuer and the owner. It offers real-time pricing data and access to the underlying assets directly to the owner. By connecting to a digital wallet and providing a comprehensive user experience without the need for additional dApps, the token enhances its own worth through self-references.

This approach ensures compatibility for the future since token holders can utilize the benefits on any chosen platform, while app developers are relieved from the burden of redesigning their applications every time a new operating system is introduced.

Offchain utility 

As a researcher exploring token utility, I’ve noticed that the on-chain perspective has its limitations. Although blockchains excel in generating utility like ownership and user rights, they fall short when it comes to serving as comprehensive databases. Their inherent drawbacks, such as slowness, publicity, and immutability, render them unsuitable for applications that demand low latency, flexibility to upgrade, and privacy for token issuers’ customer data.

As a researcher exploring the intersection of blockchain technology and traditional web applications, I’ve discovered an intriguing approach: bridging the gap between these two realms. By doing so, token utilities become just as simple to handle as managing a website. This setup ensures data security while delivering experiences with the same level of responsiveness as web2. The result? A plethora of use cases that cannot be addressed by on-chain logic alone.

For example, we built the Smart Cat game as an example of a token with an interactive application with a visual front end. To do this effectively, you need both on-chain and off-chain logic: On-chain to manage the ownership, while off-chain to manage the front-end game logic for a frictionless and fun user experience. 

As a crypto investor, I believe that expanding the capabilities of tokens beyond the constraints of blockchains is a game-changer. This enables us to unlock real-world utility and make these digital assets more than just on-chain representations, ironically detached from the “real world” they are meant to represent. Embracing off-chain logic allows for seamless interaction with the physical world, making our investments more meaningful and relevant.

Greater price discovery 

Any token has the capability to serve as a practical tool by carrying valuable information, with price discovery being an effective and essential set of data. This utility can be readily applied to all tokens since they are assets that hold value.

When playing a game, imagine holding a game piece as your character’s representation. You’ve progressed up to level 9 out of 10, granting you access to additional game levels. This token can now provide real-time information on the market value of a level 9 token, which is around $X. In the same user interface, you have the option to rent or sell this asset. Although the data is subject to change and kept off-chain, the token’s functionality is enhanced by facilitating these transactions.

“This information serves a practical purpose by helping the buyer fully understand the worth of an asset, while allowing the seller to accurately represent its value in the marketplace.”

Evolved digital experiences 

Advanced functionalities, including communication channels and tokens functioning as apps, go beyond simple token gating and proof of ownership, paving the way for a new phase of capabilities.

As a data analyst, I would suggest paraphrasing it this way: With your car token, you won’t have to go through the hassle of downloading a car app or registering for an account. Instead, you can directly access essential features such as unlocking, locating, and starting your vehicle using just the token. This streamlined approach eliminates any consumer friction in the car-buying experience. No need for app downloads, no registration processes, and no setting up of information – all functionalities are integrated into the token itself.

In the real world, managing assets like cars could be made more convenient through the use of tokens. By doing so, you’d have the ability to handle transactions related to your asset directly from it. The token would facilitate price discovery for rental and selling rates, empowering you as the owner to gain the best possible returns on your investment. With just a single click on the token interface, you could rent out your vehicle at those determined rates, secure a loan, or even sell it.

The entity that mints the token holds the power to interact with it directly. In other words, manufacturers have the ability to convey information about defects, required services, or promotional offers through the token itself. This two-way communication facilitates a more engaging and beneficial car ownership experience, contributing positively to society as a whole.

Into the real world

In the real world, a token’s usefulness should be evident and not just limited to theory. The more a token interacts with its surroundings, the higher its worth becomes. For instance, a car token can seamlessly link up with your service station, managing all maintenance records. Similarly, game assets can transcend their static function as proofs of ownership and transform into interactive experiences, not only within games but also with the external world.

A token not only holds data but also embodies both on-chain and off-chain functionality. This feature enables any external party to understand how to engage with the token instantaneously. For instance, imagine you have a gaming token. When you visit McDonald’s and connect this token to their self-service kiosk for ordering food, McDonald’s can read the token and reward you with an upgrade to the next level if you buy a larger meal. Your gameplay is instantly updated as well.

In the emerging field of token utilities, it’s essential to provide real-world benefits alongside digital assets. Mere proof of ownership and access control aren’t enough; we need to offer significant value that goes beyond mere speculation.

As a researcher exploring the frontiers of digital technology, I’ve come across some intriguing innovations that have the potential to revolutionize our interactions with the digital realm. One such development is granting tokens the central role in our digital worlds, viewing them not just as mere assets but also as communication channels. Moreover, these tokens can empower their owners to exert better control over their assets and enable others to engage in more effective price discovery. These advancements are no longer mere concepts; they’re within our grasp if we’re willing to embrace the change.

Mathew Sweezey

Mathew Sweezey serves as the chief strategic officer at Smart Token Labs, a company specializing in blockchain technology for the development of token logic execution services. Previously, Mathew co-founded Salesforce Web3 Studio. In this role, he spearheaded the creation of Salesforce’s initial web3 commercial products and collaborated with major brands on their web3 strategies.

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2024-05-18 16:26