The world of digitalized assets is much much larger than currency. In finance, currency is mostly the glue that ties all the assets together: bonds, stocks, intellectual property, deeds, all of these assets have dual forms: tokenized forms for trade and utility that gives them meaning.
Bitcoin itself is a purely tokenized asset, but in theory the Blockchain may also help enable other digital assets beyond currency. Nick Szabo was an early proponent of cryptographic assets, describing in his 1997 essay the concept of smart contracts, digital equivalents of legal documents. Smart contracts could be more efficient, more universal and cost less than the traditional legal contracts that govern standard assets.
Although the Blockchain must be limited to tokenized contracts and cannot enforce real world consequences, the presence of a neutral record with a provable proof of work helping to guarantee immutability has been proposed to serve as a foundation for asset trading records, much as the Blockchain serves as the foundation for currency trading ledger data. Most proposals imply a secondary data record of assets that lock their ledger to the Blockchain using cryptographic verification signatures embedded in blocks.
Benefits of Smart Assets
The principal objection to smart assets lies with their dual nature. Although generally the trading of assets takes place in tokenized form, violations of traditional asset contract terms are generally served with force: a capability beyond the Blockchain. That being said, smart assets adopted by governments may still feature that capability and many low-stakes assets could dispose with that requirement in favor of the benefits of a Blockchain based system that provided a neutral ownership ledger.
Even without the threat of governmental contract enforcement, another threat might be made to loom over a smart contract: a loss of Bitcoin. Smart contracts for assets might include a Bitcoin denominated penalty for cooperation failure, to defray counter party risk of the real world utility failing. If parties failed to cooperate, such as a company declaring bankruptcy, smart asset shares might be liquidated to their base values denominated in Bitcoin, preventing a total loss.
In the reverse situation, smart assets might serve as collateral against a loan. Failure to make regular payments against a debt could result in the algorithmic reassignment of a smart property, such as a deed or title. Smart domain names could create a more neutral international system, without the fear of one country unilaterally executing domain seizures.
Smart assets might grow increasingly useful as a common payment stratum in a future where all devices included digital features. In a future where cars automatically paid for gasoline without the need to swipe or tap, Bitcoin might provide a convenient medium for the funds to flow through: a common world-wide digital standard to join TCP/IP, UTF and other common protocols upon which interoperable applications may be built.