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Many believe “real-world assets” will catalyze the next bull run in the cryptocurrency market. While this sentiment is widely shared, it’s crucial to remember that assets, as we know them, offer little utility beyond speculation. To achieve mass appeal, we must shift our focus from speculation to creating actual utility.
Real-World Utility and User Adoption
Improving utility drives user adoption. As individuals experience the benefits of tokens in their daily lives, they begin to see them as indispensable. If the next bull run is to be sparked by tokenizing real-world assets, we must also pursue real-world utility.
From dApps to Self-Referential Tokens
Decentralized applications (dApps) still operate under centralized thinking. While they utilize decentralized technologies, they focus on the application rather than the token. In a dApp-centric world, the app provides utility, not the tokens. For true real-world utility, we must move beyond the app and put utility into the token itself.
All you need is a wallet; the tokens carry all other utilities. The token becomes a dApp itself, providing utility wherever it goes. The token should act as the communication channel between the issuer and the owner, providing price information and details about the underlying assets. This approach future-proofs the experience, allowing token holders to access utility on any platform.
Offchain Utility
Token utility is often viewed through the lens of on-chain functionality. While blockchains excel in certain areas like ownership and user rights, they are not suitable for all applications. They are slow, public, and immutable, which are not ideal qualities for applications requiring low latency, easy upgrades, and data privacy.
Combining on-chain and off-chain logic allows token utilities to be managed as easily as any website, keeping data private and executing experiences with the efficiency of web2. This approach opens up numerous use cases that on-chain logic alone cannot address.
For example, the Smart Cat game uses both on-chain and off-chain logic. On-chain logic manages ownership, while off-chain logic handles the front-end game experience, ensuring a seamless and enjoyable user experience.
Greater Price Discovery
A simple real-world utility that any token can offer is information, particularly price discovery. This utility can be applied to any token, as all tokens are assets that hold value.
Consider a game token. If you’ve reached level 9 out of 10, the token can inform you of its current market value and allow you to rent or sell it. This information, stored off-chain but transferred with the token, gives it new utility.
This utility aids the end consumer in understanding the asset’s full value and helps the seller convey its true worth. It’s a straightforward yet powerful real-world utility.
Evolved Digital Experiences
Advanced utilities like communication channels or tokens functioning as applications can unlock new functionalities. For instance, a car token could allow you to access critical functions such as unlocking, locating, or starting your car, eliminating the need for a separate app.
Real-world utility, like asset management, could enable you to manage your assets directly from the token. Price discovery on rental and sale rates allows the owner to maximize their asset’s value. The token issuer can communicate directly with the token, informing you of defects, service needs, or offers.
Integrating into the Real World
The more a token can integrate into the actual world, the more valuable it becomes. For instance, a car token could connect to your service station, keeping up with all service records. Game assets could evolve from static proofs of ownership to dynamic interactive experiences.
Tokens can carry both on-chain and off-chain logic, enabling real-time interactions with third parties. For example, connecting a game token to a restaurant kiosk could offer in-game upgrades in exchange for meal upgrades.
We are in the early stages of token utility. To move beyond proof of ownership and token gating, we must create enough value for tokens to matter beyond speculation. Innovations like making tokens the centers of our digital worlds and improving price discovery are just a few ways to start. This is all achievable today if we are ready for it.
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Mathew Sweezey is the chief strategy officer of Smart Token Labs, a blockchain-based service network that facilitates the execution of token logic. Mathew is a former co-founder of the Salesforce Web3 Studio, where he helped create Salesforce’s first commercial web3 products and worked with the world’s largest brands on their web3 strategy.
