20/12/2020
Asset Tokenization – Real Assets on the Blockchain
Here are some of the reasons why the market is shifting to tokenization
Elimination of middlemen
Trading of assets usually takes days to months to achieve a settlement. It involves external entities to validate the documentation of transactions and investor’s eligibility, which adds extra costs to the process. But, tokenization removes the need for intermediaries with blockchain’s ability to provide immutability and transparency.
No territorial barriers
An investor can invest in the property located in any part of the world without visiting there physically. Investment becomes secure, fast and easy with asset tokenization on the blockchain.
Fractional Ownership
When assets are digitized, they become highly divisible. Thus, investors can invest in small percentages of tokenized assets. For example, you can buy only a 10% share of a tokenized real estate property. It dramatically removes the barriers for billions of investors to enter the market.
Improved liquidity
Bringing the investment process on the blockchain provides a low-friction environment. Asset tokenization enables the automated transfer of ownership while ensuring compliance. With reduced complexity and costs, tokenized assets present the possibility to invest with fiat money and P2P trading on regulated exchanges, which can improve liquidity.
Quick and cheaper transactions
Since the transaction and transfer of tokens are done with smart contracts, the exchange process is automated. The automation can reduce the burden associated with buying and selling, with no intermediaries required. As a result, it fastens the deal ex*****on with lower transaction fees.
Broader Investor Base
Traditionally, the trading of real-world assets has a restriction on the level of fractionalization. But asset tokenization eliminates the limitation by making it possible to sell or buy tokens that represent fractions of ownership. It results in a broader investor base to participate in the investment process. Tokenization would open opportunities for a new set of investors and allow them to diversify their investment portfolio into assets that they could not afford previously.
From the above reasons, it can be concluded that tokenization will stay here for many coming years and present a wide array of opportunities to a broad asset class.
