The Economics of Tokenization

Disclaimer: The views expressed here do not represent Darico Ecosystem in any way. These notes shall not be taken as financial advice, and the text herein shall be labeled as conjecture only for what may happen in the world to come and not what will be.

Welcome to the second article in a three-part series written on the impacts of tokenization. Here we will focus on the economic effects security tokens will have on the world over. From replacing old systems to forging ahead and building new ones, tokenization will have serious ramifications that not only impact the world around us but also for the generations to come. Those of you reading this article now will become the pioneers of tomorrow.

Faster Settlements

In the United States of America, the settlement date for marketable stocks takes place over two business days. [1] In Australia, the settlement period for closing a real estate deal can take place between thirty to ninety days on average. [2] This is a common theme for most settlements in virtually every industry around the world. There are mountains of paperwork, legal proceedings, signatures, witnesses, and more surrounding a variety of transactions. To highlight the difference between today’s settlements and what tomorrow holds, we can juxtapose this to the horse and buggy versus the modern day vehicle.

DGTO is an electronic, financial instrument that will make these types of settlements instant. By utilizing the blockchain it can store electronic asset history, ensure authenticity via digital proof, and provide user verification through encryption. The swiftness of these settlements will revolutionize the securities industry, and provide liquidity to a market that has always been illiquid by nature. Placing securities on the blockchain marks a new shift from the illiquid, traditional securities to a highly liquid market that is permanently open with instant settlements to everyone.

Complex Security Vehicles

Complex security vehicles already exist within the financial markets. Collateralized debt obligations (CDOs) [3], derivatives [4], and other instruments have been created in order to improve the liquidity of these assets. CDOs are asset-backed securities that chop up existing debt and then piece them together into individual vehicles that multiple investors can buy.

What DGTO offers is the ability for investors to not just buy the debt, but to actually own a piece of the asset itself. Once an asset has been tokenized onto the DGTO platform it is then divided up into more manageable slices as opposed to its total value. This allows investors to reap the same benefits by owning a fraction of the property for less instead of spending millions of dollars for a large office building.

Developing Nations

Loans can be notoriously difficult to obtain, and it gets even worse in non-developed nations. There is a multitude of reasons ranging from banks not having capital, zero credit history, to simply not having the infrastructure for doing so. Consequently, individuals must often turn to private financing which can lead to predatory rates and impose an impossible debt cycle on the borrower.

By tokenizing the debt on the DGTO platform micro-financing [5] becomes a reality and individuals will be eligible to receive secured loans at fair rates. This allows those in developing countries to receive world-class financing and in return, an investor seeking better opportunities abroad can securely place their money into fast-growing instruments. This has the potential to completely change the landscape for financing in emerging markets and it creates numerous opportunities for retail investors who look beyond their domestic ventures.

New Generation

The developing world is not the only region that is experiencing difficulties in securing loans. Now, more than any other point in history, young adults are experiencing a debt crisis. Inflation coupled with the depreciation of fiat has added a new strain for millennials attempting to move forward and save money. [6] The loss of ownership is a new phenomenon for the West, and it has been heavily satirized in the media and society.[7]

DGTO aims to solve these issues by allowing the same benefits of home ownership to younger generations who cannot afford a house outright. This enables youthful investors to safely and securely own a fraction of land who would not otherwise achieve the opportunity on their own. For new shareholders, these securities will provide a proper investment with returns that can help sustain compound interest and help them advance towards the future.

Conclusion

This concludes our study about the effects that tokenization will have on economics. In the modern age, technology has been creating new gold rushes that we all race towards. The tokenization of assets is bound to have an enormous impact on economics as we know it. We hope our readers are set up for success. In the third part of our series, we will focus on the relationship between tokenization and society. Until next time. Thank you for reading.

For further information related to the Darico Team and platform please visit our website: www.darico.io or join our Telegram: https://t.me/darico_ico

Thank you,

Darico Team

Sources
[1] https://www.sec.gov/news/press-release/2017-68-0

[2] https://www.qld.gov.au/law/housing-and-neighbours/buying-and-selling-a-property/selling-a-home/settlement-day-when-selling-your-home

[3] https://www.investopedia.com/terms/c/cdo.asp

[4] https://www.investopedia.com/terms/d/derivative.asp
[5] https://www.investopedia.com/terms/m/microfinance.asp

[6] https://www.marketwatch.com/story/help-depressed-millennial-earns-61000-a-year-but-cant-make-ends-meets-2019-03-26
[7] https://www.youtube.com/watch?v=9eTRiU6-D5c