Asset tokenization

As the world moves towards a decentralized economy, new investment opportunities are emerging. Blockchain-based digital business models are currently being actively created and extended to physical goods and non-fungible assets.

This gives investors access to more assets. The advent of tokenization has fundamentally changed the way we invest and raise funds.

The tokenization process refers to the issuance of blockchain-based tokens that can be traded, stored, and transferred digitally. These tokens exist on-chain, act as a store of value and carry rights to the assets they represent, while the real assets backed by these tokens continue to exist “off-chain”. This concept is not new. The most striking example of tokenization is NFT tokens (non-fungible tokens).

Thanks to the properties of NFT, it is possible to tokenize both works of art and objects of popular culture. For example, a simple pixel image created in a simple editor can gain real value. Another example is the works of street art artist Benxi, some of whose works were sold for quite good money in the form of NFT tokens.

Let’s say you want to invest in real estate, but you only have $5,000 for the initial investment. You can start small and gradually increase your investment. For example, you want to invest a few thousand every two to three months. This may seem inconvenient in real estate.

People can’t buy four or five square meters in an apartment. Now let’s reverse the situation. You have an apartment and you urgently need money. The cost of your apartment is $200,000, but you only need $30,000. How can you use this property to get the money you need?

Your $200,000 apartment can be converted into 200,000 tokens, where each token is equal to 0.0005% of the apartment’s share. The tokens are then issued on any blockchain platform that supports smart contracts, such as Ethereum. When a user buys one token, it means they buy 0.0005% ownership of the asset.

If someone buys 80,000 tokens, he owns 40% of the asset, and if all 200,000 tokens, then he will become 100% owner of this property. Blockchain is an immutable public ledger that ensures that once you purchase tokens, you cannot remove ownership, whether it is registered in a public ledger or not.

Thanks to the ability to tokenize physical assets using blockchain technology, it became possible to obtain liquidity for segments that capital had previously ignored.

Another interesting aspect of tokenization is that it makes the entire production chain more transparent – from the moment an asset appears to the transfer of property rights to it. This advantage is due to the ability of the blockchain to communicate more rules than traditional financial instruments.

• Low minimum investment threshold

In the traditional financial world, investment barriers tend to be extremely high. For example, the investment required to purchase a piece of real estate or a piece of art can be tens or even hundreds of thousands of dollars. With the help of tokenization, the minimum investment threshold can be lowered, allowing small retail investors to diversify their portfolios and enter markets that were previously only available to large investors.

• Unleashing the potential of illiquid assets

Through fractional ownership, traditionally illiquid assets can unlock their potential and become available for sale in secondary markets, allowing a wider range of investors to participate in the ecosystem.

• Reducing the administrative burden

Tokenized assets enable faster transactions with less administrative burden. Through the use of smart contracts, many cumbersome manual processes can be automated and streamlined, and clearing and settlement processes can become simplified and more efficient.

• Transparency

Because each entry is stored in a shared and immutable ledger, no one can fraudulently claim ownership of the assets. Transparency within the ecosystem ensures that everyone has a clear view of the updated ownership ledger.

• Wider coverage

Unlike the traditional financial system, which is limited by the jurisdictions in which it operates, blockchain technology allows to achieve wider coverage by eliminating geographic and infrastructural restrictions.

Obviously, the tokenization of assets will lead to the emergence of new participants in the market, new services and new opportunities. This will provide traditional and new market participants with unique opportunities to invest and build a business.

We have been carefully studying blockchain and its use cases since its introduction to the market. Therefore, we understand what is needed to tokenize a real asset without any restrictions. Consult our blockchain experts and convert your real asset into a digital token.