Beyond HODLing and trading, monitoring price fluctuations, and debating the future of crypto versus fiat, something even more revolutionary is afoot: tokenization. It’s the representation of real-world goods and alternative assets on the blockchain and the reflection of rights to them through cryptographic tokens.
But aren’t tokens just for raising money in ICOs? They can be. But there’s a lot more to tokens than meets the eye. And the tokenization of our economy from real estate to finance could increase efficiency, reduce costs, ensure transparency, and allow for democratized access to investment opportunities. And beyond that, let’s check out five more key advantages.
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5. Decentralized Ownership
Through smart contract technology, we would no longer need a centralized authority taking their fee and acting as our trusted custodian. Ownership of an asset could be easily transferred on the blockchain without friction or lengthy delays and intermediaries.
4. Greater Liquidity
Consider for a moment a “unicorn” startup valued in the billions of dollars – but the owner is still living on a startup salary unable to unlock the value. Or an apartment owner with hundreds of thousands of dollars’ worth of value but no way of accessing cash. Flip the coin to the worker bee desperately trying to save up for a mortgage.
Tokenization would allow us to unlock the liquidity from illiquid assets that are hard to physically divide. Their high value (think real estate) makes them inaccessible to everyday people, as lockup periods are long and the down payments high. Tokenization would bring liquidity and allow us to buy or sell a fraction of an asset.
3. Fractional Ownership
Each token represents a small fraction of an asset’s entire value. This reduces barriers to investment and allows anyone to own a small piece of an asset, opening up the marketplace for investors. They also have the rights to a percentage of profits and losses on an asset’s value, or the ability to make voting decisions in the case of a company or property.
2. Access Around the Clock
Just like cryptocurrencies, your assets can be bought and sold at any time day or night through instantaneous smart contract technology. From anywhere in the world without having to wait for the banks or markets to open.
1. Frictionless Transfer of Ownership
Tokenization of alternative real-world assets makes for instant transfer of ownership. Rather than taking days to go through a bank, a custodian bank, a clearinghouse, and more, it’s simple peer-to-peer technology that makes the transfer instant and two-party.
The Takeaway
Tokenization will change the way that people own assets forever. Blockchain technology may be in its infancy, and the infrastructure still in the process of being built, but just as ICOs have democratized access to investment opportunities, tokenization of real-world assets will allow for fairer, easier access to wealth.
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