From works of art to real estate, the way to invest and transact assets is about to change radically with the modernization provided by tokenization.
With a huge potential to cause significant changes in various sectors, asset tokenization refers to the process of issuing a token on blockchain that digitally represents a real tradable asset.
The concept is relatively popular with computer enthusiasts’ cryptocurrencies, but is also beginning to advance in traditional industries and has the potential to provide significant changes in various sectors, simplifying trading operations around the world.
BUT WHAT ARE TOKENS?
They are a digital representation of real assets. Assets mean any economic resource, something tangible or intangible that can be used by the holder to produce economic value. See some examples:
- TANGIBLE ASSETS: money, loan, machinery, equipment, furniture, real estate.
- INTANGIBLE ASSETS: copyrights, patents, software, trademarks, financial assets such as bonds and stocks.
When tokenizing assets, you can start trading them, with rules specified through a smart contract written on a blockchain.
For you to have an idea, the representation of real assets in a blockchain is spreading to: raw materials, real estate, final products, royalties, financial services and insurance, telecommunications, works of art, power generation, services education, private equity holdings, metals precious and countless other possibilities.
TODAY THERE ARE SOME TYPES OF TOKENS, TWO OF THEM ARE:
- UTILITY TOKEN - gives the holder access to a product or service. It is the monetary unit within the ecosystem, where products and services can be purchased and paid for through it and can also be used as a reward to members.
- SECURITY TOKEN - it is considered as a security, an income generator and constitutes the real property of an asset. It can represent a share of a company, a part of a building, the participation in a fund of investment and is traded based on the metrics specified in smart contracts.
SOME OF THE MAIN BENEFITS OF TOKENIZATION ARE:
- GREATER LIQUIDITY - the ease of transaction promoted by tokenization increases the freedom and liquidity for buyers and sellers interested in a certain asset, facilitating the attraction of investors and the trading process. In addition, it makes it possible to increase the volume of trading both for markets with little liquidity (art), as well as for larger markets.
- ACCESSIBILITY - new forms of fundraising, allowing projects under development to issue shares in token format, providing reach to a much larger audience. As the asset can be divided up, it reduces the minimum values needed to invest, in addition to enabling 24/7 trading and eliminating territorial barriers.
- SPEED AND COST REDUCTION - the automation generated by smart contracts allows a great reduction in administrative costs involved in the processes due to the decrease in intermediaries, providing faster and more dynamic operations.
At the same time, it offers professional and casual fans and investors the chance to help boost athletes' careers, increasing their chances of being chosen by professional teams.
Asset tokenization will provide many tools to help companies raise funds more efficiently.
Even if it does not remove all intermediaries, it will undoubtedly promote much more efficient processes to traditional commercial relations, replacing and transferring the needs of trust, previously entirely centered on individuals, for mathematics and technology.