Consider the lending space. Right now, decentralized/automated lending requires crypto collateral. You basically need to put crypto down as collateral to borrow more crypto. It makes no sense. In the real world, we can use our house or car (or other collateral) to secure loans. With accepted standards about the tokenization of real world assets (like a house deed or car title), we could see real world collateral tokenized and used in crypto lending. And due to the network-based nature of crypto, that could expand lending beyond local or national banks into a much more accessible, global industry. The net effect of that should be to drive interest rates down competitively. We're probably many years away from this sort of application but I don't think it's impossible.
This tokenization of physical items only works if it's enforceable, and for that to happen you need to change the laws and overall rely on the government, which defeats the purpose of crypto.
No it doesn't. Is there some "10 commandments of crypto" I'm not aware of or something?
We're talking about use cases that are leaps and bounds beyond simple censorship-resistant payments. Cryptocurrencies were never intended to solve the things like physical title disputes. They aren't a replacement for governments and court systems!
That doesn't mean we can't tokenize titles the same way they are already securitized by banks today. Tokenization can simply make investing and loaning much more accessible to both lenders/issuers and borrowers/investors, way beyond the scope of banks.......the same way that ICO tokens made it so anyone in the world with access to crypto could invest in a startup.
In Bitcoin you can send coins to anyone in the Universe, but with these tokens you'll have to do KYC to verify that the person is a resident of a country that regulates tokens. Even if you rely on private companies instead of governments to enforce tokenization, you'll still have a central point of failure in your protocol.
Tokenization =/= decentralization. The point is not to create some protocol to decentralize property titles themselves. That can't be done.
What we can do is use protocols to automatically enforce liquidation/transfer of tokenized collateral upon default. This is much more attractive to lenders since they will incur less expenses recovering collateral.
Same as now with paper contracts, if there are disputes over the legal enforceability of a smart contract, that's a matter for the courts to settle. Disputes will still inevitably arise, just like they do today.