There is a saying, 'numbers don't lie' and we all have to agree to this. The emergence of web 3.0 which merges blockchain, smart contract and digital assets or token together is worth the attention of every smart investor.
The key thing to note about this is that decentralization plays a key role in the entire process. The era of borderless business, borderless investing and borderless asseting has come to stay. I don't know if we really do take some time to understand the technology behind some terminologies we often hear, it could be an opportunity of a lifetime. tokenization has been here for a while now, yet I must say very little to few know its real use case and how efficient it is in promoting a fast, fair and borderless ownership of assets.
Have you ever wanted to own a part of something yet you couldn't, maybe because of distance or should I say huge price tag to afford it. Or has something ever been shared to you and you felt robbed? It has happened to many of us and this in the process has brought disagreement and misunderstanding between parties and bodies involved
Let's start this way, a piece of land was given to you to share among four friends who no longer live close. So the question that arises here is; how do you share the land fairly and equally amongst these friends? Let me suggest what you are thinking; sell the land and divide the money or tear the land into four equal parts. That's an asset that is likely expected to appreciate in value overtime, why sell it?
On the other hand, how fair can you divide this land in the absence of its owners when two or three of them would have prefered to own the northern part. If you decide to give out the parts yourself, that's centralization. So what do you do? How do you help them keep an asset that will soon appreciate and also share it fairly? Simple, you tokenize it. Let them own their fair figures and trade it if they want to sell it out.
Although there has not yet been a massive adoption of this technology since its inception, if you understand the solution and opportunity tokenization brings to the table you won't just panic. Tokenization is the process of pushing an asset from the physical to the digital realm(digital assets) to promote equal opportunities for investors creating a fast, flexible, trusted and borderless investment opportunity.
The idea behind tokenization is to break down assets which seems impossible in their physical form for easy sharing and trading. As the world advances we will see the need for a massive adoption of this technology bundled with the fact that it operates in a decentralized system, promoting the needed asset transparency.
Increased Liquidity and lower cost
We basically know the real estate, private equity and the arts markets are always illiquid in nature. The introduction of tokenization helps eliminate this limitation by creating a liquid market when assets are broken down for easy acquisition. When assets become more accessible to larger pools of investors, the liquidity generated helps attract even more investors to an asset.
Adding to that the transaction cost of purchasing parts of these assets is mostly mitigated thanks to the application of blockchain technology. We've basically seen how difficult it is to secure shares of physical assets having to settle lots of bodies in the process. Tokenization's low cost efficiency indeed makes it worth considering to apply into a wide range of asset classes.
Accessibility and compliance
Thanks to blockchain technology which promotes borderless transactions and businessing. Tokenization helps investors from all parts of the world get their full hands on an asset and participate in the fair share and growth of that asset. This on the other hand is made possible through smart contracts; immutable codes embedded on a blockchain which automatically executes itselfs when certain terms are met. Smart contract I must say plays a huge role in tokenization, creating trust amongst members investors and as I earlier said 'numbers don't lie', when it is done automatically.
I have illustrated many times the well of opportunity borderless transactions bring to every smart investor. Converting artifacts or any valuables into a digital assets for trading is one opportunity tokenization process opens up the world economy for a fair trading. We have been facing the business limitation challenges for years until the recent introduction of blockchain technology. It has proven to us that everything around us is an asset to leverage.
Will tokenization scale?
From breaking down complex assets to creating the needed accessibility and an added fair distribution, it is more of a question of when will tokenization entirely take over. Although as earlier said, there is a challenge of massive adoption from the sector of regulatory compliance who are yet to fully understand and accept this new tech, it in the process shrinks technological scalability and reduces market adoptions. We are seeing several advancements in blockchain technology which helps in easy transfer of assets across different networks at a fast pace. As investors await greenlight from regulatory bodies, tokenization will gradually push it way forward. We heard the CEO of Blackrock eyeing tokenomics as one of their next big moves.
To conclude, let me add, tokenization has been here for a while yet we seem not to understand its real use case. I see an inevitable technology that will move future businesses. The ability to turn compound assets into a flexible and accessible asset through digitalization is a big achievement thanks to blockchain and decentralization.
Advancement is turning the earlier impossible to present possibilities, I must say the later will even be much better when this system scales through innovation and massive adoption.
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