Real-world assets need real-world utility | Opinion

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Ask anyone or look at any Twitter poll, and “real-world assets” are considered catalysts for the next bull run. While I agree with this sentiment, we must keep one thing in mind. Assets, as we have known them, have very little utility beyond speculation, and for us to reach mass appeal we have to move beyond speculation to create actual utility.

Improving utility drives user adoption; as people experience the benefits of tokens in their everyday lives, they’ll begin to see them as indispensable allies in their lives. So if the next bull run is going to be sparked in part by tokenizing Real World Assets then we also must also pursue Real World Utility. 

Beyond dApps to self-referential tokens

Decentralized applications are still centralized thinking. While their backend uses decentralized technologies, they still operate under the traditional premise that the application is the important thing, not the token. In a dApp-centric world, the app is the utility, not the tokens. It provides the functionality and hosts the interface that provides access to those features. 

For true real-world utility, we must move beyond the app and put utility into the token. All you need is a wallet; the tokens carry all other utility. The token becomes a dApp itself and carries that utility wherever it goes. 

The token should be the communication channel between the issuer and the owner; it should provide the owner with all price information, and the underlying assets. It should be able to be connected to a wallet and provide the full experience sans another dApp. All of these elements increase the value of the token itself, simply by making the token self referential. 

This also future-proofs the experience, as token holders can access utility on whichever platform they choose—and app developers don’t need to redesign an application for every new operating system that emerges. 

Offchain utility 

Token utility has also been looked at through the lens of on-chain only. While blockchains are great for creating some utility, such as ownership and user rights, they are not great databases for all things. They are slow, public, and immutable. These are not great qualities for applications that require latency, the ability to easily upgrade and fix bugs, and for situations where the token issuers do not wish all of their customer’s data to be public. 

Bifurcating across these two worlds allows token utilities to be as easily managed as any website, keeps data private, and executes experiences with the latency of web2. This unlocks a world of use cases that on-chain logic can’t solve on its own. 

For example, we built the Smart Cat game as an example of a token with an interactive application with a visual front end. To do this effectively, you need both on-chain and off-chain logic: On-chain to manage the ownership, while off-chain to manage the front-end game logic for a frictionless and fun user experience. 

By enabling tokens to go beyond the limitations of the blockchain and embrace off-chain logic, we can start to explore real-world utility that makes sense to the world beyond just being onchain assets, ironically isolated from the “real world” that they represent. 

Greater price discovery 

A simple real-world utility that any token can carry is information, and an easy and powerful set of information any token could carry would be price discovery. This simple utility can be applied to any token, as any token is an asset and holds value. 

Take a game token, for example. You’re playing a character, and you’ve built up to level 9 of 10, unlocking new game levels for you. The token can now let you know the going rate for a token at level 9 is $X, and, in that same interface, allows you to rent, or sell the asset. While that information is dynamic, and stored off-chain, it’s transferred with the token giving it new utility. 

This information is conveyed as utility, aiding the end consumer to know the full value of the asset, and the seller to convey the true value of the asset. It is a simple real-world utility.  

Evolved digital experiences 

Beyond token gating and proof of ownership, advanced utilities such as communication channels or tokens being applications themselves can unlock a new era of functionality. 

For example, there should be no need to download a car app; your token could allow you to access critical functions such as unlocking, finding, or starting your car. This removes all consumer friction from the car-buying experience. No app to download, no registration required, and no setting up of information; it is all conveyed with the token. 

Real-world utility, such as asset management, could allow you to manage your assets directly from the token. Price discovery on rental and sale rates of your car enables the owner to maximize their asset. With a simple click of the button on the token, the owner could rent out the vehicle at those rates, take out a loan, or sell the car. 

Furthermore, the token issuer can communicate directly with the token. Manufacturers can let you know directly through the token of any defects, service needs, or offers. Real-world utility from both on and off-chain can enable a better car ownership experience and create greater value for society.

Into the real world

Real-world utility should, of course, also extend into the actual world. The more a token can integrate into the world around it the greater value it has. The car token can easily connect to your service station, keeping up with all service records, and game assets can go beyond being static proofs of ownership to dynamic interactive experiences themselves. Not between games, but games and the outside world. 

Just as a token can carry information, it can carry on-chain and off-chain logic. This is a utility that can let any third party know how to interact with the token in real time. For example, you go to McDonalds and connect your game token to the kiosk where you order your food. McDonalds can read the token and offer to top you up to the next level if you upgrade your meal to the next size. You upgrade your meal, and they upgrade your gameplay instantly. All through the token. 

We are very early in the world of token utility, but as we enable real-world assets, we should consider an equal dose of real-world utility to accompany them. We have to go beyond the basics of proof of ownership and token gating to create enough value for the world to care about tokens beyond speculation. 

Innovations like allowing tokens to become the centers of our digital worlds, seeing them as communication channels, aiding owners to better manage their assets, and allowing others to have greater price discovery are just a few ways we can begin. This is all possible today if we are ready for it. 

Mathew Sweezey

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. 

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