Tokenizing real world assets on other blockchains only perpetuates the financial problems that Bitcoin hopes to fix.
This is an opinion editorial by Mickey Koss, a West Point graduate with a degree in economics. He spent four years in the infantry before transitioning to the Finance Corps.
The demand to tokenize assets like real estate is not a solution, but rather a symptom of the problems that bad money perpetuates. Real estate must be reduced to its utility value as a home or place of business, rather than used as a store of value by proxy if we ever hope to solve the growing gap in wealth inequality.
featured blocks this “advance” in technology without adequately addressing the potential side effects that widespread asset tokenization can cause. In the comments section, tokenization is touted as a means for people who cannot afford to buy their own homes to participate in the real estate market. But why are houses so expensive in the first place?
Because they are being used as stores of value, a longstanding function of fiat money that is no longer possible due to decades of fiscal and monetary alchemy that has decimated people’s purchasing power.
Tokenizing assets like real estate will only make things worse as crowds pour money into the market, driving up prices. It becomes a self-fulfilling prophecy. People buy houses because they know prices will go up, then prices go up and more demand comes along to chase profits. Every investor who follows their individual incentives puts home ownership out of reach for the average citizen. This is not a solution.
Furthermore, a “blockchain” is simply a ledger, or a record of who owns what. Especially with Ethereum, there is no meaningful link to the real world that allows native contract enforcement, preventing these token holders from taking the lead. Ultimately, the entire system relies on legacy law enforcement and the court system to uphold the property rights of these investors, a system that appears to be increasingly hostile in enforcement actions against the crypto industry at large.
Bitcoin adoption is fundamentally different, a fact that cryptocurrency folks seem not to fully understand. Rather than mindlessly tokenizing assets, Bitcoin seeks to fix the monetary issues that drive the desire to do so in the first place. By serving as a store of real value, bitcoin will deplete the monetary premium that real estate has accumulated over the past few decades due to the broken monetary system. Under a bitcoin standard, housing will eventually collapse in utility value, making homes affordable once again for the common citizen.
Tokenization is just another perpetuation of the current system in a false peer-to-peer wrapper, disguised as financial innovation. Don’t let the shiny new distract you from the broken. Fix the money, and all these things become meaningless.
This is a guest post by Mickey Koss. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
