From tokenization to payments to speculation: Five core blockchain use cases

Author: Robbie Petersen, Dragonfly; Translation: Golden Finance

Fundamentally, blockchain is an asset ledger. This means that blockchain excels in the following three aspects:

● Issuing assets

● Transferring assets

● Programming assets

Objectively speaking, any crypto use case that takes advantage of these features will inevitably gain structural advantages due to its on-chain nature. Similarly, any use case that does not take advantage of these features cannot gain structural advantages. In most cases, what is unlocked is more ideological advantages.

While decentralization, privacy, and censorship resistance are undoubtedly worthy goals, the latter actually shrinks the total addressable market (TAM) of programmable asset ledgers to only a subset of idealists. It is becoming increasingly clear that the path to mass adoption will be paved by pragmatism rather than idealism.

Therefore, this article aims to focus on the former category of use cases - those where the product would be significantly worse without blockchain:

● Tokenization

● Decentralized Virtual Infrastructure Networks (DeVin)

● Decentralized Physical Infrastructure Networks (DePin)

● Stablecoins and Payments

● Speculation

Before we dive in, I want to emphasize two points.

First, the following arguments are intended to be derived from first principles. This means more than simply repurposing crypto as a solution to a problem. Instead, it means identifying problems that will persist regardless of crypto’s presence, and then proactively evaluating whether crypto can provide a better structured solution.

Second, this article strives to be as nuanced as possible. As humans, we have a natural tendency to simplify things. Our brains like things that sound simple and straightforward. However, the reality is not simple, but rather quite complex.

1、Tokenization

Financial assets can generally be divided into two categories:

● Securitized assets

● Non-securitized assets

While this may seem like a trivial distinction, it is critical to understanding how our existing financial ledgers work. Securitized assets have two important characteristics that non-securitized assets do not have.

First, securitized assets have a CUSIP. A CUSIP is a unique 9-character alphanumeric code assigned to financial instruments such as stocks, bonds, and other securities. For example, the CUSIP for Apple common stock is 037833100. While North America uses CUSIPs, the rest of the world uses ISINs, which include CUSIPs as part of a broader 12-character code. Importantly, both codes are used to promote trust through standardization. As long as the asset has a CUSIP, everyone is on the same page.

The second unique feature of securitized assets is that they are almost all settled through a standard clearinghouse. In the United States (and globally) that means the Depository Trust & Clearing Corporation (DTCC). The main job of the DTCC and its subsidiaries is to ensure that all trades are cleared and settled smoothly.

For example, let's say you buy 10 shares of Tesla stock on Robinhood. The trade is sent to an exchange or market maker to match the seller. Then, the DTCC's National Securities Clearing Corporation (NSCC) steps in to clear the trade, ensuring that both parties fulfill the trade. Finally, the Depository Trust Company (DTC), another division of the DTCC, settles the next day (T+1), transferring your $2,500 to the seller and the 10 shares to Robinhood's account held at DTC. By the next day, your Robinhood app will show that you own the shares.

When people say that blockchain will replace our financial rails and enable faster and cheaper settlements, they are either implicitly or explicitly referring to replacing the DTCC and its closed, centralized asset ledger. However, while blockchain may offer many structural advantages due to its open and programmable nature — such as eliminating batch processing and T+1 settlement, improving capital efficiency, embedding compliance, etc. — it is difficult for blockchain to replace DTCC for the following reasons:

● Path dependency:The combination of existing securities standards (CUSIP/ISIN) and the bilateral network effects that underpin DTCC as a standard settlement layer makes it nearly impossible to replace the existing model. DTCC’s switching costs are extremely high.

● Structural incentives:DTCC, as a highly regulated clearinghouse, is owned by its users — including major financial institutions such as banks, broker-dealers, and other securities industry players (e.g., JPMorgan Chase, Goldman Sachs, etc.). In other words, the entities that must collectively agree to adopt a different settlement system also have a vested interest in the existing system.

● T+1 Complexity:Similar to payments (which we’ll discuss later), there are other reasons besides the antiquated infrastructure for T+1 settlement that blockchain may not be able to definitively address. First, brokers don’t always have enough liquidity to execute orders immediately. A one-day buffer provides the necessary time to secure funds through loans and bank transfers. Second, DTCC’s net settlement process reduces the volume of trades that need to be executed (e.g., 1,000 Tesla buys and 800 sells net 200). Intuitively, this process is more efficient over longer timeframes. Settling trades immediately would significantly increase the total volume of trades executed — something that most (or even all) blockchains cannot currently handle. Keep in mind that DTCC’s annual volume in 2023 was $2.5 trillion.

In short, it’s more likely that the existing financial rails will be updated by DTCC itself rather than replaced by blockchain. So, this means that any securities traded on-chain are still secondary issuances by definition. In other words, they still need to be settled with the DTCC on the back end. Not only does this undermine any structural advantages that blockchain theoretically offers, but tokenization also introduces the additional cost and complexity of needing to reconcile price feeds via oracles.

As a result, this reduces the value proposition of on-chain securities to a much less attractive one: opening up opportunities for regulatory arbitrage for non-KYC entities to access and use securities in DeFi. While there is certainly unmet demand here, particularly in emerging markets, this is only a small fraction of the market for primary issuance assets.

However, this is not to say that blockchain has no role to play in the tokenized securities scenario. While domestic clearinghouses currently work “well enough” and will not be disrupted for structural reasons, global interoperability between these clearinghouses is still not ideal (settlement times are typically T+3). Perhaps a more attractive opportunity for blockchain is as a global reconciliation layer between domestic clearinghouses. Given its borderless nature as an open asset ledger, blockchain can reduce settlement times for international transactions from T+3 to near zero. More interestingly, this could be a strong entry point to eventually enter the domestic settlement space without having to face the age-old cold start problem. As we’ll discuss in more detail later, the same logic seems to apply to payments.

(1) Unlocking long-tail liquidity

Let’s look at the second category of financial assets – non-securitized assets. By definition, these assets have no CUSIP and are not tied to the DTCC and our existing financial rails. Most of these assets are traded bilaterally (or not at all). Examples of non-securitized assets include private credit, real estate, trade finance receivables, intellectual property, collectibles, and shares of private funds (such as private equity, venture capital, and hedge funds). Today, there are several main reasons why these assets are not securitized:

● Heterogeneity:Securitization requires homogeneous assets that can be easily pooled and standardized. Most of the above assets are heterogeneous - each property, private loan, account receivable, fund share, or painting has unique characteristics that make them difficult to aggregate and standardize.

● Lack of active secondary markets:These assets also lack a standard secondary market like the New York Stock Exchange. So even if they are securitized and settled with the DTCC, they have no exchange to ultimately connect buyers and sellers.

● High barriers to entry:The process of securitizing assets often takes more than six months and requires issuers to pay more than $2 million in fees. While some of these steps are necessary to ensure regulatory compliance and trust, the process is too lengthy and expensive.

Going back to the premise of this article, as a programmable asset ledger, blockchain excels in three areas - each of which solves the pain points mentioned above:

● Issuing assets:While the barriers to securitizing assets may be high, there is less friction in tokenizing these assets on-chain. Furthermore, this does not have to come at the expense of regulatory compliance, as this logic can be embedded in the assets themselves.

● Transferring assets:By providing a shared asset ledger, blockchain provides the backend infrastructure for the front end to build a unified liquidity market. Other markets (such as lending, derivatives, etc.) can also be built on top of this to promote greater efficiency.

● Programming assets:While DTCC runs on decades-old systems, including languages ​​such as COBOL, blockchain unlocks the ability to program logic directly into assets. This means that heterogeneous assets can be simplified or packaged into tokenized instruments by embedding more nuanced logic in these products.

In short, while blockchains may offer some minor improvements to DTCC for existing securities, they provide a step-wise unlocking of non-securitized assets. This suggests that the logical adoption arc for programmable asset ledgers may begin with this long tail. This not only makes intuitive sense, but is also consistent with the adoption of most emerging technologies.

The (2) MBS (Mortgage-Backed Security) Moment

My personal view is that mortgage-backed securities (MBS) are one of the most important technologies of the past 50 years. By simply transforming mortgages into standard securities that can be traded in liquid secondary markets, MBSs improved price discovery through more competitive investment pools, undercutting the illiquidity premium that was historically embedded in mortgages. In other words, we can finance our homes cheaper thanks to MBS.

Over the next 5 years, I expect almost every illiquid asset class to experience its “MBS moment”. Tokenization will lead to more liquid secondary markets, more competition, better price discovery, and most importantly, more efficient capital allocation.

2Decentralized Virtual Infrastructure Network (DeVin)

For the first time in human history, AI will surpass human intelligence in almost every field. More importantly, this intelligence will not remain static - it will continue to improve, it will specialize and collaborate, and it will replicate almost infinitely. In other words, imagine if we took the most efficient individuals in each field and replicated them almost infinitely (limited only by computing power), and then we hyper-optimized them so that they could work together seamlessly.

In short, the impact of AI will be huge — and likely much larger than our linear programming brains intuitively anticipate.

Naturally, this raises the question: As a programmable asset ledger, will blockchain have a role to play in this emerging agent economy?

I expect blockchain to enhance AI in two ways:

● Resource coordination

● Economic basis for agent transactions

For this post, we’ll focus on the former use case. If you’re interested in the latter, I wrote a dedicated article a few months ago about:

Blockchain may underpin the agent economy, but it will take some time

（1）Future Commodities

Fundamentally, AI (especially agents) requires five core inputs to operate.

● Energy: Electricity is the power that keeps AI hardware running. No energy means no computing power, which means no AI.

● Compute:Compute power is the processing power that drives AI’s reasoning and learning capabilities. Without it, AI cannot process inputs or function.

● Bandwidth:Bandwidth is the data transfer capacity that enables AI to connect. Without it, agents cannot collaborate or update in real time.

● Storage:Storage is the capacity to hold AI data and software. Without it, AI cannot retain knowledge or state.

● Data:Data provides the necessary context for AI to learn and respond.

Here we will focus on the first four elements. To understand the more compelling use cases for programmable asset ledgers in the context of AI, it is important to first understand how compute, energy, bandwidth, and storage are procured and priced.

Unlike traditional commodity markets, which typically operate through inflexible bilateral agreements. For example, computing power is primarily sourced through long-term cloud contracts with hyperscale providers like AWS or by purchasing GPUs directly from Nvidia. Energy procurement is similarly inefficient. Data centers negotiate fixed-rate power purchase agreements (PPAs) with utilities or energy wholesalers, often years in advance. Similar structural inefficiencies exist in the storage and bandwidth markets. Storage is purchased from cloud providers in predetermined blocks, and companies often overprovision to avoid capacity constraints. Similarly, bandwidth is sourced through inelastic commitments with ISPs and CDN providers, which again forces companies to prioritize peak capacity demand over average utilization.

What all of these markets have in common is a lack of granular, real-time price discovery. By selling resources in rigid tiers rather than a continuous price curve, the existing system trades efficiency for predictability because buyers and sellers cannot coordinate effectively. By definition, this results in one of two things: either capacity is wasted or business is constrained. The result is, of course, a suboptimal allocation of resources.

Programmable asset ledgers offer a compelling solution to the above problems. While these resources may never be securitized (for reasons mentioned in the previous section), they can be easily tokenized. By providing the basis for tokenizing compute, energy, storage, and bandwidth, blockchains can theoretically unlock liquid markets and real-time dynamic pricing for these resources.

Importantly, this is not possible with existing ledgers. As a programmable asset ledger, blockchain has five structural advantages in this context:

●Real-time settlement: An asset ledger that takes days or even hours to settle these resource exchanges would undermine the efficiency of these markets. Blockchains are inherently open, borderless, 24/7, and real-time, ensuring that these markets are not hindered by delays.

● Openness:Unlike traditional resource markets controlled by incumbent oligarchs, blockchain-based resource markets have inherently low barriers to entry on the supply side. By creating an open market, any infrastructure provider—from hyperscale data centers to small operators—can tokenize their excess capacity and make it available to those who need it. Contrary to what most people think, the long tail takes a larger share of data centers.

● Composability:Blockchain enables other derivative markets to exist on top of these markets, promoting greater market efficiency as buyers and sellers can hedge like traditional commodities.

● Programmability:Smart contracts enable complex conditional logic to be embedded directly into resource allocation. For example, compute tokens can automatically adjust their execution priority based on network congestion, or storage tokens can programmatically replicate data across geographic regions to optimize latency and redundancy.

● Transparency:On-chain markets provide visibility into price trends and utilization patterns, enabling market participants to make more informed decisions and reducing information asymmetry.

Importantly, while this idea may have faced resistance a few years ago, the emergence of increasingly autonomous AI agents will greatly accelerate the need for tokenized resource markets. As agents proliferate, they will need to enable dynamic access to these resources due to their inherent properties.

For example, let’s consider a video processing autonomous agent tasked with analyzing security footage from thousands of locations. Its daily compute requirements may fluctuate by several orders of magnitude—requiring minimal resources during normal activity and suddenly needing to scale to thousands of GPU hours when an abnormal event triggers a deep analysis of multiple footage. In a traditional cloud model, this agent would either be over-provisioned, wasting significant resources, or face significant performance bottlenecks during peak demand.

However, in a tokenized compute marketplace, the same agent can be programmed to acquire the resources it needs, at market-clearing prices, when it needs them. When an anomalous event is detected, it can instantly bid for and secure additional compute tokens to process footage at maximum speed, then release those resources back to the market as soon as analysis is complete—all without human intervention. The economic efficiencies gained by millions of autonomous agents represent a step-change improvement in resource allocation that is unmatched by traditional procurement models.

Perhaps most interestingly, this could enable use cases that were previously impossible. Today’s agents still rely on organizations with pre-established access to compute, energy, storage, and bandwidth. However, with a blockchain-powered marketplace, agents can autonomously acquire these critical resources on demand. This flips the existing model on its head, making agents fundamentally independent economic actors. This in turn could foster greater specialization and experimentation, with agents optimizing for increasingly granular use cases without institutional constraints.

The result is a fundamentally different paradigm, where the next generation of breakthrough AI applications emerge not from the top down, but from the bottom up, from the autonomous interactions between agents. Again, this is made possible by the unique power of a programmable asset ledger.

(2) Looking Ahead

The shift may be slow and incremental at first, but as agents assume greater autonomy and economic importance, the structural advantages of on-chain resource markets will become clearer.

Just as efficient markets emerged for commodities of the past—oil, agriculture, metals, land—it seems certain that markets will emerge for commodities of the future—compute, energy, bandwidth, and storage. This time, however, they will be on-chain.

3Decentralized Physical Infrastructure Networks (DePin)

The previous perspective demonstrated the role of programmable asset ledgers as the digital foundation for these emerging resource markets, and this perspective will demonstrate how blockchain can simultaneously disrupt the physical foundation. While we will not explore each vertical in depth, the following logic generally applies to any DePin vertical (such as telecommunications, GPU, positioning, energy, storage, and data).

(1) Porter's Five Forces Model

One ​​of the best frameworks for understanding the economics of physical infrastructure companies and how blockchain and DePin may disrupt them is through Michael Porter's Five Forces Model.

The Porter framework is a more nuanced description of the many forces that erode a firm’s profit margins to its cost of capital in the absence of a structural moat. The five forces are as follows:

●Rivalry among existing competitors:Is the industry catalyzed by intense competition among existing competitors that could lead to a price war? Infrastructure giants often operate in cooperative oligopolies that explicitly or implicitly keep prices high enough to maintain thick profit margins.

● Threat of New Entrants:How easily can new competitors enter the market, diluting profitability by increasing supply? Intuitively, infrastructure giants are also protected by low barriers to entry due to capital intensity and economies of scale.

● Threat of Substitutes:Are there substitute products that undercut the value of existing products? Because they are commodity businesses, infrastructure giants generally do not face the threat of substitutes.

● Bargaining Power of Buyers:How much a business is able to charge for its products is a key input into the profitability formula. Do buyers—customers or businesses—have the power to demand lower prices or better terms, thereby squeezing providers’ margins? Infrastructure giants face low switching costs. This usually suggests that in commodity markets, the lowest-cost producer wins.

● Bargaining power of suppliers: How much a firm pays for its inputs is the denominator of the profitability equation. Does the firm have leverage over key input suppliers to ensure input costs remain modest? Infrastructure giants have three main inputs: (1) land (2) labor, and (3) hardware. While suppliers do have some bargaining power, large infrastructure incumbents typically mitigate these risks through fixed contracts and bulk deals.

Clearly, this framework suggests that physical infrastructure giants are highly defensible businesses. This is consistent with the fact that most incumbents have maintained their market positions over the past 30 years. However, the DePin model is a formidable challenger for three reasons.

(2)Three major structural advantages of DePin

First,DePin employs a novel capital formation model whereby the upfront capital costs of network construction are outsourced to individual contributors. In return, these individuals receive tokens representing a stake in the future growth of the network. This enables DePin projects to reach a threshold scale that makes the unit economics actually competitive without having to initially raise capital in a centralized manner. Importantly, this suggests that, when executed effectively, the DePin model can create viable entrants by penetrating the economies of scale that incumbents rely on.

Second,DePin fundamentally improves the economics of the fifth of Porter’s five forces: the bargaining power of suppliers. By leveraging a distributed network of humans, the DePin model not only reduces, but completely sidesteps two (and possibly all three, as we’ll discuss later) of the largest input costs of the physical infrastructure business:

● Land:By leveraging individual contributors — who own the land themselves — the DePin model completely eliminates this cost.

● Labor:Similarly, DePin sidesteps labor costs by outsourcing the setup and maintenance of nodes to network participants.

The third structural advantage of the DePin model is its ability to more finely match supply and demand, thereby reducing deadweight losses.This advantage is particularly evident in geographically dependent networks such as DeWi. These projects are able to first see where bandwidth demand is highest, and then concentrate token emissions to incentivize supply-side construction in that region. Furthermore, they can dynamically adjust incentives if demand surges elsewhere.

This is in stark contrast to traditional infrastructure businesses, which build supply in the hope of being able to support peaks in demand. If demand drops, telecom companies still need to pay the cost of maintaining the infrastructure, resulting in deadweight losses. Due to its decentralized nature, the DePin network has more granular control in matching supply and demand.

（3）Looking Ahead

Looking ahead, on the demand side, I expect the DePin model to continue to excel in two key areas: one is B2B applications, where companies are inherently more cost-sensitive (e.g., compute, data, positioning, storage), and the other is consumer goods, where consumers have no subjective preferences and are primarily concerned with optimizing costs (e.g., bandwidth, energy).

4, Stablecoins and Global Payments

In 2023, global GDP was about $100 trillion. In the same year, global payment fee expenditures exceeded $2 trillion. That is, for every $100 spent globally, an average of $2 was spent on payment fees. As our world becomes increasingly free from geographical restrictions, this figure is expected to continue to grow at a compound annual growth rate of 7%. Arguably, one of the biggest opportunities lies in meeting the demand for lower-cost global payments.

Similar to domestic payments, the high fees for global fund transfers are more a matter of risk than a matter of network infrastructure. Contrary to what you often hear, the messaging layer that facilitates global payments - SWIFT - is actually very cheap. SWIFT's network fees are typically only $0.05 to $0.20 per transaction. The rest of the cost - often as high as $40 to $120 - comes from two major downstreams.

● Risk and Compliance:The burden of ensuring that cross-border transactions comply with KYC/AML requirements, sanctions, and other currency restrictions is placed on banks by regulators. If banks violate these regulations, they can be fined up to $9 billion. Therefore, if you are a bank facilitating cross-border payments, it is critical to build dedicated teams and infrastructure to ensure that these sanctions are not accidentally violated.

● Correspondent Banking:In order to move money around the world, banks must establish correspondent banking relationships with other banks. Given that different banks manage risk and compliance based on their jurisdictions, there are additional costs associated with reconciling these differences. There is also the need to build dedicated teams and infrastructure to manage correspondent banking relationships.

Ultimately, these costs are passed on to the end user. Therefore, simply saying "we need cheaper global payments" does not hit the mark. What we need is to be structurally better at auditing and managing the risks associated with global payments.

Intuitively, this is what blockchain excels at. By not only circumventing the need for correspondent banks, but also providing an open ledger where all transactions can be audited in real time, blockchain provides an inherently superior asset ledger for managing risk.

Furthermore, and perhaps more interestingly, due to the programmability of blockchain, it is possible to embed any necessary payment rules or compliance into the transaction itself. Blockchain’s programmability also enables the native yields on collateral assets to be distributed back to cross-border payment facilitators (and potentially even end-users). This is in stark contrast to traditional remittance institutions such as Western Union, which lock up funds in prepaid accounts around the world.

The result is that the cost of underwriting risk should be compressed to the cost of programming an open ledger to handle compliance and risk management (plus the necessary on- and off-boarding costs), minus the yields generated by the stablecoin collateral. This is an objective structural advantage over existing correspondent banking solutions, as well as other modern cross-border solutions such as Wise that rely on closed, centralized databases.

Perhaps most importantly, unlike domestic payments, governments appear to have little incentive to build globally interoperable payment infrastructure themselves, which would cannibalize the value proposition of stablecoins. In fact, I think there is a strong structural incentive for governments not to build interoperable payment rails, in order to keep value held primarily in their national currencies.

This is perhaps the most favorable tailwind for stablecoins - cross-border payments are a unique public market problem that is seeking a private market solution. As long as governments have a structural incentive to maintain a poor global payment infrastructure, stablecoins will remain well-positioned to gradually facilitate global commerce and shrink the $2 trillion in annual cross-border payment fees.

Path to Adoption

Finally, let’s speculate on the path to adoption. Ultimately, two factors will determine the adoption arc of stablecoins:

●Payment type (i.e. B2B, B2C, C2C, etc.)

●Payment corridor (i.e. G7, G20 small countries, long-tail customers)

Intuitively, payment corridors with the highest fees and the worst banking/payment infrastructure will likely be the first to adopt stablecoins (e.g. Global South, Latin America, Southeast Asia). Additionally, these regions tend to be the ones that suffer from irresponsible monetary policies and historically volatile national currencies. Adopting stablecoins in these regions has a dual benefit: cheaper fees and access to USD. The latter is arguably the biggest driver of stablecoin demand in these regions right now, and is likely to continue to be so.

Secondly, given that businesses have historically been more cost-sensitive than consumers, B2B use cases will also lead adoption via the previous factor. Today, more than 90% of cross-border payments are B2B. Within this vertical, SMEs appear to be best suited to adopt stablecoins, as they operate on thinner margins while also being more willing to take risks than larger enterprises. SMEs that do not have access to traditional banking infrastructure and require USD appear to be the sweet spot for stablecoin adoption. Other notable use cases for stablecoins globally include treasury management, trade finance, international payments, and accounts receivable.

Going forward, as long-tail customers increasingly adopt stablecoins as a structurally superior cross-border payment method, we should see others gradually follow suit as the structural advantages become too obvious to ignore.

5Speculation

The final point is perhaps the most obvious and straightforward. Humans have an innate desire to speculate and gamble. This has been the case for thousands of years and will continue to be so.

Furthermore, it is becoming increasingly clear that blockchain is uniquely positioned to fill this gap. As a programmable asset ledger, blockchain once again lowers the bar for issuing assets—in this case, speculative assets with nonlinear returns. This includes everything from perpetual contracts to prediction markets to mem coins.

Looking forward, as users tend to take risks and seek increasingly nonlinear outcomes, blockchains appear well positioned to meet this need, providing increasingly novel means of speculation. This could include markets for anything from athletes, musicians, songs, social trends, to TikTok posts.

Humanity will continue to demand new ways to speculate, and blockchain is the best first principles means of satisfying this need.

6. What’s the future like?

Throughout history, adoption of new technologies has followed a similar arc:

An emerging technology offers a structural advantage -> A small group of businesses adopt the technology to improve profit margins -> Incumbents either follow suit to remain competitive or cede market share to more nimble adopters -> Adoption of the new technology becomes a baseline requirement, as capital inherently chooses winners.

This is why, in my opinion, the adoption of blockchain as a programmable asset ledger is not only possible, but inevitable.By offering clear structural advantages in these five areas - tokenization, DeVin, DePin, payments, and speculation - it is likely only a matter of time before blockchain adoption occurs. While it is unclear how long it will take, what is certain is that we have never been closer to that goal.