Research

Digital Assets Trends

By using the AI-powered Reply Sonar platform we created an overview of relevant trends related to digital assets, based on their occurrence within expert media articles, mass media, patents and scientific publications.

#Digital tokens
#Fungible tokens
#Non-fungible tokens

Digital Assets: a Hot Topic

While cryptocurrencies’ ups and downs were getting the main titles in newspapers, an entire set of reliable technologies got ready to support different industries. The phenomenon is highly diversified, and there is no univocal list of assets that can be catalogued as Digital Assets. Tokens can be issued for material assets (e.g., real estate), for immaterial assets (e.g., copyrights), and also for financial instruments (e.g., bonds). The innovation that tokenization will bring will benefit consumers and corporates with more options to manage their assets and finances, new products and services, and a lower barrier to entry.

Payment Token

Cryptocurrencies, Stable Coins, CBDC (Central Bank Digital Currency).

Security Token

Debt & Bond Tokens, Stock Tokens, Real Estate Tokens, Commodities Tokens, Carbon Credit Tokens

Utility Token

ICOs (Initial Coin Offerings)

NFT

Digital Art, Collectibles, Gaming, Fashion & Luxury, Virtual Reality

DIGITAL ASSETS & BLOCKCHAIN

Tokenization of real world assets

Blockchain technology has enabled the creation of various types of digital tokens with different applications.

First type of digital assets: Payment Token

Payment tokens represent a payment method and can be used as a virtual currency to purchase goods and services. The most famous example of payment tokens are cryptocurrencies and Stablecoins. Unlike Fiat currencies, these are not (yet) issued by governments or other financial institutions but are monitored and organized in a decentralized (peer-to-peer) network that also serves as a secure ledger for each transaction.

The rapid rise in stablecoin circulation over the past few years has prompted central banks to explore their own stable digital currencies, the so-called Central Bank Digital Currencies (CBDC). A large majority of central banks around the world are already participating in pilot projects or other types of digital currencies. For instance, the Bank of China started a trial program in 2021 of the Digital Yuan (e-CNY). The pilot program has expanded to 23 cities, and a report from early 2022 indicates that more than 260 million wallets have been opened. In September 2022, the ECB announced that it would develop prototypes of different digital euro(s), and it is set to begin a pilot in 2023.

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Second type of digital assets: Security Token

Security tokens are a digital representation of a traditional financial instrument such as a stock, bond, or derivative. A Security Token can then represent, for example, a share of the company issuing the token. As they are digital assets, they offer additional advantages, such as greater ease in the development and distribution, a reduction of settlement times for purchase orders, and greater flexibility in the creation and distribution process for SMEs and Startups.

The Reply Sonar platform has identified a rising interest in carbon credits tokenization over the past two years. In fact, carbon Credits markets often lack transparency and efficiency: blockchain technology could revolutionize the monetary side of a carbon offset lifecycle (to start with) by tokenizing carbon credits.

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Third type of digital assets: Utility Token

Utility Tokens permit the user to perform an action on a specific blockchain or decentralized application and receive services or products from a company. Utility tokens can only be used for particular use cases in a defined ecosystem. An example of a rising use case for utility tokens is executing payment for cloud computing services.

Startups or small enterprises often use utility tokens to obtain financing in ICOs (Initial Coin Offerings): participants in the capital raising will receive a token that grants them a specific right in the usage of the company’s products, like being first to access it or getting other privileges (e.g., participate to decisions regarding the evolution of the company). This approach helps a company to gain funding and attract early customers.

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Fourth type of digital assets: Non-Fungible Token (NFT)

Non-Fungible Tokens (NFTs) application covers different sectors.

Traditional supply chain: physical goods typical of a conventional producer-to-consumer supply chain (bottles of wine, fashion industry, jewelry). Digitization enables their traceability and prevents possible fraudulent use.
Asset management: can be used to represent an investment product. An example is real estate, where the ownership of a unit can be represented in a token.
Art: by representing works of art on tokens, the respective transactions can include a wider group of investors. In addition, authentication procedures, tracking of transportation and restoration processes as well as their trade can be simplified.

NFTs have many potential applications in the Metaverse. Through NFTs, users can own digital property in the Metaverse. For example, it could be possible to acquire pieces of a virtual estate where the proof of ownership is the NFT linked to that share.

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Opportunities for many industries

Today, Reply supports several Financial Institutions in their adoption of digital assets, but also relevant players in Healthcar e, Energy & Utilities, Fashion & Luxury, Public Administration, and more. The increasing maturity of the regulatory framework lets us forecast an increasing number of players that will experiment with DLT-related technologies. The intense work by Central Banks on their own Digital Currencies will extend wide access to digital assets to final customers, organizations, and governments.

Among other benefits, payment tokens will offer real-time settlement and reduced transaction fees. In the long term, also personal identity will become a digital asset. By tokenizing it, it will be possible to create a portable and secure digital identity that can be used across different platforms and services. This will streamline processes such as onboarding, identity verification, and access control, making it easier for individuals to interact with organizations and public authorities.