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At Sibos, Sergey Nazarov Says Global Finance Will Inevitably Run On Blockchains

During Day 3 of Sibos, Chainlink co-founder Sergey Nazarov participated in a panel discussion exploring “The Future of Value,” moderated by author Leda Glyptis, who observed that the digital horizon is closer than previously assumed. 

“A few years back, it felt like a frontier too far; today I would bet that everyone in the audience understands the concepts of tokenization, understands that there’s a different world of value exchange that we are beginning very much to build,” she said.

Nazarov shared his view of this new frontier, where real-world assets such as real estate, art, and IP are tokenized on-chain, conferring numerous benefits and opportunities like fractionalized ownership. 

“I think everything is going to become digital and tokenized and turned into fractional shares that have a few unique properties that didn’t exist before,” he said. “One of the properties is you can own smaller and smaller pieces of everything, which is useful because then everybody can participate in owning various types of value.”

The second unique property of digital assets is superior user control.

“Historically, you’ve had to rely on institutions to be an intermediary that gives you a way to interact with value, but new technologies – blockchain technologies – basically allow end users to have direct control over a piece of value, and then institutions facilitate that through applications,” Nazarov explained. 

Thirdly, he said, assets tokenized on a blockchain and secured by technology like decentralized market data and proof of reserves offer cryptographic guarantees that are superior to promises made by brands and institutions. 

“There is a consistently very worrying pattern where value is destroyed when risk is poorly managed, and you see this in the 2008 financial crisis and recently with SVB,” he explained. “All the information that’s going to go into these tokenized, unique, separate pieces of value also allows people to know what the risks are of having each of those distinct pieces of value.”

The ability to “eliminate a lot of systemic risk” that makes value “not work the way people expect” is, in Nazarov’s view, a solution to “one of the fundamental problems” of all financial systems. 

“There could be days when you thought the value was this much, and then there were some decisions made that didn’t include you, and then the value is something else. And that’s a very fundamental problem that I think we’re well on the way to solving with blockchains and tokenization, real-world assets, oracles, and smart contracts.”

On behalf of the packed audience filled with representatives from leading global financial institutions, Glyptis asked Nazarov, “What does not being left behind look like?”

He said blockchain adoption is not a question of “if” but of “to what degree?” In his view, adoption will be a matter of user demand, and user demand for digital assets is inevitable. 

“In my opinion, it’s such a superior way for people to own, control, transmit, and manage the risk around all value that eventually everyone’s users will basically demand it as a requirement.”

Nazarov compared the intrinsic value of blockchain technology to the internet. “It will be very similar to the internet decision, and if you don’t participate in it, it’ll be a very big problem,” he said.

He concluded, “I think the whole global financial system will run on blockchains, period. So everyone here is going to be in the blockchain industry eventually. There’s no decision, really. It’s a decision of how much do you want to be ahead of that or behind?”

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