Ethereum
With tokenization, anyone can invest in any type of asset
Blockchain is impacting the financial services industry in many different ways, and one of the most exciting is the idea of tokenization, where real-world physical assets are represented as digital tokens so they can be more easily traded.
Tokenization is more than just an idea, and it’s certainly not a fad. Some of the world’s largest financial institutions, including BlackRock, BNY Mellon, and JP MorganChase, have already embraced the concept. These organizations, once wary of anything crypto-related, have been convinced that tokenization promises to bring tangible improvements to the way assets are traded, paid for, and settled.
For the masses, the most significant benefit of tokenization is how it can potentially democratize finance, paving the way for anyone to become an investor and start building wealth through the concept of “fractional” investing.
What is tokenization?
Tokenization allows almost any asset to be traded on decentralized peer-to-peer markets. It can be thought of as a magic portal through which anyone can invest in anything, whether it’s stocks, commodities, currencies, real estate, vintage wines, or anything else. Plus, anyone can access it, with just a few dollars. In this way, tokenization opens the door to financial opportunities that were once exclusively reserved for the wealthiest among us.
The magic of tokenization is that it becomes possible to buy a small share of a luxury apartment building, a hotel or even a parking lot, or to own shares in a gold reserve or invest in a blue-chip work of art, with just a few clicks of the mouse from the comfort of your home.
In terms of benefits, tokenization paves the way for faster trade settlements, with transactions processed in just seconds, and lower trade costs, as there are no intermediaries – except for network “gas” fees, but these are usually minimal.
Tokenization also means more security thanks to the strong foundations and transparent nature of blockchain, greater accountability, transparent tracking of ownership, and less reliance on custodians.
What assets can be tokenized?
Digital tokens live on the blockchain, where they are created to represent assets in the real world. By creating digital tokens that represent a precious metal like gold or platinum, for example, that asset can then be bought and sold on the chain, with the tokens changing hands instantly, as soon as a transaction is processed. No one can be excluded from the process, and there is no limit to the number of tokens that can be generated per asset, meaning they can be affordable enough for anyone to get involved with just a few dollars worth of crypto in their wallet.
The most interesting thing about tokenization is that it is not just a future possibility. Tokenized assets already exist and there are dozens of decentralized markets up and running that anyone can participate in if they want to become an investor.
For example, if you want to become a real estate investor, Blocksquare, through its Oceanpoint.fi marketplace, allows you to do so, offering a multitude of real estate investment opportunities spanning penthouses, hotels and shared spaces.
Square of blocks has been around for several years now and demonstrated its feasibility back in 2018 by creating the world’s first tokenized parking space that anyone can invest in. The parking space, which exists in a parking garage in the Slovenian capital, Ljubljana, has been divided into several digital tokens that each represent a fraction of the ownership. Anyone who buys one of the tokens can earn regular dividends from the $90 per month in rental income generated by the parking space.
Since that first PoC, Blocksquare has evolved into a much more comprehensive platform, offering white-label tokenization marketplaces for real estate operators to create their own marketplaces. It also offers a way for real estate tokenization projects to attract crowdfunding. For example, a project called Pieme recently spear a Marketplace Pool campaign, seeking support from Blocksquare’s investor community to help fund its first tokenized hotel in Kampala, Uganda.
Other options for tokenized investments include commodities. For example, MANTRA Mantra has created a marketplace where users can purchase tokens that represent ownership of physical gold and silver, which can be traded as easily as any cryptocurrency. This is much simpler than traditional methods of investing in precious metals, which involve buying physical bars or coins and storing them securely, or buying shares in a gold exchange-traded fund. Mantra also allows investors to earn passive income by staking its native token OM to earn rewards for supporting its network.
If gold and silver aren’t your thing, you might be more interested in ArtFiwhich owns a physical art gallery in Dubai where it showcases dozens of high-value artworks it has acquired on behalf of token holders.
ArtFi works by sourcing paintings, purchasing them, and then tokenizing them so they can be bought and sold by investors. For each painting it owns, it creates 10,000 NFTs that represent one 10,000th of a share of that work. These NFTs are auctioned off to ArtFi’s community of investors, after which they can be freely bought and sold on its community-run peer-to-peer marketplace. ArtFi reserves the right to sell its paintings at any time, and if it does, it will refund token holders their share of the proceeds.
Of course, it’s worth pointing out that tokenization doesn’t rule out more traditional financial assets. For example, if you’re looking to invest in government bonds (always considered a safe and secure asset in times of economic crisis), you could do a lot worse than looking Ondo Financewhich has created a thriving market for tokenized bonds. One of its most popular offerings is the Ondo Short-Term US Government Bond Fund, which gives USDC holders a simple way to invest in and freely trade tokenized short-term US government bonds.
The Future of Investing
By now, you should be starting to understand why tokenization is such an exciting development in the blockchain world. It promises to transform the way people invest and build wealth, paving the way for everyone to get involved in real-time asset trading and diversify their investment portfolios with minimal hassle.
The underlying blockchain provides a secure, transparent, and immutable ledger that can accurately track investments around the world, prove who owns what, and facilitate quick transfers when those owners want to sell and cash out. With tokenization, investing becomes more accessible and consistent, meaning everyone has the opportunity to get rich.
Disclaimer: This content is informational and should not be considered financial advice. The opinions expressed in this article may include the personal opinions of the author and do not reflect the opinion of The Crypto Basic. Readers are encouraged to conduct thorough research before making any investment decisions. The Crypto Basic is not responsible for any financial losses.
-Advertisement-