Tokenization’s next phase requires real-world data integration — Chainlink

Chainlink Labs’ director of capital markets said that enhancing tokens with real-world data could unlock better applications than traditional finance.

Researchers from the blockchain oracle platform Chainlink believe asset managers have a “sizable” opportunity to jump into tokenization as financial assets infrastructures continue to go digital. 

In an industry report titled Beyond Token Issuance, blockchain oracle platform Chainlink explained where the opportunity lies and how interoperability and real-world data could unlock the value of tokenized assets.

The report laid down the potential benefits of tokenization for asset managers. This includes unlocking dormant capital, giving assets greater availability and creating novel revenue models.

Apart from these, Chainlink said that asset managers could also create unified client portfolios, differentiate their service offerings and improve their risk management as tokenization allows for more automated risk assessment.

Within the report, Chainlink also argued that blockchains continued to evolve into an “integral component of the existing financial ecosystem.” In addition, the company highlighted that traditional and blockchain-based assets are already merging into a single financial ecosystem.

The researchers believe this resulted from continued digitization, as blockchains offered superior infrastructure for asset storage and transactions.

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Ryan Lovell, Chainlink Labs’ director of capital markets, told Cointelegraph that tokenization has been in a research and development phase for several years.

Lovell explained that institutions were bringing simple account balances on-chain and were trying to figure out the potential impact of tokenization for their businesses only at a basic level. Lovell said:

“This was kind of like building a concept car without an engine or interior. Just a basic shell of what the future will hold.”

However, the executive believes that the next phase for tokenization will be more about building foundational infrastructure. This is necessary to make tokenized assets composable and programmable across traditional systems and private and public chains.

Meanwhile, the Chainlink executive believes that enhancing tokens with real-world data and letting them become interoperable across blockchains and traditional systems could unlock powerful applications.

Lovell said these use cases would feature more transparency, lower costs and more streamlined administrative processes than traditional finance infrastructure.

“We’re actively working on several exciting initiatives at the moment to enable institutions to go beyond mere token issuance, manage tokenized assets throughout their entire lifecycle, and transact across the cross-chain economy,” Lovell added.