Talk about the most discussed concept in the contemporary fintech world and crypto tokenization of assets on blockchain is the most trending topic today. For those uninitiated, tokenization refers to the protocol of transforming ownership and rights of a valuable asset into digital format. Although tokenization is nothing new yet the concept is gaining stronger traction today with the advent of cryptocurrency and crypto businesses.
Crypto tokenization
Crypto tokenization on blockchain primarily serves two functions. One, the process is used to increase divisibility of ownership rights of an asset. The other is for securitization of an asset. When an asset is tokenized on blockchain, a crypto token is assigned to it. The crypto token here represents the asset or rights to it.
In regard to assets under tokenization, crypto tokenization on blockchain tech caters to regulated financial assets (loans, bonds, funds, and equities), tangible assets (artworks, real estate), and also intellectual property.
Best aspects of crypto tokenization of assets
There are multiple advantages of crypto tokenization of assets.
Easy liquidation of assets
Assets, especially high value assets, command enormous selling prices. Now, this comes with a couple of problems. One, if the price is beyond the reach of a larger chunk of investors then it would be a herculean task to find a buyer. The other is the process of selling might take a longer time. Worse, the owner of the asset then might have to sell off the precious asset at a discounted price.
Crypto tokenization of assets makes way for improved liquidity. This way, the asset would be able to fetch a large number of buyers and get sold off faster.
Better security
It has been mentioned above that the concept of tokenization started rising in popularity with the advent of cryptocurrency and crypto businesses. Well, the primary reason behind it is that crypto tokenization of assets enjoys the cutting-edge benefits of blockchain technology. One of them is state-of-the-art security. All the data related to the crypto tokenized asset is recorded in blockchain ledger, backed by impenetrable cryptographic encryption.
Also, blockchain ledger is immutable and no data entered into it could be altered. Thus, you will be able to have peace of mind about the fact that all your transaction and ownership data about a tokenized asset cannot be manipulated by anyone.
Faster settlement
With blockchain as a base, settlements for tokenized assets operate in a decentralized environment. This implies faster settlement of asset-related transactions which could otherwise be a huge deal if it’s an international transaction.
Industries that would benefit from crypto tokenization of asset
Real estate
This is the most crucial industry that would benefit from crypto tokenization of assets.
In the traditional selling process, high value properties often take a lengthy time to get sold. But, crypto tokenization of assets has allowed to introduce easy divisibility of a realty property into several highly economical fractions. An aspiring person can buy one or a bunch of such fractions to enjoy shared ownership of the real estate property.
By fractionating the property into affordable parts, crypto tokenization of the asset makes it easier for several aspiring buyers to aim for ownership rights (shared) in the property. This way, the property would get sold off faster, despite being a high-priced asset.
The shared owners have the right to sell off their ownership rights to interested buyers if they want to sell it off in the near future. This way, crypto tokenization of assets like real estate brings in a fair and even investment environment for all investors.
Gaming
Gaming industry has started the P2E protocol where you would be able to earn crypto tokens on playing the game.
Art
Crypto tokenization of assets applies in the art industry in the same way it applies to the real estate industry, as discussed above. High end art pieces find it tough to find a host of buyers. Not all art enthusiasts are millionaires and it’s often difficult for most art connoisseurs to shell out a small fortune for the asset.
Nobody is saying that the art piece does not deserve such high prices. But, the above paragraph just mentioned the problem encountered by high-value art pieces. Crypto tokenization of the art asset resolves the problem by making the asset highly liquid and the ownership easily divisible and attainable.
Financial services
As mentioned above, crypto tokenization caters to financial investment assets.
Thus, the financial services industry is one of the most significant industries that has been benefited by crypto tokenization of assets. The tokenization process helps these companies to easily divide several financial products- like equities, funds, stock etc.- into small fractions with shared individual ownership rights for each fraction. This way, crypto tokenization enables the financial service companies to make these products easily accessible to a large number of investors that eventually help in fast selling of these assets.
Investment platforms
Investment platforms too find it hard to find the right buyers for high-value assets given the high price. Crypto tokenization of assets helps these portals to connect the creator or sellers of the asset with a long line of potential buyers through the privilege of shared and affordable ownership benefits.
Pharmaceutical
Fake drugs are becoming a glaring issue in the pharmaceutical industry with each passing year. Worse, most of these fake products represent major antibiotics as well as life-saving drugs. Well, crypto tokenization of pharmaceutical assets, say drugs, could show a way here to combat the growing problem.
Crypto tokenization could be assigned to the most faked drugs. After tokenization has been implemented, the pack of medicines would be represented by the token on the blockchain. As blockchain allows easy transparency, every person in the entire supply chain system of medicine would be able to have a clear view of the product. Tokenization would enable them to verify the product at each stage with a QR (tamper-proof) code that would stand as evidence for the genuine product.