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The principle of tokenization is facing a new cycle of expansion. After a phase of experimentation, the digital representation of assets and money has now developed into an increasingly mature technology. The year 2024 could now bring a breakthrough for the token economy. “A potent mix of new venture capital, improved regulatory frameworks in Europe and technological advances is accelerating the tokenization of assets and money. This dynamic has the potential to fundamentally transform the traditional economic and financial system,” says Dr. Heinz-Werner Rapp, founder and head of the FERI Cognitive Finance Institute, on the occasion of a new analysis on the ‘Takeoff derTokenization’.
The concept of a token economy strives for a highly developed digital financial market infrastructure that overcomes inefficiencies in trading and high transaction costs. At the same time, this would enable a comprehensive change towards greater transparency and productivity in all sectors of the economy. “Token-based transactions of assets or money are no longer abstract experiments, but are already being used in practice in many industries. This increases the general acceptance of this technology,” says Dr. Michael Blaschke, blockchain expert and author of the analysis. Traditional financial institutions and crypto-native companies have recognized the potential of the technology and have successfully issued tokenized financial products on blockchains. The volume of tokenized assets is expected to expand massively from USD 600 billion in 2024 to almost USD 11 trillion in 2030, which is US dollars in 2030, which corresponds to annual growth of over 60 percent.
2024 will be the decisive catalyst year for the upcoming era of a token economy, in which assets and money circulate equally in digital form as tokens on the blockchain. The demand for tokens in various industries, including finance, real estate, art, healthcare, supply chain and logistics, energy, education, entertainment, law and sports will increase significantly. There is a certain order to the tokenization of assets: first digital goods, then financial goods and money and finally real economic goods. “Both the traditional financial system and the blockchain scene have come to realize that traditional assets are not tokenized at the same time. Instead, this process takes place sequentially in waves, taking into account specific structures and market conditions,” explains Blaschke.
Now is the right time for entrepreneurs and investors to take a strategic approach to the topic. “The increasing market dynamics and expected technological advances offer both companies and investors attractive opportunities to benefit from the global trend of tokenization,” says Rapp. With a sound understanding of the underlying drivers and a careful analysis of market trends, investors could benefit from the advantages of a tokenized economy and align their portfolios accordingly.
The current analysis by the FERI Cognitive Finance Institute follows on from a comprehensive study on “Blockchain and Tokenization” from 2021. Both analyses are available in German in the download area of this page.