Asset tokenization and its benefits

Author : Phyllisgibbs
Publish Date : 2020-12-12


Asset tokenization and its benefits

Asset tokenization refers to the process of converting real assets into digital assets and thus converting the ownership of a particular asset into a digital token.

A digital token is a term that refers to a unit of value issued by an individual, but which, unlike well-known cryptocurrencies (with bitcoin as the main indicator), can be used in a much wider range of applications.

From direct investment to real estate, gold reserves, art and even agricultural products. Tangible objects have always been difficult to separate and physically transfer, and investors had to negotiate them manually on paper and through multiple levels of intermediaries using expensive, complex and time-consuming processes.

By switching to a digital token system, asset owners and investors are increasing efficiency by making assets more liquid by automating what were once cumbersome and manual processes, while maintaining the real characteristics of the underlying asset and reducing assets. barriers and obstacles to information exchange and trade.

Thus, tokens become digital and highly efficient representations of real assets.

 Fungible and non-fungible assets
There are two types of assets that can be represented as tokens: fungible assets and non-fungible assets. The consumables are fungible, which means that every unit of the asset is the same and has the same value.

For example, a unit of fiat currency such as the US dollar is a fungible asset. All units of dollar bills are exactly the same, have the same value and are interchangeable. Fungible assets can also be divisible, in the dollar example, it can be divided into cents.

However, non-fungible assets are unique and not necessarily fungible. For example, a gold bar is usually unique. It is distinguished by its weight, purity and even a serial number and, as a rule, is not divisible.

Interchangeable tokens are prime numbers associated with units of account. Transferring a certain number of tokens between accounts is a transfer of value. Blockchain-based platforms tend to use fungible tokens to implement a tokenized economy.

However, non-fungible tokens are also viable, usually in combination with fungible tokens, which represent prices. Non-fungible tokens require more data to be stored to identify each individual unit, making them harder to manage.

Benefits of asset tokenization
Investors can trade real assets that, due to their low liquidity, would have been difficult to trade in the past.

Tokens increase asset liquidity, lower territorial barriers, and attract new investors through fractional ownership, allowing you to own a percentage of a real asset and repackage it using traditional bonds or hedge funds for resale. markets. cryptographic. Did you know the world best real estate tokenization platefrom like digishares.

They increase portfolio diversification as investors can now jointly own multiple assets at the same time.

By working with blockchain technology, asset tokenization becomes a much more defined process as documents, information and asset data are stored in a secure digital vault that can be accessed using the blockchain private key.

After someone buys tokens, no one can delete or change the ownership record, blockchain tokens can be accessed from anywhere in the world, 24 hours a day, 7 days a week, via a web or smartphone app ...

In addition, tokens eliminate the asymmetry of information present during the transfer of ownership and expand the base of potential investors.

What can be tokenized?
Many assets can be tokenized and moved to the blockchain: financial instruments such as stocks and bonds, real estate, gold, loans, and even works of art.

When it comes to stocks, tokenization makes it easier for companies to interact with shareholders by providing transparent ownership and availability information to confidently execute secondary market transactions.

On the real estate side, real estate tokenization makes fractional ownership possible, opening up an opportunity for increased market share and a new opportunity for the growth of real estate investment markets.

Traditionally illiquid assets such as art, aircraft rentals, collectibles, vintage wines and more can be scanned to verify their provenance, providing transparency



Category :others
Author Website : digishares

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