It’s not only individual investors who recognize the true potential and utility of cryptocurrencies, more and more businesses are now also turning to this novel asset class. In this article, we’ll outline the three top reasons why crypto attracts businesses, which will prove that tokenization and blockchain technology are here to stay.
What started off as a fringe interest of the tech-savvy has turned into a multi-trillion dollar global industry that carries a multitude of applications for businesses. Despite the support from retail investors, most businesses waited for quite awhile before dipping their toes into this revolutionary world. The floodgates finally opened in Q4 2020, when a bigger wave of institutional investors started one of the greatest bull runs ever recorded and the rest is history. Nonetheless, let’s see what likely contributed to thousands of businesses looking into crypto after the historic uptrend mentioned above.
Blockchain is a groundbreaking concept that enables users to store and validate transactional data more securely. main reason is that data stored in a blockchain is fully immutable, that is, it can’t be altered or tampered with by anyone. Companies looking for a completely incorruptible and unbiased system have found the perfect candidate in blockchain technology. Thus, to get a head start in adopting the idea, many of them likely poured funds into blockchain-based startups that, most of the time, had their own cryptocurrencies circulating.
Tokenization is the act of tying certain activities to crypto tokens in order to potentially enhance the benefits for all parties involved. For example, a crypto exchange could offer users the option to pay for trading fees with the crypto token issued by the exchange, which not only gives utility to the exchange’s asset but also provides a discount for traders, thereby creating a win-win situation. Other types of businesses are also looking into tokenization, such as famous sport clubs with their fan-tokens. With these unique crypto assets, teams like FC Barcelona, Juventus, or Paris Saint-Germain can directly involve their fans in decisions about the clubs, all thanks to tokenization.
Now it’s time to talk about the very businesses that likely started the adoption wave: institutional investors. These are usually hedge funds, venture firms, or any other pooled capital for that matter. Institutional investors spotted the unmatched opportunities offered by the crypto market, and a lot of them decided to turn them into their advantage. Renowned examples are MicroStrategy led by Michael Saylor, or Grayscale directed by David LaValle, who each ownbillions in various crypto assets including Bitcoin (BTC), Ethereum (ETH), and Cardano (ADA).
Overall, it’s safe to say that cryptocurrencies exhibit features that are quite attractive for the institutional sector. Businesses are starting to recognize the true potential of the crypto world, be it due to of blockchain technology’s unprecedented security attributes, tokenization and its revolutionary applications, or novel investment opportunities, which means that all of the above is here to stay and grow as the global economy does.
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