Our world is full of assets, for e.g. shares, stocks, gold, diamonds, oil or even land. Physically moving many of these assets or subdividing them is not possible. What buyers and sellers do is exchange deed papers mentioning the transfer of the right of ownership from one person to another. However, documenting every transfer deed is a lengthy, cumbersome process that is difficult to track.
Security Tokens: What’s it all about?
Tokenization has come forward as a solution; the process will lead to converting rights to an asset into a digital token on Blockchain.
The reason for moving real-world assets on to Blockchain platform is to remove the enormous cost and lengthy procedure of transferring the right of ownership and secondly will remove the lack of transparency in the system. The reason for moving on to Blockchain is also to gain the advantage of Bitcoin while keeping the characteristics of the asset intact.The Tokenized asset will give the power to the owner to get the best price from the most interested user. For e.g. I can sell my apartment in Norway to an American citizen who is paying me the best price possible. Now as the tokens are divisible, it helps the American citizen to sell half of my flat to another American citizen by sending him half of the asset tokens.The technology world has proposed many ways and means to put real-world assets on the Blockchain platform. There are multiple platforms (LAtoken, Digix, WishKnish) already working on Tokenizing real-world assets.
What’s the advantage of Security Tokens?
- Real-world assets being Tokenized will open a borderless market where anyone can buy/sell any kind of asset anywhere.
- The cost of physically moving the asset bought/sold will not be there anymore.
- The blockchain platform will make the entire process decentralized making the system more resilient.
- No need to pay for escrow services like banks or lawyers.
- The transfer of ownership of real-world assets from one person to another will speed-up.
- Tokenization will offer the ability to monitor asset conditions and potential financial risks in real-time.
Tokenization is here to stay
The word ‘Tokenization’ has become a hot topic mainly due to the recent phenomenon of Initial Coin Offering. A company issues a new cryptocurrency, digital coin or token that investors purchase to invest in a company. As a result, a company can raise millions of dollars without the conventional VC funding model. It is no wonder that in the last three years, the world of cryptocurrency has grown from just a handful to more than of 4,000.