Real-world applications
Episode 6: Beyond Payments – Other Uses of Cryptocurrency
Cryptocurrency is often considered just digital money for payments, but the technology behind it goes much further. In fact, it is creating new opportunities in investment, business, and everyday life, especially in countries like Zimbabwe.
Tokenisation of Real-World Assets
Tokenisation means turning physical assets, like property or financial assets, into digital tokens that can be traded on the blockchain. Think of it as creating digital certificates of ownership that can be easily traded and verified. For example, a building in Harare worth $1 million can be split into 1 million digital tokens worth $1 each, each representing a small share of the property. Instead of needing the entire $1 million to buy the entire property, investors could purchase 10,000 tokens for $10,000, owning 1% of the property. This makes real estate investment accessible to ordinary Zimbabweans who couldn’t afford entire properties. Beyond real estate, government bonds and company shares could be tokenised, allowing fractional ownership and easier trading.
Smart Contracts
Smart contracts are self-executing, digital agreements that run automatically when predetermined conditions are met without the need for human intervention. For a Zimbabwean agricultural example,think about a tobacco farmer who could use a smart contract with a buyer. The contract might state, “When the farmer delivers 1,000 kg of Grade A tobacco to the warehouse (verified by IoT sensors),automatically pay $5,000 to the farmer’s wallet.” This eliminates delays, reduces disputes, and ensures immediate payment, which is crucial for farmers who often wait months for payment through traditional systems.
Asymmetric Returns and Diversification
For investors such as pension funds, insurance companies, and asset managers, crypto offers diversification, because digital assets do not always move in the same direction as traditional markets. Cryptocurrency also offers “asymmetric returns”: the “potential for large gains with limited downside risk if you invest small amounts. This is attracting institutional investors globally.
For example, a $1,000 Bitcoin investment in 2010 would be worth over $1.2 billion today. With gold,$1,000 would have grown to $3,600, or $4,000 if invested in the S&P 500. Although past performance is not a guarantee of future results, the crypto markets are still at an early stage of acceptance and still have acres of potential to develop since global adoption and institutional interest have only begun to bloom.
Decentralised Finance (DeFi)
DeFi uses blockchain technology to offer financial services such as lending, borrowing, and savings without traditional banks or intermediaries. Instead, smart contracts oversee everything automatically, creating a more efficient and accessible financial system. Anyone with internet access can use DeFi platforms to borrow money quickly or earn interest on their savings, often at more competitive rates than traditional banks offer. This democratises financial access, particularly for those who have been excluded from conventional banking systems.
While some traditional banks view DeFi as direct competition, this perspective misses the bigger picture. The future of finance is inevitable, and banks that want to survive should not fight this innovation but rather identify ways to integrate with these new technologies.
Progressive financial intermediaries can position themselves as bridges between the traditional financial world and the decentralised ecosystem of DeFi. Rather than being replaced, they can become trusted gateways that help consumers navigate this new landscape safely.
In the next episode, we will take a deep dive into the tokenisation of real estate.
