Boom and Bust Cycle Amidst the Rise of Web3 Technologies

The crypto market is amid its characteristic boom and bust cycle, with Web3 technologies like DeFi and NFTs taking centre stage. While DeFi has introduced decentralized finance systems and NFTs have democratized digital scarcity, they have primarily operated with volatile, small-market-cap digital assets. This pattern of initial installation, followed by high expectations and financial crashes, is consistent with technology adoption cycles.

A growing thesis in crypto and traditional finance suggests that tokenising real-world assets (RWAs) will be the driving force of the next crypto bull run. This shift from digital assets to tokenized RWAs has the potential to unlock the transfer of trillions of dollars into the crypto space, marking a new "Golden Age" in blockchain and finance.

Major players in traditional finance, such as BlackRock and Fidelity, and RWA startups like Tzero, Securitize, and Polymath, are already leveraging blockchain technology to tokenize assets like commodities, fine art, real estate, stocks, and bonds. The tokenization of RWAs aims to reduce the role of intermediaries and facilitate faster, cheaper, and more transparent transactions.

However, the current challenge lies in ensuring trust in redeeming tokenized assets. If intermediaries are involved, and they disappear, so does the claim on the underlying asset, creating the physical asset oracle problem. This problem cannot be directly solved by blockchain technology alone, as it requires human coordination and trust.

A more Web3-native approach to addressing this issue involves forward contracts encoded within smart contracts and tokenized as redeemable NFTs. Disputes can be resolved through decentralized dispute resolution mechanisms, ensuring trust-minimized tokenization, exchange, and settlement of RWAs. This approach provides a higher level of assurance and enables the creation of "harder" tokenized RWAs that can form the foundation of a smarter, more programmable economy.

By fully leveraging Web3 technologies to harden tokenized assets, we can pave the way for a trillion-dollar opportunity and unlock a programmable Web3 economy. This shift represents the next phase of growth in the crypto space and has the potential to reshape the financial landscape.