This post intends to illustrate the extent of the value which Overledger (Quant Network’s Operating System) can handle through the expected tokenisation of the World’s assets in addition to the expected outbreak in machine-related data and value transfers (also called ‘Internet of Things’ or ‘IoT’).
Overledger is a first-of-its-kind Operating System which enables choice between the various types of Distributed Ledger Technologies (‘DLT’), and make them interoperate between each other and also with existing/legacy systems (which is crucial for adoption). So far, Bitcoin, Ethereum, Ripple, Hyperledger Fabric, Corda, IOTA, JPM Quorum, EOS, and Stellar have been connected (Binance Chain is also expected in August).
Applications built on Overledger can switch chains as necessary (e.g. for costs reasons), or write smart contracts on platforms that don’t support them natively such as Bitcoin. The technology is unique, patented, and it has been heavily marketed for about 18 months now both by Quant Network and by global technology powerhouses which have white-labelled the product. It is allowing all types of institutions and developers to adopt DLT technology in a secure, flexible and resilient manner. It acts as the deeper protocol on top of which the various DLTs are used, and applications can be built in a manner which complies with the stringent infrastructure requirements of Banks, Enterprises and Public Sector bodies.
Reminder of Overledger’s position in the DLT layers:
There are many reasons to believe that Overledger is being adopted by a large number of institutions across the world, as demonstrated by the Sia partnership with 570 banks involved, since it provides unique and necessary benefits to a hair on fire problem (i.e. the need for interoperability, standards, resilience, and flexibility for Enterprise implementation) for mass adoption to happen in the DLT space.
This article is a follow-up on my previous post on the merits of holding the Quant Network (QNT) utility token called “The reasons why Quant Network (QNT) will rise to the Top of the crypto sphere in the coming months” which I recommend reading before going any further. I would also like to point out once again the extensive series of articles related to the inner workings of Overledger and its fundamentals written by our Community Member “Seq”.
I have split the analysis into two parts, to separate the human-related and the machine-related activities.
1. Human-related activity: The Tokenisation of the World’s assets
Many people involved in the Crypto sphere have come across the chart produced by “The Money Project” before, which you can find here. It is a particularly interesting (and mind blowing!) illustration of the absolute amounts of money which the World’s assets represent — ranging from various forms of money supply, to commodities, stocks, debts of all kinds, real estate assets and derivatives.
As widely reported by the media already, the largest institutions in the world have been marching towards the “Tokenisation” (or “Digitalisation”) of all types of assets. Here is a definition of what it means:
The Tokenisation of assets refers to the process of issuing a blockchain token that digitally represents a real tradable asset — in many ways similar to the traditional process of securitisation, with a modern twist. (Source: Deloitte’s “The Tokenization of assets is disrupting the financial industry. Are you ready?”)
The benefits of such process are broad and include:
- Immutability: the ownership of the asset is recorded on an immutable, tamper-resistant ledger which prevents conflicts regarding who the owner of an asset is.
- Divisibility: the digitalisation of assets allows to break ownership in small pieces, which in turns improves accessibility, liquidity, and transferability. For instance, it is now possible to own and exchange 0.0000001% of a Van Gogh painting which may be worth tens of millions of US dollars.
- Transparency: since DLT technology provides a single source of truth to reconcile an asset with its owner(s), it can facilitate the work of regulators and help monitor the compliance of ownership transfers in addition to preventing fraud in general.
- Accessibility: the restrictions around trading hours or availability of trading in general are removed, which increases the liquidity and flexibility around the transfer of ownership.
- Cost reduction: DLTs help reduce the need for middlemen, which consequently limits the costs related to custody and transfer of a given asset. Also, asset ownership can now be transferred to a third party, anywhere in the world, for a small fee, quasi instantly.
The Tokenisation of assets is therefore inevitable, because it is a better way to record, exchange and monitor asset ownership for all parties involved. The amounts at stake represent many hundreds of trillions of US dollars and, in order to help you visualise the actual figures involved, I have slightly modified the chart from “The Money Project” in the following way: I have highlighted Bitcoin’s target market as a Store-of-Value (i.e. to be broadly in line with the market capitalisation of Gold, or bigger potentially) and the target market of Overledger acting as the underlying protocol that facilitates:
A) such massive shift towards Tokenisation to be undertaken and
B) the subsequent movements of Digital Assets between the world’s largest institutions and decentralised networks to occur.
Please see for yourself below:
This shows the extent of the reach allowed by being the deeper protocol behind the shift towards DLT-based technology — which is potentially the entire World’s assets. To be clear, it does not mean that Overledger is the one and only technology required! But it is the technology that provides the rails for the other ones, on the layers on top, to be safely used by Enterprises to re-architect the existing financial system. This means that it can capture value across the full height and width of this chart. This is similar to Windows providing the necessary, user-friendly technology for developers to build applications and for users to use them — Windows is the “Layer 0” in this example in a similar way to Overledger being the “Layer 0” for DLT-based activity.
To dig deeper on this point, some of you may think, sure, but Ethereum is also targeting this market! Or this favorite STO platform which you may have in mind! Or that other, faster, more secure, more scalable smart contract platform which is launching next month! Or even this interoperability-related blockchain which some people have talked about! But the picture is a lot more interesting with Overledger, and I want to insist on two key points:
A) Overledger sits on top of and connects all blockchains. So the potential goes well beyond what any single chain may offer. Quant Network are connecting existing and future blockchains as required by their institutional clients and developers. So this revolutionary blockchain project you may have in mind would simply sit next to the many others which will also be contributing to the structural shift we are looking at today. The potential is therefore as broad as it can get by design.
B) As we have seen in previous articles, the world’s largest institutions are primarily using private/permissioned distributed ledgers for better control and privacy (e.g. Corda, Hyperledger Fabric, JPM Quorum). This means that public/permissionless blockchains are, by default, unlikely to capture the lion’s share of the upcoming boom. The fact that Overledger also encompasses the activity from the private/permissioned DLTs allows it to be exposed to the largest amount of traffic possible — which makes its profile and potential unparalleled in the crypto/blockchain/DLT world in my opinion.
The human asset-related value which could in theory be handled by Overledger therefore equals that of this chart broadly speaking. Mind blowing once again. Now, combine such picture with the the various theories around Network effects such as the famous Metcalfe law (“the effect of a telecommunication network is proportional to the square of the number of connected users of the system”) and one can quickly see that the potential at stake is beyond belief.
So who are the main actors here? Who are the issuers and holders of this gigantic amount of assets? Who needs to onboard the new DLT systems to innovate, organise and complete such massive structural shift in the coming years? I am providing a simplified overview of what it looks like in the following 30 seconds video, and how Overledger fits into the picture:
Do these actors of the world’s financial system sound familiar to the Quant Network/Overledger talks? Absolutely! They have been quoted many times. Quant Network team have been very clear, from the very beginning, that mass adoption of DLT technology would come from Enterprises, Banks and Public Sector bodies, which each have millions of users within their reach. Exchanges have been referred to many times as well (see this recent Tweet as an example). They together hold the keys to global economic activity and, for them to engage into such transformational shift, most would surely like to use a fully interoperable and future-proof Operating System to avoid being locked-into a single vendor technology, benefit from interoperability of all DLTs, and be able to use these new distributed networks securely with minimal changes to existing infrastructures. This is what Overledger offers, and this is also why capturing activity from all Public and Enterprise chains enables to be exposed to such a high amount of value.
If you wish to gain a better sense of how much preparation there is for such structural shift in the asset industry, you can read this article which details the ongoing work performed by traditional Securities Exchanges around the world (e.g. SIX, NASDAQ, ASX, LSE, Deutsche Börse) to adapt to the new opportunities offered by DLT innovation. In addition, the Deloitte analysis quoted earlier also provides a good overview of the transformational changes which are upcoming. Many other reports and articles can be found on the topic on the web, since it is now very clear that the march towards future large scale asset Tokenisation is already engaged.
Amazingly, it does not stop there! Many other forms of assets could be tokenised such as events tickets, air miles, art, intellectual property, and even energy (e.g. take a look at the Atlantic Power Exchange being built on Overledger as we speak) — the possibilities are truly endless! It is hard to quantify the further activity on this front, but sky is the limit as they say. This will gradually be phased into consumer habits as Enterprises continue to fine tune their new offerings — which will result in further transfer of existing, real world value onto the rails of DLTs.
2. Machine-related activity: The emergence of the “Internet of Things” and the need for secure communication rails
Let’s start by defining what is meant by “Internet of Things”:
The Internet of Things (IoT) is the extension of Internet connectivity into physical devices and everyday objects. Embedded with electronics, Internet connectivity, and other forms of hardware (such as sensors), these devices can communicate and interact with others over the Internet, and they can be remotely monitored and controlled. (Source: Wikipedia)
Indeed, with the further progress related to:
- Internet speed: with 5G and its future evolutions providing higher bandwith and lower network latency, and
- Safer communication rails: thanks to DLT technology that can, for the first time, assign an IP address to a physical device and allow for data and value to be exchanged
a lot of new business opportunities are emerging across industries.
A good example is related to things as common as vehicles, autonomous or not, as they illustrate the large amount of use cases at play:
- Connected vehicles could record, on a real-time basis, data related to their country and date of manufacture, current and past owners, shocks they may have suffered, insurance policy history or even establish the profile of a driver’s behavior. Such data could be used by new owners to prevent fraud, or by insurance providers to adapt policy fares to specific individuals or verify if someone involved in an accident was driving too fast for instance.
- Autonomous vehicles could communicate with each other, share their location and intent, and subsequently avoid collisions. You could also imagine paying a monthly fee for the right to overtake certain cars and experience faster journeys, or to join emptier roads or toll lanes.
- Rental cars may also be unlocked remotely once the client’s details have been verified and a payment has been made on-chain, limiting the needs for a human being to be present to hand the car over at the time. Also, for the first time, machines can now be assigned an IP address and receive a payment without any bank account involved (for obvious reasons).
Think about the millions of DLT-related transactions such activity would represent if most cars were to be connected in the future. Feeling excited? Great, because this also is happening as we speak as you can see here. The nonprofit smart mobility consortium MOBI made up of companies such as BMW, GM, Ford, Groupe Renault, and many others (including large insurance companies) has announced the First Vehicle Identity (VID) Standard on Blockchain. I quote:
“A standard for Digital Vehicle Identity will be the cornerstone of a new realm of blockchain-based solutions for the mobility ecosystem,” explains Sebastien Henot, Chair of the VID Working Group, and Renault’s Silicon Valley Innovation Lab Manager of Business Innovation. “The creation of a blockchain ‘digital twin’ will enable connected vehicles to securely identify themselves, share data, and transact with other vehicles, infrastructure, and their environment.”
“The first standard is the foundation developed by the working group to enable trusted data communication amongst inter-operating stakeholders within the mobility ecosystem. The VID is the master data key to a vehicle’s existence, behavior, and performance, supporting data transparency, coordination, and automation among stakeholders throughout its lifecycle.”
As a side note, Quant Network have been part of MOBI from the very beginning. Although this is all we know for now, it is important to appreciate that the type of interoperability required here goes well beyond what has primarily been on offer so far (i.e. payment-related atomic swaps). Universal interoperability is required to port identity across chains and exchange data of all sorts — and this is what Overledger provides to the car manufacturers. This is what Gilbert Verdian, the CEO of Quant Network, said about this news:
Like anything in technology. There never is a single network for everyone to connect and use. The industry continuously creates walled gardens to protect against competitors. This has been the case for corporate networks, SCADA networks, telecoms networks etc. I see each car manufacturers also operating on different blockchains and networks. They may have a group or consortium. These closed networks need to all interoperate for cars of the future to interconnect and talk to each other securely. Which is why we are in MOBI from the beginning. (Gilbert Verdian, Quant Network CEO)
Developments around IoT also affect cities and their urban-related issues around everyday objects, and overall public services’ efficiency. The notion of smart cities emerges. What if rubbish bins could tell if and when they need to be collected? What if traffic lights could detect when a car crosses as the lights turn red? The list goes on, and on, and on. The Internet of Things also extends to health-related devices and systems, containers in the logistics world, smart homes, wearables, military devices, and many other physical assets that will be able to safely and efficiently communicate from now on. How many millions of daily transaction will they all represent?
Let’s also think about the huge amount of data which will subsequently be stored on DLTs and how AI can help analyse it to detect trends, room for efficiencies or anomalies. This can save money, shorten response times to certain events, and fast track innovation towards a more efficient economy and society.
Here are some charts from IoT Analytics on the short to medium term expected growth in the IoT market for your information:
Additional illustrations and statistics can be found in the “2018 Roundup Of Internet Of Things Forecasts And Market Estimates” by Forbes here.
Conclusion
The aim of this article was to illustrate how vast the market which Quant Network operates in will become in the coming years. As you could see, even a fraction of the market share related to such shift towards DLT technology would mean a huge amount of data, value and transactions being captured. Also, a key advantage in managing activity across permissioned and permissionless chains is that you incorporate all DLTs within your scope and hence the global traffic running on Overledger may well exceed that of any single chain in the future.
We have gone through both the human-related and the hardware-related activity but, as a side note, software is also interesting. Many new Consumer or Enterprise apps and software may partly or fully run in a decentralised way in the future thanks to Overledger. The activity on the dApp front has been disappointing so far, but mApps created by larger institutions may show more potential for adoption in the future. This includes re-inventing some of the apps you currently use on your smart phone such as messaging apps, Facebook, Instagram, and the likes. The team has also demonstrated serving websites (HTML) directly from multiple blockchains, which is another exciting development which could lead to a huge amount of additional activity. Again, the possibilities are bottomless.
Whilst it is impossible to make precise forecasts with regards to how much of the market Quant Network will manage to capture, what matters today is the anchoring of their technology with the actors of these future markets. In this respect, the fact that Overledger is a unique and fascinating piece of technology, which we have every reason to believe is being adopted by the global institutions embarking into this profound re-architecture of the way humans and machines interact, is very encouraging.
This is an exciting venture which I hope I have helped further illustrate. I believe Quant Network team will, in the coming months, progressively reveal the work they have been doing with many of these institutions in the last 18 months, and it is an exhilarating feeling to be part of their journey.
Thanks for your time and interest.
Appendix:
July 2019 Blockchain Brad interview of Gilbert Verdian (CEO): Click here
February 2019 Blockchain Brad interview of Gilbert Verdian (CEO): Click here
QNT community Telegram channel: https://t.me/QuantOverledger
My previous article: The reasons why Quant Network (QNT) will rise to the Top of the crypto sphere in the coming months
Seq’s series of articles: Quant Network’s Overledger: Part One Blockchain Fundamentals
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My name is David and I spent years in the Investment Banking industry in London. I hold QNT tokens and the above views are based on my own thoughts and research only. I am not affiliated with the Quant Network team in any way. This is not investment advice, please do your own research and understand what you are buying before doing so. It is also my belief that more than 90% of all other crypto projects will fail because what matters is what is getting adopted; please do not put more money at risk than you can afford to lose.