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Sergey Nazarov Outlines How Tokenization Will Transform Asset Ownership

At this year’s Consensus, Chainlink co-founder Sergey Nazarov sat down with Kitco News’ lead anchor and editor-in-chief, Michelle Makori, for an in-depth discussion of how real-world asset tokenization paves the way toward transforming global finance and reformatting the world’s value onchain.

Having heralded the U.S. bitcoin ETF approval as a watershed moment for crypto earlier this year, Nazarov said the inevitable next step is tokenizing both existing and entirely new asset classes into a superior state onchain.

Having enabled over $12 trillion in transaction value as the industry-standard decentralized computing platform, Chainlink provides a comprehensive set of services that are critical for creating and securing tokenized assets that serve as a unified golden record which combines ownership rights and vital data about the underlying asset into a continuously updated smart contract.

Nazarov explained why Chainlink-powered tokenized assets that impart numerous benefits, such as atomic settlement, fractionalization, and programmability, are so appealing to traditional financial institutions and global asset managers.

“People like Larry Fink are mired in all kinds of legacy problems that cost them literally hundreds of millions of dollars,” he said. “And that’s one of the reasons people like him are so excited. Because if you’re a craftsman doing something with one tool and someone gave you a much better tool, you’re excited about that.”

As illustrated by the DTCC’s recent Smart NAV industry pilot, which leveraged Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to demonstrate how traditional financial institutions can deliver key mutual fund data onchain, Nazarov said some of the largest clearing and settlement systems in the world are actively transitioning to a blockchain-based model to satisfy demand. 

“Traditional financial instruments are more attractive onchain because people want to own them onchain in a direct way where they control the asset, just like they control a bitcoin,” he explained. “Then there’s this whole category of net new assets that are not currently in the financial system, but tokenization is just a better, more efficient way to put them in the financial system.”

He believes the value of tokenized assets will ultimately reach hundreds of trillions of dollars.

“Take every market – take the gold market, the real estate market, the debt market, the derivatives market, the securities lending market – all of these assets. What’s fundamentally happening is you have a new format for assets – for ownership and also for the data associated with that ownership. And the data is now appended to it in a way that proves things to you about the underlying assets.”

Highlighting recent failures in the traditional financial system, such as the collapse of Silicon Valley Bank, Nazarov said blockchain technology exposes how little control people have over their assets and provides an alternative that inextricably links control with ownership.

“People realize that their relationship with their assets is a fiction and it’s a fiction that benefits people with a brand,” he explained. “Brands and institutions are unbelievably expert at assuring everybody that they are safe and that it is safe to put your value and your assets in the system.”

Nazarov said blockchain technology takes brand promises and turns them into cryptographic guarantees that eliminate information asymmetries and give owners direct control over their assets through private keys, creating what he calls the verifiable web.

“Imagine if you knew every single piece of information that the CEO of your bank knew,” he said. “This is the new world we’re shifting towards.”

Watch the full interview.

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