The Capital
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The Capital

Tokenization Of Assets As One Of The Key Drivers Of Blockchain Technology

Asset tokenization has become one of the most stable blockchain trends, opening more doors to exchanges and marketplaces.

Image: plazzel.com

Some of the industries that have undergone significant positive changes with the advent of tokenization are the sports industry. If it is sufficient to represent a share of the rights in the form of an established decentralised protocol, then asset tokenisation enables investors to buy shares in a given resource. Benefits of tokenization include increased liquidity, faster settlement, lower costs, and improved risk management. Asset tokenization means that a user can trade their value in the form of cryptocurrencies in a way that can be managed through an exchange or a written contract. Issuers and users of tokenised assets can engage in peer-to-peer trading without the need for a third party, which is cheaper than traditional databases and records.

The tokenization of assets confuses the financial industry by facilitating smooth transfers of ownership and democratizing asset ownership. Asset tokenization on the blockchain has emerged and has become one of the leading blockchain technology trends, opening new doors for tokenization on the market, whether for diamonds, paintings, or real estate.

Asset tokenization on the blockchain interface

Image: Asset tokenization & legal implications

Asset tokenization on a blockchain is exactly what it is — a process in which a blockchain token is issued representing a real, trading asset in a way that only a fraction of it can be traded. This sounds a lot like securitization or partial ownership, but there are some significant differences. Asset tokenization is the concept of using blockchain technology to securitize assets. Asset tokenization is the concept of using blockchain technology to securitize assets. In other terms, it is the process of issuing a blockchain token that represents a real, tradable asset.

Whether real estate, real estate, paintings, precious metals or corporate shares, everything can be symbolized on the blockchain. In fact, blockchain is an invariable public register that ensures that ownership cannot be erased after the purchase of a token, whether or not it is registered in a state register. The concept of asset tokenization refers to the use of blockchain technology to securitize assets of an organization by issuing blockchain tokens that represent the real value of an asset to the organization. These types of tokens are stored and managed in the blockchain network. The potential of asset tokenization is highlighted by block technology and one of its derivatives. If you digitize an asset and split it into many parts that must take the form of tokens, you can offer any time anywhere in the world by buying and issuing tokens through a securities token offering.

The process of asset tokenization

Blockchain, a data-based technology that builds on data tokenomy on infrastructure, appears to be bearing low-hanging fruit or at least connecting the dots. From a regulatory perspective, residence laws can be symbolized for data, and the use of blockchain transparency features can be useful to ensure data sovereignty and compliance. Another interesting aspect of tokenization is that if we can push through tokenization to democratize certain aspects of economic activity, we can improve the competitive conditions of our macroeconomy by adding resources we can use with transparent price tags.

Source: How Blockchain Technology Can Improve Inefficiencies in Capital Markets

If we can use blockchain technology to symbolize physical assets, we can provide liquidity to segments that are currently undercapitalised. Assets such as oceans, data securitisation and liquidity in data pools can be provided. Permanent proof of ownership of symbolic assets enables improved traceability and transparency. Whether payments or other asset classes, the ability to move real assets into the blockchain gives the advantage of a secure digital platform that maintains the asset’s characteristics. By using intelligent contracts, many tedious manual processes can be automated and streamlined, and the clearing and settlement process is simplified and more efficient. Permanent proof of ownership of symbolic assets enables improved traceability and transparency. Whether payments or other asset classes, the ability to move real assets into the blockchain gives the advantage of a secure digital platform that maintains the asset’s characteristics. By using intelligent contracts, many tedious manual processes can be automated and streamlined, and the clearing and settlement process is simplified and more efficient.

In the securitisation process, contractual obligations such as mortgages, car loans and personal receivables are bundled together with their cash flows and sold to investors as standard units. Tokenization of such assets is driving a new wave of investment, with investors rewarded with a share of the return on symbolic assets, as in the case of LAMP. LAMP is a symbolic asset and was made available to investors in 2019 by the International Institute for Sustainable Development. Investors are ready to fully build and maintain LAMP.

Blockchain tokenziation versus traditional tokenization

Blockchain tokenization is not fundamentally different from traditional tokenization mechanisms. But there are significant differences between the tokenization of assets on the blockchain. The benefits of blockchain technology for asset tokenization are enhanced information security through timestamps and cryptographic encryption. In 2019, the global real estate market reached a staggering $830 billion. With tokenization, assets tend to inherit a large amount of benefits, such as their tangibility, and the same is true for data. Paul Maritz describes the potential of data as highly leveraged. Data is an established asset class available to retail investors.

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Yahya Mohamed Mao

Yahya Mohamed Mao

Dynamic and data-driven marketing leader. Author, Mentor & Speaker. Top 50 Global Thought Leader. See www.yahyamohamedmao.com