The emergence of blockchain-based asset tokenization has changed the landscape of businesses that deal with assets, from art to buildings, management of such assets, and the way investors look at investing with assets. Today, asset tokenization is gaining significant traction and attention among potential global investors in the blockchain and financial world. What is the reason for the buzz around asset tokenization? What is meant by asset tokenization and what benefits it brings in for investors and entrepreneurs over traditional asset management business? That is what we are going to discuss in this blog, to help you understand asset tokenization platform development is indeed the right way to go, for your business as well. So, let’s go ahead and get started.
Unraveling the concept of asset tokenization
Tokenization of assets is the process of issuing blockchain-based digital tokens that represent the value of a real-world asset. In simple terms, By tokenizing the asset, the asset value is divided into several shares, as well as their ownership is fragmented on a blockchain platform that keeps a track record of every transaction and ownership information.
For example, a million-dollar value property can be divided into 100 shares/ 100 tokens, each token representing 1% of the value of the property. This enables fractional ownership, and the investor owns a % share of the property according to the number of tokens they purchase.
Various types of assets can be tokenized on a blockchain platform such as,
- Real Estate Assets
The major stumbling block for Real estate investors is the illiquidity of assets due to the involvement of third parties, limited investors access etc. Through tokenization of real estate assets, middlemen are eliminated and token issuers and investors can conduct speedy, smooth transactions with enhanced liquidity.
- Private Equity shares
Blockchain-based tokenization simplifies and streamlines the process of issuing, managing, and selling equity private equity shares within the defined time period, and companies can efficiently reach global investors and amplify their financial growth.
Tokenization of commodities removes barriers to entry and allows investors to efficiently access the market and offers them a wide range of opportunities to double up their investments. It also provides them with added liquidity for efficient and seamless transactions.
- Any Other Physical Goods
Any physical goods can be tokenized from artwork, wine, cars, private companies ownerships, partnerships, etc. By tokenizing, the assets become more easily accessible, and blockchain brings in more liquidity and transparency for users.
The key benefits of asset tokenization
- Improved Liquidity
As discussed earlier, the tokenization of assets enables access to a broad range of investors. Once the tokens are created, investors are allowed to trade them on a secondary market of their choice, which brings in more liquidity, thereby efficiency to transfer the assets or convert them into fiat money.
- Faster and cheaper Transactions
A tokenized asset platform eliminates middlemen and facilitates automated smart contract-based transitions. Therefore, it facilitates speedy execution of transactions with lower transaction fees.
- Improved Accessibility and broad user base
Tokenization of assets paves way for a wider range of audiences to participate and invest in assets as it enables fractional ownership and divides the asset value into small shares. Even small-time investors can participate in an investment of expensive asset value and diversify their portfolios and earn double the profits with the help of tokenization.
- No geographical barriers
As the asset values are converted into digital tokens, there is no geographical barrier. Any investor can purchase and own a share of any asset, and conduct transactions from anywhere around the world.
- Elimination of middlemen
Elimination of middlemen in a tokenized asset platform not only helps with reduced transaction costs, but also ensures quick settlements and provides added security, immutability, transparency, and a quick process.
- Enhanced Transparency
Blockchain records every transaction, legal, and ownership information of the asset which cannot be altered or erased once recorded. Every involved user can view and access the information required such as ownership rights, etc.
With the constantly growing demand and competition, many companies have started offering asset-backed tokenization development solutions. To choose the right platform for your business, below mentioned are a few factors that you need to carefully look into.
Essential factors to carefully consider in an asset tokenization platform
- Legal Compliance
The first and foremost factor to analyze is if the platform is legally compliant. To ensure a strong foundation and long-term sustainability for your business, the asset tokenization platform should comply with every essential legal framework based on your geographical location. Also, you should make sure the platform complies with KYC( Know Your Customer) and AML( Anti-Money Laundering) Norms to ensure authentic users and transactions.
- Infrastructure and Blockchain Integrations
The company you choose to tokenize your assets on should thoroughly research, analyze your business model, and integrate the right blockchain platform it will be feasible to work with and implement advanced features and core functionalities for smooth operations. Also, the platform should comprise robust infrastructure, scalability, and flexibility for users to customize or make decisions on the platform according to their personal preferences.
- Enhanced Security
Security should be given utmost importance while building your asset tokenization platform. Every user information, asset information, and transaction details should be completely protected end-to-end and users should be constantly updated about what is happening on the platform, the changes made, etc. The platform should be integrated with multiple security protocols for smooth, secure, risk-free operations for both token issuer and investors.
What does the future hold?
As we discussed earlier, asset tokenization is gaining momentum by the day, and more issuers and investors are inclining towards them due to the many benefits it brings in such as enhanced efficiency, privacy, transparency, speedy and seamless transactions, globalization, etc. Mainly, it brings in a wide range of opportunities for small-time or new investors to participate in the ownership of assets with a rich value, to diversify their portfolios, and boost up their profit chances. Experts predict that tokenization of assets is slowly transforming the industry into a whole new level and has all the potential to become the future of asset investments.
If you are eager to become a part of this revolution as quickly as possible, the best choice is to acquire a white label tokenization platform from a reputed company. A white-label platform is nothing but a readily-available platform that ensures a quick and an efficient launch for you to get down to business in the shortest possible time, and forge ahead of your competitors in the market. Therefore, conduct ample research and choose your asset tokenization company as soon as possible.