After many years of investment, experimentation and infrastructure improvements, the intersection of three market trends are paving the way for enterprise adoption of public distributed networks: tokenization, decentralized finance (DeFi) and business logic moving to layer 2.
In 2020, it became ever more apparent that these trends, in addition to hard lessons learned from attempted deployments of private networks, have caused enterprises to be open to the use of distributed ledger technology (DLT) in ways they simply were not in 2017.
This post is part of CoinDesk’s 2020 Year in Review – a collection of op-eds, essays and interviews about the year in crypto and beyond. Mance Harmon is CEO and co-founder of Hedera Hashgraph.
Tokenization enabling economic activity, DeFi spurs more efficient financing
In 2017, tokens were used almost exclusively as a way to raise capital for startups. The value proposition of tokenization was only beginning to be understood, with very little appreciation for the full range of use cases and types of tokens that could be created.
Fast forward to 2020, and groups like the Interwork Alliance have created frameworks for understanding the definition and scope of the token concept, including use cases, taxonomy and terminology. Early use cases of DLT focused on its ability to synchronize a ledger across multiple parties, ensuring that all parties get the same information at the same time, and that each network participant has confidence all parties receive exactly the same information.
For example, a prominent use case is the track and trace of supply chain activities, specifically recording when and where a product was made and its flow through the supply chain. Tracking when and where a product was made can help provide transparency and reduce fraud, which is of some value.
Creating a token that represents the item being produced…