In a market where each second determines between profit and loss, time is of the essence.
We have seen how Virtual Reality has transformed the gaming experience of players by plunging them in the simulated ‘reality’ of their virtual world, but what if we had a mirroring experience in the world of investors? Diamonds and properties placed before you in a silver platter through binaries and codes, ready for your inspection before pouring your investments in. Yes, we are referring to one of blockchain’s latest trends: asset tokenization.
If you haven’t known by now, asset tokenization refers to the process of splitting a real-world asset into various parts and representing them digitally through blockchain technology. This revolutionary technology is so popular the European Union noted in its report back in April the integral role blockchain would play in investments and trade when asset tokenization takes root.
So, What’s so Special About Asset Tokenization?
Asset tokenization is based on blockchain technology and that naturally brings with it advantages such as immutability and transparency. Ignoring the confusion the above jargon may bring, it simply means that most intermediaries can be eliminated with investors having direct access to everything that goes on in the investment market.
Below is an image of how traditional investments work:
[Source: India Avenue Asset Management]
Think of investment and trade as a tiny factory with various little gears running to make things work. These gears can include a depository, exchange, clearinghouse, backend software, risk management, industry analysis etc and are vital to the successful production of goods by the factory.
Sounds like quite a mouthful, right? One of the greatest advantages tokenization can bring is the integration of all the above processes through decentralization. By removing reliance on the multiple third parties as listed, and distributing their previous functions across all investing parties, it negates the need to trust in a central provider, allowing real-time auditing with access to the ledger and their investments at all times.
Compare the previous picture to the one now shown below:
The processes look so much simpler, yes?
In addition to the benefits digitalisation can bring, security, convenience, and transparency amongst others, the act of putting assets on the blockchain also increases the liquidity of assets that are not initially inherent. We’re talking about proof of ownership, fractional ownership, brand new management principles and an unventured way of the trade no investor has truly had the chance to fully explore.
All these as bonuses in addition to the convenience of technology? It is no wonder why tokenized assets have been gaining traction in recent years.
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