- The Stardust upgrade of IOTA Chrysalis protocol aims to expand IOTA’s functionality by introducing smart contract chains and user-defined tokens, allowing digital money to be programmed with any business logic.
- Bernstein research suggests that the tokenization opportunity over the next five years, driven by stablecoins and central bank digital currencies (CBDCs), could reach $5 trillion, signifying a significant surge in on-chain deposits and payments.
IOTA is poised to become a pivotal player in the rapidly evolving world of blockchain and digital assets with its latest upgrade, Stardust. This comprehensive utility enhancement aims to transform IOTA from a single application protocol into a versatile infrastructure capable of supporting second-layer smart contract chains and user-defined tokens.
#IOTA is perfectly positioned to be a DLT of choice for tokenization.
Assets are first class citizens embedded natively in our protocol. They are as secure, scalable and feeless as the IOTA token itself.
Many of our adoption projects are focused on leveraging this. https://t.co/Kqw2mImQKS
— Dominik Schiener (@DomSchiener) June 26, 2023
The previous IOTA protocol, known as Chrysalis, was designed with a singular function in mind: facilitating digital money transfers from one entity to another. Stardust, however, transcends this narrow application, introducing capabilities for programming digital money with any business logic through smart contract chains. Not only that, but it also enables the creation of unique digital money, transforming IOTA into a multi-asset ledger.
The shift from Chrysalis to Stardust has required a redesign and extension of the original ledger. The result is a powerful protocol that could become instrumental as the world embraces tokenization at a larger scale, as suggested by a recent research report by Bernstein.
Tokenization, the process of converting real-world assets into blockchain-based tokens, is being recognized for its benefits, including operational efficiencies, enhanced liquidity, and accessibility. Bernstein’s report estimates that the tokenization opportunity could reach an astounding $5 trillion in the next five years, primarily driven by stablecoins, central bank digital currencies (CBDCs), private market funds, securities, and real estate.
Currency tokenization, facilitated by stablecoins and CBDCs, is predicted to expand its application in on-chain deposits and payments. The report anticipates about 2% of the global money supply to be tokenized in the next five years, approximating to $3 trillion.
Bernstein analysts, led by Gautam Chhugani, envisage a rise in the circulation of stablecoins and CBDC tokens, with China’s CBDC program predicted to take the lead. These digital currencies, combined with yield farming in decentralized markets, are expected to rival traditional bank deposits as an investment or saving instrument.
However, the acceleration of tokenization hinges on regulatory support. The report cautions that the success of blockchain-based tokenization depends on policymakers understanding and appreciating the benefits of blockchains and how crypto tokens are integral to blockchain operations. How these regulations unfold will inevitably influence the growth and impact of tokenization in the near future.