What is tokenization?
Tokenization transforms the way in which both tangible and immaterial values are appreciated, managed and traded, by converting them into digital tokens on a blockchain. This is part of a larger movement towards digitizing assets, so that the ownership of, for example, real estate and art, but also of shares and copyrights, can be represented in digital form. The tokenization process offers a transparent, safe and unchanging way to register ownership or interest in an underlying value via the blockchain. By dividing assets into smaller, affordable parts, tokenization makes it possible for a larger audience to invest in other unreachable or expensive assets. Smart contracts , automated pieces of code on a blockchain, play a crucial role in this process by automatically performing certain actions, such as paying off dividends or facilitating voting rights, as soon as certain conditions are met.
Applications
The potential impact of tokenization is versatile. In the real estate market, for example, it can increase accessibility and liquidity by splitting ownership into more affordable units. Art and collective objects can also be made more accessible in this way, which opens new financing options. For financial products, Tokenization offers a way to more efficient and more accessible markets, and stimulates the development of new financial products and services.
Tokenization fundamentally changes the way in which we look at ownership, investments and value transfer. It makes assets more accessible, efforts the road for more efficient markets and ensures safer transactions. The development of tokenization, driven by the progress in blockchain technology, promises transformations in various sectors, illustrated by initiatives such as the new BlackRock Fund (read more information about this fund below).
The benefits of tokenization at a row
Asset Tokenization brings countless important benefits that can fundamentally change how we deal with and invest in various assets. Below is a floor in five of these benefits
Increased liquidity
One of the main benefits is the increase in liquidity, which manifests itself in several ways. By dividing assets into smaller sharing certificates, it becomes possible for a wider audience to invest in other unreachable assets, which increases the potential market and more buyers are attracted. In contrast to traditional markets, where transactions can take time, tokenization makes faster transactions possible, with immediate completion ( instant settlement ). An additional advantage is the possibility for permanent trade, since digital markets are not bound by standard trading times.
Fractional ownership
Fractional property, another fundamental advantage of tokenization, makes valuable assets such as luxury real estate or artworks more accessible to the average investor. This creates new investment opportunities that were previously reserved for the wealthy people, while at the same time it gives smaller investors the chance to diversify their portfolios by investing in different types of assets, reducing the risk and increases the chance of higher returns.
Transparency and safety
The transparency and safety offered by Tokenization are also important. By registering transactions on a blockchain, the integrity of investment data is guaranteed, which facilitates the verification of ownership history and the current owner of a token. The nature of blockchain also makes it extremely difficult to manipulate or falsify data, which significantly reduces the fraud risk.
Efficiency
Tokenization reduces the need for intermediaries such as brokers and lawyers, leading to lower transaction costs and a more streamlined investment process . Smart Contracts Automaten The implementation of agreements as soon as certain conditions are met, which not only increases efficiency but also reduces the risk of human errors.
Global accessibility
Investors from all over the world can gain access to markets that were previously outside their reach, resulting in a more inclusive and more diversified investment environment. This global reach can increase the valuation of certain assets, since the demand is no longer limited to local or regional investors.
Example from practice
The recently launched new Fund of BlackRock on the Public Ethereum Blockchain - Buidl (Blackrock USD Institutional Digital Liquidity Fund) strives to maintain a stable token value of $ 1, with dividends paid daily in tokens. The fund invests entirely in US government bonds and this gives Token owners the chance of a return. BlackRock uses Coinbase for the custody (storage services). Among the first initial investors are renowned names such as Anchorage Digital Bank NA, Bitgo and Fireblocks. Securitize plays a key role as a platform for tokenization.
In addition, BlackRock has strategically invested in Securitize, with Joseph Chalom from BlackRock who is joining the Securitize board. These types of funds form an entrance gate to token further financial assets, such as bonds, on blockchain rails .
This article was compiled by the BitStaeteInvestment Team. If you want to know more about the professional investing in Digital Assets, please contact us.
