Translating real assets into digital equivalents has a number of fundamental advantages over traditional investment methods. Perhaps the most intriguing to the average investor is the…
Because tokens are highly divisible, they provide great investment opportunities for a wider range of people. Fractional ownership allows potential investors who may not have the funds to purchase the entire asset to purchase just a fraction of it. For example, if you want to expand your real estate portfolio by purchasing a penthouse overlooking Central Park, you can purchase a token that gives you fractional ownership. This will allow you to share in the property’s rising value and generate rental income without having to raise millions of dollars to do so. When property titles are digitized as multiple tokens, you can buy as much or as little as you want on any number of different properties, and your tokens will become indisputable proof of your ownership.
The smart contracts underlying tokens significantly speed up transaction processes. With digital signatures and blockchain algorithms replacing traditional paperwork and manual data entry, the time it takes a buyer to purchase a home is reduced to days, while other goods, such as company stock, can be purchased in minutes. Moreover, with all transactions invariably stored on the blockchain, this increase in transaction speed comes without sacrificing security and accuracy.
Converting real assets into digital tokens creates a much healthier and liquid trading environment. Some investments are not inherently liquid – fine art, for example. If you own a Van Gogh painting, while it may be a solid investment, it’s not easy to sell at a moment’s notice if you need the money (at least not without losing a small fortune). However, thanks to tokenization, ownership of Van Gogh can be divided into multiple units, which are easier to trade and increase the value of the underlying asset in the process.
While a token can hold an immutable record of ownership, it also contains all the data about the owner’s rights and legal obligations. This allows for much greater transparency in transactions, as you will have a clearer picture of the person you are trading with and the legal rights of both parties, as well as a complete list of people who have previously owned the token.
More cost-effective transactions
When tokenization eliminates the number of intermediaries involved in transactions, the entire process becomes simpler and cheaper. Because blockchain itself serves as the “source of truth” when it comes to transaction data, we no longer need the seemingly ever-expanding list of brokers, agents, registrars, and custodians that have traditionally held the keys to the market. Moreover, with the elimination of these intermediaries, tokenization increases security because there are fewer points where data storage and exchange can be compromised.
All of these features indicate that widespread adoption of tokenization cannot come too soon, the question is, what stands in the way?