Jamie Coutts, Realvision’s Chief Crypto Analyst, projected that asset management will change dramatically over the next 5 to 10 years, with Ethereum playing an integral part in tokenizing $10 trillion to $30 trillion in traditional assets.
This ambitious projection seems particularly bold when compared with BlackRock’s current $10 trillion dollar under management. Based on the existing two-year compounded annual growth rate of 121%, tokenized traditional assets might reach approximately $1.3 trillion by 2030.
Estimating the blockchain fee income from this projected $1.3 trillion in tokenized assets is complex, but we can draw some insights from traditional financial metrics. In 2023, the S&P 500 stocks saw $130 trillion in volume traded against a $40 trillion market cap, leading to a turnover ratio of approximately 317%.
Applying this turnover ratio as a benchmark for blockchain transactions might offer a conservative estimate, given the higher trading velocity typical of decentralized finance (DeFi) platforms.
Imagine using Apple stock as collateral for a loan, receiving Ethereum, and staking it on platforms like Allstake to support Avalanche’s blockchain. This blend of traditional finance and DeFi, known as “DeFi legos,” suggests blockchain fees could drop to 1 basis point compared to the 10 basis points typical in traditional finance.
Potential Impact on Ethereum
However, if $1.3 trillion in real-world assets (excluding stablecoins) were tokenized and governed on-chain, it would disperse and fuel increases in activity across different crypto sectors like NFTs, social platforms, and gaming. Ethereum would experience huge but hard-to-estimate effects that are determined by the market share of layer-1 solutions compared to layer-2 solutions.
As more activity potentially moves to permissioned rollups, those developed by firms like Robinhood or Interactive Brokers or established layer-2 solutions such as Base and Arbitrum, Ethereum’s role could get more complex.
Layer-2 solutions would naturally want to take a major share of the revenue, and that can even be as high as 95-99%, taking only a small fraction of the settlement costs for Ethereum. On the contrary, if layer-2 solutions finally enable a fee switch, it would be highly advantageous for token-holders.
Presently, Ethereum continues to be among the leading platforms in asset tokenization in traditional finance as companies such as BlackRock and Franklin Templeton managed to secure more than $900 million worth of the total $1.4 billion in tokenized US Treasuries. This emphasizes Ethereum’s importance towards finance and blockchain-based assets.
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