Blockchain can unlock : Big banks and tech companies are seeing how blockchain can change things and create huge chances to make money by turning private assets into digital tokens.
According to Colin Butler from Polygon, who is in charge of institutional money, blockchain technology is nearly ready to help asset managers make $400 billion by breaking down private assets into smaller, digital pieces.
Talking to Cointelegraph, Butler explains that the finance industry is about to start offering new products and services using blockchain technology, which could greatly change the world’s financial system.
Butler, who moved to Polygon after working for 20 years on Wall Street, points out that big investment companies like KKR are now using new blockchain technology to create digital versions of their large funds, showing how institutions are starting to embrace this technology.
“Butler explains that KKR turned their healthcare fund into digital tokens using Securitize on the Avalanche platform. This move greatly increased the use of digital tokens and attracted more big organizations to use blockchain technology as a tool and software platform.”
Butler says the technology is causing the change because it provides much better solutions and sometimes offers a new service or utility. This is leading to a lot of institutions starting to use it by 2024.
Blockchain’s real impact on finance
Butler points out three main examples of big organizations using blockchain technology in ways that have made business much better or could have a big effect on certain areas.
Butler highlights how Siemens, a big tech company from Germany, used Polygon to issue a tokenized bond in February 2023. This process cut down the time it takes to settle transactions from seven days to just one day. As a result, it saves a lot of money, amounting to trillions of dollars every year.
“Butler explains that it might not seem very exciting to a lot of people. However, from their point of view, it makes their whole process of issuing safer. It also changes how entire industries work because they don’t have to lock away their money for a certain period.”
In April 2023, the big investment company Franklin Templeton started using a digital system called Polygon to manage its money market fund more efficiently. This change, which uses a technology related to Ethereum to handle transactions quicker and more securely, also helps to lower costs.
Butler says this change lets investors keep trading in the blockchain system without always having to switch between cryptocurrency and regular money by using a special token from a money market fund.
“In my opinion, when you’re working within the blockchain system, this lets you skip converting to regular money. You’re earning a 5% rate. You can use that digital currency for more transactions on the blockchain. I believe that’s really significant for the industry,” Butler says.
$400 billion revenue opportunity in private assets
The leader of Polygon is really interested in a chance for asset managers and banks to make $400 billion by working in the private asset area. Butler talks about how Hamilton Lane, an investment company, is starting to use tokens for funds aimed at people worth $1 million to $30 million. This is to help spread out private assets more.
Turning private equity and hedge funds into digital tokens aims to make these investments available to people who don’t have a lot of money.
Investors have a few big challenges: they need to tie up their money for a long time, invest millions of dollars, deal with extra money requests, and handle paperwork. Butler thinks that $150 trillion worth of funds are not invested in this type of asset.
According to Baine & Co’s 2023 report on private equity, there’s a chance to make $400 billion, which is a huge market opportunity that every financial company is looking to tap into.
Suddenly, there’s a big reason for the old financial system to make a version of itself using private blockchain assets and mix it with the old system. For the first time ever, the biggest financial groups have a huge reason to start using blockchain, Butler explained.
Polygon’s aggregation layer aims to centralize liquidity
Throughout 2023, Cointelegraph kept covering news about Polygon, including many important updates and new releases.
Polygon Labs says that for people using it, it will feel as easy as using the internet. Users won’t have to deal with difficult and often bridge connections to use different networks.
In February 2024, Polygon launched a free tool that lets anyone create ZK-proofs for any blockchain that works like Ethereum. This tool will help certain technologies, like optimistic rollups, use advanced features related to ZK-proofs on a second layer.