Redefining Ownership: Tokenization and Next-Generation Markets - TOKEN2049 Singapore 2024

All right. Thank you everybody for being here. Nice to see you all again. Good to see you guys. Uh let's just kick this off.

Maybe you know, I think what we'll do is maybe do two two chunks to the conversation. One maybe just like set a bunch of context for everybody. Um get everybody on the same page about terminology and kind of how things work. And then uh the second section we'll call hot takes. Where I'm going to ask you guys questions and hopefully you all disagree with each other cuz that's a lot more interesting for everybody here.

Um okay, maybe we just start it off to to define some terms. How how do you all think about what is tokenization exactly? Like how would you define tokenization and how do you think about kind of the key pieces of infrastructure to make tokenization work? Um who wants to start? I can just start since I'm the only tokenization platform here.

Well, this case asset manager more. Um tokenization is the the process of representing the ownership of an asset on a blockchain through a token, right? Uh so so the tokenization itself implies that the representation of the asset of the ownership of the asset is done on a public distributed ledger uh as a blockchain. Um what what is what it involves it depends on what is the asset that you're tokenizing, right? Cuz in some cases you could tokenize a commodity, you can tokenize dollars, you can tokenize securities and depending of what is the underlying asset the amount of infrastructure is is vastly different as well as the regulatory framework of how you do it which is very very important, but it involves some sort of, you know, technology process for issuing the token as well as tying back the ownership the legal ownership of the asset back to the the digital representation of the token and then controlling how the token flows across the the people depending on the you know, legality of the transfer uh etc.

But for the most part that's what you So let's let's try to make that really concrete for everybody. So maybe Justin, you want to start? Like how does that actually work for Ondo? Like end to end how does how does a dollar actually get tokenized or how does you know, how do treasuries get tokenized? Can you walk us through kind of like end-to-end process?

How does that actually work? Yeah, I think um in in tokenization I think is sort of defined as sort of a complement to other tokens that exist at other these digitally native tokens that are sort of born on blockchain and live on blockchain entirely, whereas tokenization sometimes refers to real-world assets where there's a token representation and then that is actually tied to some assets in the real world and you need to make sure that that tie uh has integrity and of course is is done in the right way. So, our main products are effectively things like money market funds or Treasury bill-like products where when you buy the token, you get the same financial profile as if you did the same thing in a traditional asset. And so, when somebody comes to us and sends us money, they can either send us stable coins on chain or they can send us money the old-fashioned way, you know, via bank wire. When money comes in, we then mint new tokens or create new tokens and those tokens are then given back to the actual client and with that money that we get, we go in the real world via our broker-dealer, we go buy something like an actual T-bill or we buy something like BlackRock's securitized bill.

Um where you have to make sure that you have that mapping one-to-one of like what the money is in the real world versus what the money is represented in token form. And can you speak a little bit to like how does the the actual token get created? You know, like at what point are you doing KYC if you have to do any KYC and how is that handled? Is that done in-house or third parties? How does custody work?

Um Sergey, I'm sure you have thoughts on on like how oracles actually like help people on chain represent the parts of the process. Can you just speak to like the components here that are actually required? Like abstractly speaking, tokenization seems like really easy, right? There's a smart contract and you like you sent me some money and I like gave you a token. But there's like a lot of infrastructure behind the scenes.

And so, can you can you guys speak a little bit to like what are these pieces of infrastructure that are actually required to to actually make this work end-to-end? Like what are the key pieces of infrastructure? Like how do you think about KYC? How do you think about If the token if if you're tokenizing a real world asset for the most part, you're issuing a security because either you tokenize a such as I was saying a fund like a money market fund or a private equity fund, whatever type of fund. So, that's a security.

You can tokenize equity, debt, etc. Or you're taking an asset and you want to provide fractional ownership through the token, then you have to securitize the asset to be able to assign from a legal perspective the the underlying financial ownership of the asset to a a number of different investors. That's the the securitization process in traditional markets. Just brought in into into the blockchains. From from my perspective then, because that token represents a security, it's a regulated entity and a regulated instrument.

And therefore, the wallets that contain that token need to be KYC, need to be associated to a real world identity of an investor that has been KYC, has passed AML, etc. So, you have to do KYC first. You have to then whitelist the wallet of the investor and then you can then issue the token there if it fits the requirements of the regulatory framework. So, that's a requirement for 99% of the real world asset tokenization except for stablecoins, I would say. And do you do you guys handle KYC in-house or is this like a third party that you offset it to?

Or how how do you actually do that? We are regulated entity, so we do it ourselves. Got it. Same. Got it.

Okay, so now now the token exists and it's in a wallet. Is it tradeable? Is it you know, are they allowed to do things with it or does it have to sit in that wallet? Like how do you think about kind of what happens when it's in the on-chain world? So, there's sort of this infrastructure that you have to do the KYC and create the token and move get the money and on the back end go buy the asset that that is supposed to represent.

When it's on-chain, what happens? You can do anything? If you don't do anything with it, my recommendation is don't tokenize because then you're just basically using a more, you know, cumbersome ledger than just using a some other ledger technology. So, there is a lot of people that tokenize, you know, a bottle of water and if you're talking on the blockchain that you can't do anything with it, that's a waste of time and I think one of the reasons why tokenization hasn't taken off because a lot of these tokens don't actually improve on anything. Yeah.

So, my view of the world is that you need to tokenize for the token to be able to actually provide additional utility to the security of doing something that is hard to do in traditional finance. And then in our case for instance, we do peer-to-peer transfers across white-listed wallets that allows you to transfer the ownership of the security in a very, very efficient in some way. That's very difficult to do in traditional finance. That leads to potentially better trading of our liquidity. That involves other things, of course.

Um, we do instant redemptions on chain. We do issuance of dividends on chain directly into the investors' wallets and things like that that add value to the token because besides just using a better ledger to represent the ownership. And when you when you start doing these things, you know, let's maybe double click on the the idea of like what is on chain here and what does that look? Are you guys Are you guys operating mostly on L1s or you mostly L2s? How do you think about maybe Serge you can speak to this.

How do you think about um, permissioned versus permissionless ecosystems and chains and does that create any like risks and liabilities? So, can you speak a little bit about kind of like the on chain infrastructure that you're using to actually create these assets and move them around and Yeah, sure. Yeah, so I think you need um, kind of four things for all this work. In addition to the blockchain, you need a tokenization platform like what Securitize creates which is used by, you know, the majority of the great institutional clients out there today. So, that's really great work.

Then you need um, Oracle Networks to create what's called uh, a unified golden record, which is getting all the off-chain data into that token. And the more data in the token, the better the token in my opinion because it does more risk management, proves more things, is more secure. That's what we call a unified golden record. And that token can exist on these public chains or these private chains. And then you have all kinds of really good distribution mechanisms, which is not exactly what Ondo is, but that's kind of what I view it as as something that can help package things in a way that's easy for people to consume.

And then you have D 5 protocols that generate yield on it. You have all these kind of distribution channels that are optimized for people to gain, you know, easy access to these things. And then all those all those things need to work together. They can work on public chains or private chains. Really the distinction between public chains and private chains, I think, is a little bit confused because on public chains you can have very hard to access financial products that are effectively private as far as who's able to access them.

So the the membership of the product can be very limited, right? Under a set of conditions, it's on a public chain, but there's a very limited group that can access this financial product. Then you can have private chains that it's easier to join than it is to gain access to this public chain financial product. So I I think the distinction between public chains and private chains is just going to kind of go away, especially with good connectivity across chains that's seamless. And that's one of one of the final pieces that needs to be put in place is that you still have a lot of fragmentation about where private key value is.

But once you have a good cross-chain system that efficiently and seamlessly and reliably connects all the value on all the chains into one what we call internet of contracts, then launching that financial product on any one chain doesn't limit you to the user base in that chain. It's kind of like in the internet, you launch an internet application, there's not like the Spanish internet and the American internet, there's not like different internets. The people from Spain can access the American application and you know, it's all one big internet if that makes sense. Well, to extend that analogy though, there is a Chinese internet which is Yeah, I'm going to disagree a little bit here. So Yeah, please.

I think these permission private blockchains in my opinion are a bit like glorified databases. Uh because first they're closed so only you know, approved participants can participate. They're not necessarily decentralized. They tend to be like in a single data center so they're not resilient towards uh specific attacks etc. So I think this is similar to what in going back to the internet analogy that Sergey was doing, when MSN or American Online launched and they had this mini internet that it was only the approved content that they were putting there and only the people that were connected there.

And that obviously didn't work because all the innovation happened on public open chain open networks like the internet, right? So public blockchains are what it is and a good example is what Andor is doing for instance with Biddle where they've done an integration in for you know, redemption and issuance on chain directly integrating with a smart contract that were on a public blockchain without talking to to us basically. So that's that's will not have happened if it was a private blockchain where we have to give them permission to access it and then you know, you're in a data center you have to use a VPN to connect like we've done integrations with private blockchains is a very painful process that doesn't lead to open innovation at all. So So so just a problem that a little bit though. I mean, America Online was actually how most people accessed internet services for for many years.

It was it was sort of the on-ramp before you hit the public internet. It was almost sort of you know, like at peak there were tens of millions of users paying them every month. Yeah. I I think it's all what what I'm saying is the American Online, the MSN and all this stuff, it's just because there's different protocols. Yeah.

And there isn't like a simple way efficient way to make them all into one internet. But eventually they all merge into one internet. Like AOL merged into the internet and whatever MSN was merged into the internet. So, it's all just one internet. So, I think we're just going to arrive at a at a similar place.

Yeah. Where, you know, I might have started on AOL and you might have started on MSN and you might have started over there. But, eventually they just merge into one internet. And actually, on the back end, MSN and AOL and whatever, they can all use different database technologies and they can all use different, you know, clouds or whatever, but they're going to merge into one internet. And that internet isn't defined by the database technology they use.

It's defined by the protocol that connects all of them into that internet, namely TCP/IP. Right? That's what creates the internet. So, this is kind of where it's going to evolve. And then there's just going to be different levels of access control.

To like, I'm on the internet through MSN. Man, this password system is real It, you know, it forces me to make uh a special character in the password. It's really kind of annoying. I get into the internet through AOL. And it has a better password.

It's That's That's like going to be the distinction, right? But, you're going to be on the internet. Which is going to be a collection of different technologies that are synced together over a single standard, over a single protocol that defines how they interact with each other. Right? That's what the internet is.

I I do you So, I'm I'm kind of curious from the market perspective, do you guys see different sorts of entities that are actually interested into in this today? So, obviously BlackRock is playing with this. But, who else are you seeing that's actually interested both on the supply side and the demand side? Like, who wants to tokenize assets and is interested in tokenizing stuff? And where are you seeing the demand side?

Like, where are you seeing people come in and say, "I actually want access to these assets um in a tokenized form?" Like, what do you What do you guys think in the market these days? So, first, I think saying BlackRock is playing with this is a bit of a disservice to what they're doing. It's a real project with a commercial objective that has grown to be the largest tokenized asset in the world. I don't think that they it's a pilot or an experiment.

is something that they they really see commercial value. And I think that they what we see is that there's two things like in if you think about 5 years ago, people saw tokenization as a as a maybe more efficient way to reach TradFi investors. And at the time, crypto wasn't really not big enough to be a target audience. But if you think about now, crypto went from like 5 years ago being $200 billion to be a $2 trillion. So now the suddenly you have, you know, a crypto audience that is large enough that want to access TradFi assets on their crypto ecosystem for benefiting what they're doing in in crypto.

And I think that's has been the shift of the thinking of the asset managers in terms of why do they want tokenization for? Not just to be more efficient on the TradFi space, but to basically bring TradFi products on chain for the crypto economy, which is now large enough to be meaningful to them. Is this is this what you guys see, too? Yeah, I agree with all that, certainly. Um I I think in terms of supply and demand for tokenization, there's tons of supply of people who have non-tokenized assets that want to have a tokenized version of them either for marketing purposes or they think that it's a, you know, up-and-coming growing place to sell, to distribute their assets, which is like somewhat true, but also crypto's still very small, you know, so I think there's an imbalance between asset managers that want to tokenize their assets versus the actual organic demand on chain for those assets so far.

Um I think all of us on stage probably believe that all the world's assets are going to be tokenized at some point in the future. You know, we're definitely not there yet, and we're still figuring out how long it's going to take and what the right path is going to be and what the next assets are to be tokenized. Um but I think there's still a little bit of a supply-demand mismatch between um issuers who want to tokenize their assets and then actual on chain demand for some of these traditional assets just because the traditional assets are maybe a little bit boring for people who are have their capital on-chain and there's sort of you know lots of you know much more risk-on things that people can do with their capital on-chain. So another way to say that is you think DJ's don't want low risk assets. Like there's a mismatch between like the those assets.

Well maybe throw let me throw a question to you guys. Cuz I think it's a good segue maybe into the to the hot take session now that everybody sort of has context on on the market and sort of how this works. What are the assets do you think that gets tokenized that get tokenized early? Like you know that from a from a success perspective if you were to tokenize them you might actually have a shot at at actually making that a successful market. And kind of relatedly what are the assets that you think are getting tokenized that actually nothing's going to happen like it's just too early.

And so how how are you guys looking at which asset classes actually matter here? I've been in the space since the first you know wave if you want of 2017 2018 where everyone was very excited about organization and now that people are excited about organization again I think that they back then and throughout the years people thought let's just say everything is going to be tokenized and people started like I'm going to tokenize you know I remember a project from another company that no longer exists that they were like tokenizing a student dormitory in North Carolina. And if you think about it that that that makes no sense because it's very difficult to really add any value through tokenization to a you know a student dormitory in North Carolina because it's a small single asset it's difficult to understand what the benefit of it is the you know you're not going to get it liquid anyway because it's an illiquid asset by definition there's not necessarily you know demand for those assets etc. I think today the approach in the industry is a bit more pragmatic and they're looking at the number one tokenized asset today is the dollar right? 160 billion dollars of stable coins.

So what's coming next then anything yield bearing dollars. So that's what you know, Justin is doing with their products, that's what we're doing with BlackRock, with BITO, etc. And if you think about it, in traditional finance, there's $2 of Treasuries for every dollar of actual dollars. And in crypto, it's the opposite because it hasn't been an efficient tokenized Treasury product on chain that crypto people can really use. So, they have to, you know, use the stablecoins for things that in traditional finance, nobody will use stablecoins just because there's no on-chain Treasuries.

I think that's the the asset class today that is growing, it's growing faster than stablecoins, it's $2 billion, which is really, really tiny for what it should be. And I think the next evolution, especially now that, you know, interest rates are coming down, is anything adjacent. You know, you know, floating rate products, credit maybe, CLOs, and things like that that are kind of like the next adjacent thing. But all these are long-tail assets like, you know, single asset real estate, etc. I think will take very, very long time for tokenization to really be a thing there.

So, so obviously not financial advice, but so you guys, I mean, I'm curious bullish or bearish real estate tokenization on chain? I'm bearish. That over what time frame, Right. Uh let's say next 5 years. Not going to happen.

Not going to happen? You can talk all you want. right. Like, maybe you can tokenize maybe a REIT. Yeah.

Or you can tokenize, you know, a yield-bearing like, I don't know, some sort of like a big debt product, but not individual homes, you know, put them on chain to make them more efficient or liquid and stuff like that. I don't think tokenized REITs might happen in the next 5 years? And people actually tokenized REITs possibly, like if you think if you look at, for instance, Blackstone, they already have you know, a publicly a successful publicly traded REIT, right? So, there's no reason why this shouldn't percolate into the crypto economy within the next 5 years. But that's not real estate as people perceived tokenization of real estate 5 years ago when the industry started.

That's like a fund, basically, that happens to contain real estate assets. Sergey, what do you think? What's your what's your thought on this? Yeah, so basically, I think the things that that have a lot of potential are the things that create diversification for like the Web3 community. That's one of the reasons things like Terra happens is cuz their collateral and what backed it wasn't diversified.

I think that's what this more traditional financial product of treasuries is very useful for in the Web3 community is it creates diversification of the underlying assets that isn't like crypto backing more crypto backing more crypto. So, that's a really useful thing, especially if it can generate yield. I think anything that's hard to own that generates or has a big group of people believing it could generate yield. This is like tokenization of private equity. That's an example.

It's hard to enter those funds. It's complicated. You have to have a minimum, these types of things. And people have beliefs that certain categories of certain venture equity fund, private equity funds can generate yield, but it's hard for them to access them. And then the third category, which is where real estate comes in is where fractional ownership would be valuable, right?

And there I think is um different market dynamics in different regions. So, there's different regions in the world where like in the Middle East where real estate's a really big deal and people really want to invest in real estate and they want to do it in a fractional way and it's like culturally really accepted in a good idea. And it's viewed as a form of diversification in addition to gold, in addition to other things. And then there are places where there's like a lot of financial products and there was the real estate crisis in 2008 and people are like real estate's a bad investment. But I think anything where you can take let's say a $100 million building of some kind like in the middle of Riyadh or something and you can tell people, "Hey, you can own a piece of the Kingdom Tower and you can own that."

And that's like, "Wow, what an amazing thing. I can own that. That's cool. I couldn't own that before." And anything where like fractional ownership of something that has real value in people's minds, I think that that still has a lot of value.

Uh because you're you're basically now able to aggregate demand from a bunch of people that current that previously were not demand, right? Because they couldn't meet the minimums, the friction was too high. That, you know, fundamentally makes sense to me. I think there need to be good user applications like end-user applications that do that. So, end-user applications make it very easy for me to have a fractional share in you know, piece of art, building, stuff I believe in but wouldn't be able to to own.

I I think there's a there's a pretty cool market there, in my opinion. guys agree disagree? These use cases make sense? Uh I sort of have a lot of thoughts in my head about all this. Um I I I think if real estate tokenization is going to happen, it's going to be something like here in Singapore or in like Dubai where it's a very real estate focused economy and they're a little bit more sort of simpler regulatory structure where there's, you know, one or only a few regulators involved in something.

So, not not in the US is your I'm Yeah, so I'm I'm American, so I apologize, but my sort of American-centric view of this is like a lot of the real estate data isn't even digitized, you know, let alone tokenizable, you know, so county by county records of who owns what and all of the real estate is really non-fungible tokens, right? If you own a condo on the 20th floor versus the 60th floor, they're not the same price. Um and then I think I can talk a little bit more about why we started where we did. Um and this really harkens back to I think Carlos and my my mantra is that you actually have to just use the tokens, otherwise just go buy the private equity or private credit thing and you know, if you're never going to use your private equity shares to to do anything, like you might as well not tokenize it, right? Um so, we were the first ones to get any material amount of adoption um in a tokenization project.

If by material I mean north of 100 million dollars of TVL. We started with um effectively a short-term cash management asset that people could actually use to do short-term cash management on chain. So, if you have dollars on chain and you were looking to get out of those dollars and invest in something like a money market fund or T-bills, you literally had no real option to do that before. But, we saw a need for people doing that both for cash management of just I rather earn yield on my dollars rather than not on chain as well as what I think is a much more interesting but longer-term use case, which is actually using these things within the DeFi protocol machinery themselves and in particular as collateral for these various different protocols. The two main types of finance protocols on chain are lending and trading.

T-bills are widely used in the traditional financial world as collateral for both of those things and so it makes a ton of sense if you are putting dollars in stablecoin form into, say, an AMM and you're putting in asset A and dollars and putting in 50/50 of each, you'd actually much rather have, you know, yield-bearing dollars in there. So, while your money is LPing, you're actually earning a yield on the dollars, right, rather than paying the yield to the actual stablecoin holder. Um and so we're starting to see uptick in that. We're, you know, north of 10 million dollars of liquidity actively in various different DeFi protocols. Um another thing that clients really care about is really quick redemptions and so we have a really cool project where we've worked with Carlos's team at Securitize to offer 24/7 redemptions, effectively atomically within the redemption transaction.

So, when you redeem, you send the tokens back to us and in that same transaction on chain, we actually work with their smart contracts under the hood to source liquidity and return you stable coins in that same you know, atomic settlement effectively like atomic redemption. Um another thing people always talk about is like atomic DVP. We won't talk about that yet, but getting to the point where, you know, people are actually getting a demonstrably better result financially like from this actual use case. Like you actually have to have We were talking about this a little bit backstage earlier, an actual use case to drive adoption, right? Like I think there's a lot of sort of Field of Dreams ask if you build it, they will come type tokenization projects, and I think those are cool, interesting projects, but if you're running a startup, you might run out of runway before, you know, the market gets there.

You know, so I think the you have to be relatively ruthlessly practical about what to tokenize now. Uh and so we started with these very cash management like project products because people actually are using them for cash management. Yeah. I disagree with that. So like the the use case that uh Sergey said about fractional ownership for real estate or art, if you think about there is a lot of startups that have tried that with centralized systems.

There is Cadre, which recently got sold in the US for nothing, and they raised a ton of money over time. They completely failed. Masterworks, which question mark whether they're going to survive. And then they do fractional ownership, right? They just don't use a blockchain.

They just use a centralized database. But for the consumer of the product, and by the way, those are actually pretty good user experiences. So they um for a consumer of a product, whether they the underlying shares are represented on a distributed ledger or not is completely irrelevant. And I would argue that if you actually use a token, then you add friction because then people need a wallet, and not everybody, unless you're in crypto, are familiar with the concept. So if the whole purpose of tokenization is providing uh fractional ownership, I think it will not succeed.

You have to do something else with the token. It's like you can put it on a DeFi protocol to make it be valuable, or you can then if you really reduce the cost, then it has to translate into a huge amount of value for the end investor of way lower fees, which is really not the case yet because tokenization also had other type of frictions today, etc. So, I think that uh yes, all these things conceptually sound like the right thing to do that tokenization can solve all these problems, but the reality is today they don't yet. So. But are you are you not sympathetic to this idea?

Go, sorry. Go. Yeah, just one quick thing. So, I totally agree with with both of you. I I think what's happened, for example, for this money market example, is that the securitized team has done an amazing job kind of navigating the legal complexity of generating these tokens, right?

And making them available to the ecosystem. And then I think what Ondo did is make made a really good what I would call user experience for both users and for the protocols that then consume these things. And that is uh so, I agree with both of you that there needs to be more value to that. But I I guess what I'm saying is that somebody like Ondo, somebody like you will do a really good job at generating the tokens. And then somebody like Ondo will come along and generate a really good user experience for those tokens to make the demand for them uh efficient or seamless or valuable.

Like they'll figure out a way how to make um the adoption of a tokenized piece of real estate valuable to the user through through some set of economic mechanisms, some way there like maybe you can earn yield on your real estate token and that's like a mind-blowing thing cuz you couldn't earn even 0.1% of yield. Like I don't know what those things are, right? But like the permissionless innovation thing that you folks have experienced, right? And has, you know, helped make what you do successful, like this kind of um combination is I I don't know how it's going to happen in every vertical cuz I don't know enough about each of those verticals, but I think this pattern will repeat itself.

Okay. Can I I I I think that's definitely there's there's a sort of that argument. I think there's another argument. I'm curious how you guys think about this, which is if you think about let's say something like Polymarket, which is doing phenomenally, right? Um A lot of people have tried to do prediction markets in Web 2 for a long time, and they and they never quite worked.

And so there's an argument, and just to be clear, we're not investors in Polymarket or anything, right? But like But you are. So I'm not I'm not shilling our portfolio, but uh I think there's an argument that this is a a kind of like what you were saying, there's a new capital market here. And there's a bunch of people that have dollars now on chain, and it's a different group of users that have historically had dollars. And that that capital market may seek access to instruments or or tools or or products that the traditional Web 2 people didn't really care for.

And so prediction markets might be an example of this, which is like the Web 2 prediction markets never worked, the Web 3 prediction market looks like it's kind of working. So are you are you not sympathetic to this argument that like I I I think that the the the reason Polymarket is successful is because the the the Web 3 audience likes gambling and DJing stuff. Sure. And then that's why they like Polymarket, and that's why Polymarket has been successful. But but is gambling on fractionalized art, you know, like if Yeah, we'll talk fractional art or something, and or fractional real estate, it's a lot more boring, right?

There's a lot less gambling expected, like the amount of the returns you're going to get are going to take way longer, they're going to be much more predictable, much much more stable, and I think that the the the crypto audience don't have an appetite for these boring products, right? I think Treasure is largely not being used by the crypto users, but are used by the crypto institutions as, you know, Justin said, for, you know, posting collateral instead of posting stablecoins or or doing other things. Uh so I don't know if if the crypto DJ individual investor that can gamble out in any of the million tokens that are out there or in Polymarket betting and getting a reward within a week about whether, you know, So it sounds like you're actually positing something about the market that is kind of interesting, which you see in a lot of markets, which is sort of this bar bellying. Which is you're saying, it sounds like, correct me if I'm wrong, that uh on-chain tokenized dollars and treasuries sort of the lowest risk asset that can be used as collateral is a very interesting thing and there will be many, many billions or maybe many trillions of dollars of that because it's a that's a fundamentally utilitarian and useful thing. And there's a bunch of stuff in the middle.

Art, real estate, whatever, which is is not so safe and not so risk-free and and doesn't generally get used as collateral and is not so risky that it's interesting in terms of generating 40% a year. But that might imply then, what you're saying is that there is a set of assets that could generate 40, 50, 60% a year that are extremely risky that might be very appealing to this audience like a Polymarket. And so is that abstractly speaking like suppose I'm a founder today and I'm thinking about what you might want to tokenize and I can't compete against the Ondo or securitize. It's regulated, it's KYC, it's tradfi, yada yada. Does that imply that there's a group of assets out there that if you could go and say you can make 40% a year on this or 50% a year on this that actually the crypto capital markets on-chain might be interested in that?

That's a good point. So we've thought about like if you think about one of the reasons for instance on on the DG inside of things but not Web3, company like Robinhood has been very successful with short-dated options. Right. Yeah. Short-dated options, yeah.

On something. So if you could bring this kind of product on-chain, um you know, this could be attractive for for the the crypto people. Of course, you're competing with the frictionless, let's say, gambling that you can do on DeFi on Polymarket where there's no KYC. Uh there's no friction at all, right? So all these other products by nature they're always going to have some degree of friction because of regulations and stuff like that.

So but yeah, I agree with you. There there are all the products maybe that are Until Ondo makes it easy to use. They still have KYC and then I'm very happy to hear that we have a good user experience. That's great. I mean we've certainly put a ton of time and energy and love into into the product experience.

Um yeah, I mean I I that you know, all this stuff I mean it's it's so cliche but all this stuff is going to take so much time, you know, like we are you know, we're at an all-time high. We're north of 600 million now in in our TVL or what traditional people call AUM. Um and it's growing probably very quickly in comparison to any kind of traditional financial thing. You know, I I haven't looked at the numbers but it's definitely like double-digit percent month-over-month type growth that we've seen since launching our most recent product. Um but you know, I think it's we have to remember that not everybody is at this conference.

Not everybody is in these conversations and they're still learning a lot of basic things like, you know, what is an oracle and how do they get this information and why should we trust them and you know, what we you know, we sort of take it for granted like we obviously know who, you know, Chainlink is and Securitize is and those types of things but like this is just going to take so much time, you know, like the traditional financial system is going to be tokenized. I think we all agree with that but I you know, I think the time frame for this is, you know, very very um you know, longer than people think. Yeah, I mean it's it's, you know, the the famous Bill Gates quote, right? It's, you know, in the short run and versus the long run. Like in the long run it'll get here sooner than we think but Yeah.

you know, you you you you I think it's a an infamous Bill Gates quote. It's people dramatically underestimate or dramatically overestimate what's possible in two years and dramatically underestimate what's possible in 10 years. Yeah, which is probably good in this space. Keep in mind that this is a regulated environment, right? As opposed to all the things in crypto that can flourish and grow very quickly.

So so we're constrained by definition of Yeah, of the nature of the products that we're bringing on chain. So we're almost up on time here. So maybe last question for each of you to to close it out. Um suppose we're all back here in a year, uh 2049 in in 2025. What is going to surprise people the most about what's happened over the last 12 months in meaning over the next year, what do you think is going to surprise people the most in this area?

Sergey, you want to start or we'll just go down? I think the amount of uh value that will flow in uh to the TradFi ecosystem from the Web3 community and I think by this time next this year, it's September, October, yeah, I think there'll be more institutional adoption of crypto as well. So, I think there'll be more Web3 crypto adoption of TradFi products, like what Securitize makes and kind of what Ondo makes and those things, things backed by more traditional systems and and processes. And I also think the institutional industry uh the the traditional kind of TradFi folks will also be doing more institutional transactions Yeah. between each other and that will also be happening on on chain.

You're an engineer, put some numbers on it. I'm sorry. Give me some quantified numbers here. Like, what do you What do you Like, what what dollar amount you think is moving from Web3 back into TradFi or, you know, how do you think about the volume of What is What is RWA now at 170 billion? Something like that in total when you add up all the stablecoins?

Yeah. I wouldn't be surprised Stablecoins is the large majority. Yeah. Yeah, large majority. I wouldn't be surprised if we're at, I don't know, 4 500 billion.

It's more than doubled Yeah. in the in the RWA side. Yeah. And a lot of that flow I wouldn't say 50%, but a decent percentage of it has come from the institutional world in addition to the Web3 crypto world. Most of it has come from the Web3 crypto world, but some of the value has flown in from the institutional side.

Uh that's what what I would think would be reasonable. Cas, what what do you think? What's When we're looking back a year from now, what's going to surprise people the most? think that the Web3 world will penetrate the TradFi world. You think it's the other way around.

The TradFi people will try to create with, you know, the TradFi products into the Web3. Mhm. And I think crypto today, you know, that yes, this 170 billion, but it's largely stablecoins, 160 billion. I think you're going to see the yield bearing dollar products, which are different varieties of tokenized treasuries, etc., to grow significantly faster than actual tokenized dollars.

So, so today, if it's, you know, the the tokenized treasury space is maybe 5% of the uh you know, compared to the the stablecoin market, I think it's going to grow to be like 20% of it. And it's going to grow significantly faster because it makes no sense to be using stablecoins for the things that we're using today. It's lack of quality products that give you a uh the earn allowed to earn your earn a yield that can replace a stablecoin. Can Can I ask why you're not optimistic about the Web3 capital flowing into Web2? I mean, I don't think it's going to happen in 1 year.

You said next year. So, Well, well, but if so, to probe on this for a second, right? Like, Tether has something like 80 or 90 billion dollars in treasuries now. Who? Tether.

USDT, right? Right. And so, it is now something like the 18th largest treasury holder in the world. But they have it on the web on the on a TradFi asset manager without putting them on chain or anything like that, right? Yeah, yeah, but that's that's what I'm saying is like what happened was there was a hundred billion dollars sitting on chain that came in through on chain and they moved it back into Web2 land and are now holding a hundred billion dollars in treasuries.

Doesn't that sort of imply that like if there's another trillion dollars that comes on chain, that the easiest the path of least resistance is for that next 900 billion dollars to find its way into commercial paper or or triple A bonds Yeah, for for me, I see it the other way around, right? That's actually taking TradFi products, which are treasuries, and create a a crypto wrapper, which could be a tokenized treasury or in the case of Tether, a dollar, and put them on the crypto space, right? Sorry, that's what I meant. Yeah, you you told me that the the the Web3 into TradFi is more like the ETF space, right? Where you're taking a crypto asset and put a wrapper and put it there.

And I think that actual tokenized assets being used in a TradFi environment, there's too much friction between the two systems. So you guys are actually I think saying something very similar using different terminology. Yeah, well I I'm saying that there'll be more traditional assets adopted by Web3 crypto people in these wrappers. Yeah, yeah. I'm also just saying that there will be separate from the public chain Web3 crypto world institutional transactions also.

Yeah. And that that'll happen. Justin, what's your what's your this is going to surprise people the most over the next 12 months prediction. I'm going to give you a little bit of a roundabout answer, but I I do think it's incredibly possible to create a Web3 native finance company that does compete with and challenge the incumbents in Web2, but you do have to build something in a way that is like Web3 native, you know, so I I think what you don't want to do is sort of like lift and copy and drop what you do in Web2 onto Web3 and then expect that to be exactly right. Like you actually have to use the power of blockchain, and I say that somewhat sarcastically, unfortunately, but such a cliché, but like you actually have to use the tokens and the technology, right?

So with our tokens, it's not just like the tokens represent T-bills, you actually can do interesting things with them. Like you can have a version of the token that looks like a stablecoin where it pays out the yield in new tokens. You have a version that can be used as collateral, you know, like you can convert between the two. You can bridge the tokens from chain to chain. So I actually think that one, you can be a a Web3 startup and compete with the incumbents, um, but you have to do that in a way that's innovative, but you really have to, and this is going to answer your actual question, work with the actual existing infrastructure, which is still I think really getting there and improving.

There's all kinds of really awesome technology that is still a little bit in the proving grounds from a traditional financial perspective, but if you can build out institutional grade products that use this new amazing technology, things like bridging of tokens, things like DeFi protocols, and do that in a safe way where people with a traditional financial mindset, whether they're an incumbent financial institution or a web3 native person, can use that product. I think that's the real unlock. That's the real use case where you actually have these products that people want to buy. You can actually use them within the DeFi protocols that have been battle-hardened people trust. And I think that a year from now we're going to see tremendous improvements in things like bridging, things like even like token standards and consistency of token standards across this multi-chain universe that we have now.

And all of that's going to really help developers build the actual platform in a way that ties in with Sergey's vision for this sort of internet of assets where the tokens all actually work together and you can sort of seamlessly move them across chains. And the user doesn't have to be, you know, a a rocket scientist equivalent of a blockchain engineer to make sure that your money goes from A to B. So, your assertion 12 years from 12 months from now is it will all just kind of work and people will be surprised at how seamless it is 12 months from now in terms of it'll just all kind of work. Yeah, just I think significantly better user experience, you know, where they understand what's happening, there's more transparency, the chains are getting faster. I think there's a good bit of just using multiple different blockchains even for Arb, you know, if you're trading some asset here and there and you can buy, you know, buy low here and sell high there.

You need to be able to move the asset. And like a lot of that is just like really basic financial plumbing that really is dramatically gotten better even in the past 12 months. I think that's going to very much continue over the next 12 months. Okay. All right, guys, we're out of time.

Thank you everybody for listening. Let's have a round of applause for the panelists here. Thanks, guys.