Here’s 5 Reasons Why Tokenization Makes Sense and You Should Use ItPublished by
Blockchain returns power to the people after it had previously been held by the financial elite and the unforgiving norms of capitalism. It allows us to digitally distribute value and govern the flow of things without relying on powerful interest groups or wealthy individuals. Future-thinking concepts like expanding access to culture for the general population and encouraging creative risk-takers may be introduced in this manner. Tokenization on the blockchain allows us to expand opportunities for investors, consumers, and entrepreneurs by making previously inaccessible resources more widely available.
You may be wondering, "Why the heck are we even concerned about tokenization?" And what business is it of yours to know?
Allowing for entry by individual investors
Real estate, pricey works of art, rare jewels, and flashy sports vehicles are just few examples of the kinds of traditional assets that are unaffordable to all but the wealthiest of investors. Additionally, transaction costs associated with conventional trading of desirable assets might be excessive for deals of modest value. Now that everything can be stored and accessed digitally, even middle-class people may afford to indulge in previously unattainable luxury goods. With tokenization, a wide range of investors may participate in the value and ownership of a single asset while benefiting from reduced transaction costs.
After purchasing tokens, they may be saved in a digital wallet that can be opened in minutes online, without the need to visit a bank or a broker. Capital barrier elimination is another way that tokenization streamlines the process. With a digital wallet, you are not restricted in any way, either in terms of how much money you can put in or how often you may use it. This makes cryptocurrency and other digital assets more widely available than their conventional counterparts. As a result, many people's first foray into the world of investing is in digital assets like cryptocurrencies and tokens.
The infrastructure of the tokenization ecosystem makes it possible to automate several steps of the regulatory compliance process (including know your customer and anti-money laundering). Token issuers may use pre-built solutions for Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance monitoring and implementation by various developers to ensure that their investors' identities are properly verified in a way that is both efficient and low-maintenance.
Blockchain, as a distributed ledger, ensures and decreases the risk of the transaction partners due to its transparency and immutability. It allows for accurate tracking of where digital assets really are. Smart contracts have recently emerged as an exciting new option for building completely decentralised apps without the need for a third party. In this way, the execution speed, cost, security, and privacy of smart contracts are more enhanced compared to conventional transaction methods. Legally material acts and occurrences are automatically carried out, regulated, and recorded by a computer-written contract. Blockchain technology improves the openness of digital reality, fosters trust, and affects how secure a transaction is seen to be from each participant's perspective.
Increased Cash Flow
Real estate, copyrights, and artwork are just some examples of private assets that could benefit from tokenization. Once created, these tokens could be traded on secondary markets, such as the increasingly popular decentralised DeFi platforms (Uniswap and PancakeSwap) or centralised cryptocurrency exchanges (Kucoin, Binance, Coinbase). Since of this, the token's liquidity is improved because it may be traded by more people. Token holders and the issuer both gain from this increased liquidity. The reduced cost of obtaining tokens and enhanced marketability result from the disinter-mediation in processing transactions. The lucky confluence of circumstances increases the token's value on the market (known as a "liquidity premium").
In conclusion, the limited liquidity, high obstacles to entry, high cost, and lack of transparency of transactions associated with investing in conventional financial instruments are only a few of the numerous drawbacks that dissuade small company owners and investors. With blockchain technology, we can avoid these issues and open the door to investment and funding for everybody. The tokenized asset market has several advantages for its players, including increased efficiency, more transparency, and reduced processing times for various financial market procedures due to automation and lower enforcement costs
By splintering equities and making room for smaller organisations and people to participate in markets that were formerly reserved for huge enterprises, tokenization provides liquidity to assets that were previously deemed illiquid. Last but not least, tokenization is facilitating the emergence of hitherto unattainable financing channels for micro, small, and medium enterprises, as well as a wide range of projects and independent groups. Blockchain allows us to remove these stumbling blocks, giving new life to the dreams of intrepid business owners.