Digital Assets Trends

Payment tokens represent a payment method and can be used as a virtual currency to purchase goods and services. The most famous example of payment tokens are cryptocurrencies and Stablecoins. Unlike Fiat currencies, these are not (yet) issued by governments or other financial institutions but are monitored and organized in a decentralized (peer-to-peer) network that also serves as a secure ledger for each transaction.

The rapid rise in stablecoin circulation over the past few years has prompted central banks to explore their own stable digital currencies, the so-called Central Bank Digital Currencies (CBDC). A large majority of central banks around the world are already participating in pilot projects or other types of digital currencies. For instance, the Bank of China started a trial program in 2021 of the Digital Yuan (e-CNY). The pilot program has expanded to 23 cities, and a report from early 2022 indicates that more than 260 million wallets have been opened. In September 2022, the ECB announced that it would develop prototypes of different digital euro(s), and it is set to begin a pilot in 2023.

Security tokens are a digital representation of a traditional financial instrument such as a stock, bond, or derivative. A Security Token can then represent, for example, a share of the company issuing the token. As they are digital assets, they offer additional advantages, such as greater ease in the development and distribution, a reduction of settlement times for purchase orders, and greater flexibility in the creation and distribution process for SMEs and Startups.

The Reply Sonar platform has identified a rising interest in carbon credits tokenization over the past two years. In fact, carbon Credits markets often lack transparency and efficiency: blockchain technology could revolutionize the monetary side of a carbon offset lifecycle (to start with) by tokenizing carbon credits.

Utility Tokens permit the user to perform an action on a specific blockchain or decentralized application and receive services or products from a company. Utility tokens can only be used for particular use cases in a defined ecosystem. An example of a rising use case for utility tokens is executing payment for cloud computing services.

Startups or small enterprises often use utility tokens to obtain financing in ICOs (Initial Coin Offerings): participants in the capital raising will receive a token that grants them a specific right in the usage of the company’s products, like being first to access it or getting other privileges (e.g., participate to decisions regarding the evolution of the company). This approach helps a company to gain funding and attract early customers.

Non-Fungible Tokens (NFTs) application covers different sectors.

1. Traditional supply chain: physical goods typical of a conventional producer-to-consumer supply chain (bottles of wine, fashion industry, jewelry). Digitization enables their traceability and prevents possible fraudulent use.

2. Asset management: can be used to represent an investment product. An example is real estate, where the ownership of a unit can be represented in a token.

3. Art: by representing works of art on tokens, the respective transactions can include a wider group of investors. In addition, authentication procedures, tracking of transportation and restoration processes as well as their trade can be simplified.

NFTs have many potential applications in the Metaverse. Through NFTs, users can own digital property in the Metaverse. For example, it could be possible to acquire pieces of a virtual estate where the proof of ownership is the NFT linked to that share.