Why Tokenized Funds Might Be Worth Watching in 2020

Given that there are over 1,000 cryptocurrencies, almost 2,000 tokens, and over 2,000 DApps, it can be extremely difficult to separate the wheat from the chaff in the blockchain industry and figure out what to pay attention to. Here’s why tokenized funds are one use-case to take note of.

Tokenized funds emerged, as with virtually all things in the space, fairly recently. The first tokenized crypto index fund, CRYPTO20, was released in 2017, acting as an autonomous “token-as-a-fund” that dynamically re-balances a portfolio of the top 20 cryptoassets. While CRYPTO20 came first, it was far from last, with new tokenized funds, like Hyperion, the world’s first tokenized VC fund, emerging soon after.

The main benefits for investors, such as higher liquidity, no investment minimums, diversification, and simplicity, helped bring in over 15,000 investors to the company behind these tokenized funds: Invictus Capital. This is a big deal, because if we look at other blockchain use-cases, like DApps, we’ll find that even the #1 DApp by users, FreebyCrypto, has just over 3,000 daily users.

Why Tokenized Funds Might Be Worth Watching

Clearly, the industry is struggling with adoption, so blockchain’s biggest challenge is simply getting enough users to make a difference. After all, “building it” doesn’t mean they’ll come. More than new protocols, consensus mechanisms, stablecoins, or DApps, we need more users.

Indeed, traditional players like Google boast around 2 billion users while Facebook has an estimated 1.6 billion daily users. Comparing Google’s 2 billion users with DApps, the blockchain ecosystem seems practically motionless.

Users have never cared about technical specifications or vagueries like a product being “trustless” or “decentralized”?—?they care about the tangible benefits they get, whether it’s not feeling lonely (Tinder), talking to their friends (Facebook), conveniently getting around (Uber), or spiking their emotions (Reddit).

Fortunately, tokenized funds offer a number of tangible benefits to investors, whether it’s simple portfolio diversification via alternative investments, higher liquidity, or no investment minimums.

Traditional investment fund managers like Vanguard have over 30 million investors, so tokenized funds are still minuscule in comparison, but they’re rapidly growing. After all, traditional funds are highly conservative, and dare I say it, boring in comparison to alternative investments like (tokenized) emerging market solar or crypto.

We can’t expect tokenized funds to be widely adopted anytime soon. Change takes time, and there’s a long road ahead, with roadblocks from regulatory confusion to technical scalability issues. But once these issues are overcome, tokenized funds and traditional funds can be compared side-by-side, and the choice is clear for investors looking for innovative, diversified, liquid portfolios.

As mentioned, blockchain’s greater challenge is adoption, so the next step for the industry is to raise awareness of strong, on-the-market use-cases like tokenized funds. After all, the blockchain industry is master-class in raising awareness, but unlike in the early days, we now have actual products to market.

Ultimately, tokenized funds are well-positioned to increase adoption in the blockchain ecosystem, because they finally bring tangible benefits that can convince non-crypto folk to enter the ecosystem, like liquidity, transparency, and innovation.

Author Bio

Frederik Bussler is the Founder of the Security Token Alliance, the industry’s largest think tank with over 100 partners. As a public speaker, he has presented for audiences including IBM, Nikkei, Slush Tokyo, and the Chinese government, and is featured in outlets including Forbes, Yahoo, Thrive Global, Hacker Noon, European Commission sites, and more.

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