When the concept of decentralization was introduced in 2009 with the bitcoin, it looked like a fanciful figment of my imagination had gotten real! It has been just a little over a decade since the introduction of the technology but it’s manifestations have grown by leaps and bounds.
In these years, blockchain and cryptocurrency have undergone a lot of transformations and proliferations. One of the many proliferations that found significance in the year 2020 is decentralized finance, commonly abbreviated DeFi. It and visions of the financial system where there is no need for a centralized authority like a bank or a government controlling transactions. This would mean that transactions would be global and swift. While the primary impact of this transformation is in the arena of finance, there are a lot of other manifestations that DeFi opens up in the future.
Even your email address or your social media profile is a digital identity on The Internet. The identity however is not completely in your control. It has been recklessly handled by a few giant technology companies to make a profit by advertising. Although like the GDPR and the Consumer Protection Act does not assure, that data will completely control users. it does not alter the epicent of data collection but enforces a system of consent.
With blockchain technology in place, it is now possible to give controls back to the users. This Means that the centralized data harvesting companies are not liable for the data that they hold through a consent-based system. Users can now control and decide the pieces of data that they want to make open for specific purposes.
For example, a user can choose to give out data with respect to their educational qualification and previous job records for recruitment only to a company that needs to know this piece of data. Even job aggregators will not have access to this data as it is cryptographically secured. The same goes for trivial pieces of data like online shopping history.
With DeFi data handling, users can also choose to monetize their data and reap the benefits without worrying about technology giants siphoning data. They can choose to share their health data for medical research purposes and receive payment from medical companies because they have shared their data to that company.
If DeFi data handling is introduced, it could mean a major paradigm shift in the world of social networking and data-driven advertising. while still keeping intact the “networking“ and “social“ aspects of websites, pave the way for a more democratic and user-centric social network.
While DeFi data handling is quite nascent and a few companies have flickered here and there, tokenization has a wider acceptance and impact. It means that even an entity that doesn’t exist within the digital framework can still have a digital representation And also all the advantages associated.
Tokenization has impacted almost every asset class. Real estate tokenization is a fad right now. People are in the process of DeFi real estate platform development that is expected to make easy and efficient all the processes involved in real estate transactions. The impact in real estate has also created a strong case for tokenization of real-world assets.
Tokenization has also opened up investment avenues for crypto entrepreneurs through initial coin offerings, initial exchange offerings, and security token offerings. The last one comes within the purview of the SEC, making it a lucrative and dependable investment opportunity for accredited investors. It can also be viewed as one of the first and finest convergences of the traditional world of investments and new technology like the blockchain.
This phenomenon of tokenization is not just limited to traditional investment avenues but even collectibles and art. Bringing in the blockchain helps establish the authenticity of collectibles and also maintains a flawless and non-editable record of ownership.
Since tokenization is about breaking down the asset into small representatives without losing its value, it also brings considerable liquidity. It would mean that an asset owner does not have to sell their property if they need a small investment. It also opens up opportunities for retail investors and even people to participate in asset-investments like commercial real estate which was considered inaccessible and beyond.
Tokenization also does away with all the intermediaries and the cost involved. brings a trustless ecosystem where there minimal paperwork and maximum efficiency and transparency. The relevance and success of tokenization can be attributed to the versatility of DeFi-smart contracts.
Governance and security
It might seem a bit ironic that we talk about governance which has always been about centralized authority when talking about DeFi, which is all about the centralization and distribution of authority.
There are many decentralized anonymous organizations (DAOs) that do not have a centralized or hierarchical structure. What makes the entire system function flawlessly is the votes on the members’ proposal and a predetermined magnitude of consensus that should reach across all members. There are special-tokens called governance tokens that represent membership and voting rights.
All the rules by which the organization operates are encoded on the blockchain. It automatically makes the laws immutable and transparent. The organization’s financial history is visible, making it easy not only for members to review the transactions but also for auditing purposes.
It is, however, to be remembered that the stability of such an organization is contingent upon fair distribution of governance tokens and voting rights. suppose, by some unforeseen chance, a single person/entity becomes the owner of a majority of governance tokens. the organization’s decentralized governance is as good as being centralized because most decisions are pretty likely to sway in the direction of the person/entity that holds a majority of tokens.
The requirement of universal consensus and the immutability of the system ensures that the entire ecosystem is secure. It is the polar opposite of how susceptible centralized service and ecosystems are to hacks and malicious attacks. It cannot be denied that there have been instances of hacks in the DeFi system as well. It is the rickety of the smart contract and the quality of coding that makes a difference.
It is quite evident that the future is quite likely to witness the impact of tokenization in almost every sphere of our daily lives. If you would like to be a part of this revolution, you will need to invest in DeFi development and build solutions that solve problems while keeping intact all the blockchain’s advantages.
You can get in touch with a company specializing in DeFi platform development and let them know of your ideas and requirements. They will take care to understand it and build a proper DeFi development solution that can handle the cases that you have presented. While doing so, it is strongly recommended that you test for possible security floss. If not, your product will be the next big thing in the DeFi world!