Tokenization of assets is in trend and it is one of the most profitable use cases of blockchain technology that helps the crypto enthusiast to enhance the value of their real assets by converting them into their digital versions. Today, there are certain platforms where asset tokenization is made easier. It allows individuals and businesses in the blockchain realm to prove ownership of their assets and tie a value to them. Asset Tokenization of real assets on the blockchain also enables them to transfer the ownership of assets in a secure, transparent, and fractionalized manner to enhance their liquidity and remove investment hurdles by removing intermediaries.
Why Is The Market Shifting To Asset Tokenization?
According to the predictions, the value of asset tokenizations will reach from $310 billion to $16.1 trillion between 2022 to 2023, which will be a 50x increase. Have you thought about what might be the reason behind the growing popularity of the tokenization of assets?
Let’s find out!
Eliminates The Barriers of Boundaries
Anyone can invest in tokenized assets, without any hurdle of different physical locations. The transfer of assets can be done in a fast, secure, and easy manner through the blockchain network.
- Eliminates Middleman
There is no requirement to involve a middleman for selling or purchasing tokenized assets. As there will be no external entities involved, the buyer won’t have to pay separate fees or extra costs to anyone. The record of the transfer is maintained automatically on the blockchain ledger.
2. Fractional Ownership
It’s one of the best benefits of asset tokenization, as it allows divisibility. Anyone interested in investing in tokenized assets can buy a small percentage of the share, and consequently, the investment amount will also be smaller as compared to the full ownership.
3. Enhanced Liquidity
Asset Tokenization of real assets on the blockchain helps create a low-friction environment. The transfer of ownership is done automatically, with no compliance issues. It also reduces complexities and costs. Assets present the possibility to make investments in the form of fiat as well as crypto money through P2P-regulated exchanges, which in turn improves liquidity.
4. Quick & Cost-Effective Transactions
Usually, assets are managed through smart contracts, and the process of transfer of tokens is automated. It reduces the time of making sales or purchases and managing transactions. As the investor has to pay only the gas fees, it also lowers the cost of transactions.
5. Enhanced Transparency
The aspect of transparency is yet another benefit of asset tokenization. It allows the token holders to embed the applicable rights & obligations for defining token characteristics and also maintaining the record of ownership. Therefore, the purchaser will be aware of the original source of the token.
6. Improved Accessibility
Asset Tokenization of real assets on the blockchain helps in the fragmentation of a particular asset, and it allows the investor to claim the ownership of a fraction of the share he has bought. It simplifies asset management and allows small investments.
What Kind of Assets Can Be Tokenized?
There are endless possibilities for tokenizing real assets. Here are some of them:
- Art
- Precious metals
- Collectibles
- Real estate
- Intellectual property
- Gift cards
- Domain names
- Licenses
- Certificates
- Music
- Commodities
- Reward points
- Luxury goods
Which Industries Are Embracing Asset Tokenization?
Here are some of the industries that have adopted asset tokenization technology:
- Finance
Fintech is changing the finance market in diverse ways. It is making it easier to lend, borrow, invest, and pay for products or services. Many organizations are using it as an opportunity to convert their real assets into digital tokens that can be exchanged for cryptocurrencies or fiat money easily. Similarly, the tokenization of equity shares helps the token holders to issue more than one token from the same credit card.
2. Real Estate
Real estate is adopting asset tokenization of real assets on the blockchain at the most rapid rate. The concept of real estate tokenization is helpful in streamlining the investment process and gaining better profits for the assets. Besides this, it reduces fraud.
3. Healthcare
The healthcare industry is also turning towards the tokenization of sensitive patient data, which includes identity cards, insurance cards, etc.
4. Sports
The sports industry has not remained untouched by asset tokenization technology. Today, we can easily find tokens related to sports accessories, popular players, team logos, and more such things.
5. Enterprise
Enterprises are also harnessing the potential of tokenization of real assets. It helps them to expand their markets and induce better incentive models.
6. Arts
Artworks can be easily converted to tokens and are more easily accessible to art lovers and sell them without involving any middleman.
Factors To Be Considered For Starting Tokenization
- Business Model
When we speak of asset management, the first thing we need to consider is the business model, and to decide the roles of idea maker, token developer, and token keeper. Apart from this, the decisions related to choosing a custodian or using a decentralized network, and writing smart contracts are also crucial steps.
2. Choosing The Right Platform
Once the business model is set up, the next step will be to choose the best-suited platform. The main determinants will be the type of products or services of the business, the type of audiences, and the required infrastructure & regulations.
3. Cybersecurity
As more people are tending towards cryptocurrencies, it has increased the risk of cyberattacks. Although blockchain technology ensures a high level of security still there are some weak points that need to be dealt with care for the protection of tokenized assets.
4. Compliance
In a token economy, it is imperative to ensure compliance with the regulations. It is necessary to be aware of the rules of the land and implement the same for better operations.
Wrapping Up
Asset tokenization of real assets on the blockchain provides unlimited opportunities for financial institutions to shift to the DeFi ecosystem. Want to harness the true potential of asset tokenization? Connect with Antier, the blockchain expert to discuss the requirements and take the first step towards tokenizing real-world assets in a hassle-free manner.
Asset Tokenization of Real Assets on The Blockchain- The Gist was originally published in The Dark Side on Medium, where people are continuing the conversation by highlighting and responding to this story.