Colin Cunningham, Head of Tokenization & Alliances at Chainlink Labs, recalls that it was 2008 and he was in the back half of my economics degree when the global financial crisis struck.
Insulated from the world behind college walls, Colin Cunningham says he observed former classmates struggling to land jobs and families around the country losing their homes.
He couldn’t put his finger on the problem at that time, but as he has come to understand the underlying issues over the last 15 years – he believes they can be solved.
After a short stint on Wall Street and a decade in fintech, he discovered how blockchain-based technologies could “create greater transparency that exposes hidden leverage, provides indisputable ownership claims for pledged collateral, and enables the automation of mission-critical risk management strategies that ensure solvency even in volatile market conditions.”
Colin points out that technology alone is not what excites him the most today. In the same way that the financial crisis took opportunities from billions across the world, tokenization—”both the infrastructure and the ecosystem—will create them.”
As the Head of Tokenization & Alliances at Chainlink Labs, he claims to be at the front lines of what he sees “as a seismic shift in the global financial system.”
Having previously worked at Centrifuge and currently chairing the Tokenized Asset Coalition — a 23-member organization focusing on formalizing efforts toward awareness, advocacy, and adoption of tokenization at a global and institutional scale — his North Star “remains bringing the global financial system onto blockchain-based technology through the tokenization of traditional assets.”
Here’s why he is looking forward to tokenization and why Chainlink is the foundation of tokenization opportunity.
A Multi-Hundred-Trillion-Dollar Opportunity
First, he thinks tokenization is a “generational opportunity.”
The market size is enormous, and this is “becoming a more widely held view among many industry participants.”
For example, the WEF estimates “that $867 trillion of value is ready to be disrupted by tokenization, with the potential use cases encompassing much more than just financial assets.”
This is a long-term, generational prediction, and it is what they’re ultimately focused on: the tectonic shifts “of global infrastructure underlying how the world works. On a smaller timeframe, however, this market is still set to become tens of trillions of dollars in the next decades.”
This opportunity exists because “tokenizing existing real-world assets” offers major benefits:
Moving assets from existing traditional finance rails “to blockchain-enabled infrastructure presents multiple areas with 10x efficiency gains compared to the status quo.”
There are many ‘superpowers’ of tokenized assets, but these have the greatest potential:
- Lower transaction costs and instant settlement, especially cross-border payments.
- Decreased risk and increased efficiency via programmable onchain data utilized within automated risk and portfolio management.
- Access to global liquidity via interoperability and fractionalizing, lending, and borrowing via blockchain-enabled composability
Consider alternative assets such as private equity, private credit, real estate, carbon credits, and hedge funds.
Today, alternative asset managers “often require a $5 million or more minimum to invest in an alternative asset fund, as siloed infrastructure and a lack of standards make operating and administration costs high.”
Colin further explains that this makes them “inaccessible to the majority of investors. So despite individuals controlling over half of global wealth, they only allocate about 5% to alternative assets.”
Tokenization completely changes this.
By automating backend workflows and risk management with smart contracts and seamlessly connecting financial services and investors “across a composable onchain environment, the cost to offer tokenized alternative assets to individuals plummets.”
Ultimately, this could increase the liquidity for private equity issuers, open up new asset classes to individual investors, and, according to Bain and Company, could “increase revenues for the asset management industry by $400B annually.”
Tokenization is inevitable.
Take this inevitability and expand the opportunity “to any and all asset classes in any jurisdiction – it’s clear we have a generational opportunity in front of us today.”
Blockchain technology will replatform “all of the world’s assets into a superior format.”
He added that tokenization isn’t happening “simply to meet the demand for onchain assets—it’s happening because it is fundamentally a better way of doing things.”
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