Opportunities are plentiful in the world of decentralized finance. Despite numerous efforts focusing on cryptocurrencies only, it is essential to look at real-world assets. Tokenizing and fractionalizing such assets – through providers like Convergence – can pave the way for much broader financial inclusion.
Real-World Assets And DeFi
In the current DeFi landscape, one can primarily use cryptocurrencies or stablecoins and nearly nothing else. While that system works, for now, it may not appeal to mainstream users and onlookers. Solving this problem will require a radical new approach that bridges the blockchain and real-world assets gap. Rather than oppose traditional finance, the DeFi industry needs to tap into its existing liquidity.
Tokenization is a powerful tool to achieve that goal. Creating a token representing real-world assets and transferring it freely to people who may not own the asset unlocks many potential use cases. Having the benefits of real-world asset exposure transforms the concept of ownership, allowing it to meet our modern society’s needs and requirements.
For the DeFi industry, the concept of tokenization creates much broader liquidity. Many people want exposure to specific real-world assets but may never do so through traditional means. That market needs a solution, which is where traditional finance and DeFi can make a meaningful impact.
The Convergence Mission
As one of the DeFi service providers acknowledging the potential of real-world assets, Convergence takes a slightly different approach. Not only is the project focusing on tokenization, but they also want to fractionalize such assets. Tokenization will help bolster capital market innovation, whereas fractionalizing makes it easier for investors to explore illiquid asset classes. Additionally, owners of such assets can receive more funding through means that would otherwise not exist.
At its core, Convergence sources assets to tokenize, allowing for better price discovery for asset owners. Any wrapped asset can become part of the liquidity pool on ConvX, the Automated Market Maker (AMM) platform built by the team, once it launches. ConvX is built on Ethereum but will migrate to Moonbeam. Cross-chain compatibility with Binance Smart Chain and other chains is on the agenda.
Moreover, wrapped assets can be traded by any DeFi user, leading to new potential use cases down the line. The ConvX offering has gone through a successful testnet launch. A mainnet launch is imminent. Certik has audited the code to ensure everything works as expected, bringing more legitimacy and validity to this project.
As there are no direct competitors for Convergence, the focus on fractionalization can prove worthwhile. Bringing real-world assets into DeFi requires out-of-the-box thinking and an approach capable of letting everyone benefit equally. As Convergence raised over $3.75 from various investors and completed a $2 million round one fundraising, there is genuine interest in this project from day one.
SpaceX Is An Appealing Example
Tokenization and fractionalization of real-world assets has many possible use cases. SpaceX shares, for example, are only accessible to users willing to buy at least one full share. Moreover, the stock has not gone live through its Initial Public Offering (IPO), creating too many hurdles ahead of time. Considering how SpaceX will not go public until regular flights to Mars are achieved, there is a lot of anticipation for this stock, yet no supply.
For now, it is only possible to invest in the company directly. Not an option accessible to most people, yet one that can still prove useful through Convergence. In theory, the investment will give investors stock in the company/ That stock can be tokenized on the blockchain and even fractionalized into much smaller bits for easy and global trading. The same concept applies to regular SpaceX shares whenever they become accessible.
Users can explore many opportunities through this approach. Convergence creates a landscape where anything – liquid or illiquid – may find its place and audience. Millions of real-world assets exist today, yet one can trade very few of them in a financial setting. Through tokenization and fractionalization, bringing these real-world assets into DeFi will prove rather straightforward.
Closing Thoughts
It is exciting to think of all the possibilities with the help of Convergence. Bringing real-world assets into DeFi is an essential milestone to make these new financial services and products more approachable and accessible. As a project that seems well ahead of the curve regarding DeFi and real-world assets, Convergence pushes the boundaries of innovation.
More importantly, the project has numerous prominent partnerships in Asia and the rest of the world. Targeting the financial hubs of the world first is a bold yet sensible decision. It is essential to democratizing investments in real-world assets. Decentralized finance can play a significant role of importance in this process.
Featured image via Unsplash.
