Assets tokenization has been one of the most sensible solutions for most businesses regardless of their scales.
If you are striving for digital asset tokenization to improve your business growth and process, then you have come to the right page since we are going to cover the basics of assets tokenization with the help of the blockchain.
As we know, asset management is an important part of all organizations and businesses. However, the asset owners are prone to downsides because of the risks of documents duplications, forgeries, and many other irresponsible behaviors from third parties. One of the most effective ways to preserve the ownership of the asset holders is to transform the asset management process by tokenization.
On this occasion, you will learn about the tokenization basics and what you need to do to get started.
Asset Tokenization definition
Asset tokenization is the process of converting physical or digital assets into the blockchain. However, this definition has been more common for those who want to keep their physical assets.
From time to time, the conservative industries have started to proclaim their interests in the benefits offered by the asset tokenization platform. Actually, the birth of tokenization was three decades earlier than blockchain and cryptocurrencies. Since the 1970s, some enterprises use tokens to keep confidential information such as credit card numbers, social security numbers, and so on. But now, we have recently seen it is also viable for physical assets too.
The usage of tokenization
The use cases could be different from one industry to another. For instance, the hospitals use tokenization to keep the patient records safe and sound.
In government bodies, the staffs use this solution for utilizing voter registration.
This specific solution can help protect a lot of sensitive information from outsiders.
In the Banking industry, it holds such crucial aspects for the customers. The information of the customers is safely stored in the centralized data storage. To create tokens, the bank will utilize the crypto function. The customers will then receive the tokens which represent their credit card. the practices of asset tokenization do not only focus on financial information. The sky is the only limit.
The nowadays asset management conditions
It is important to be aware of the current state of asset management to find out the real use cases of human asset tokenization. Asset management refers to the process of producing, storing, and other important tasks in every phase of the ownership. That includes the transfer of ownership from one party to another. All in all, smart contracts can assist all folks with tasks management automation. The current problem which most folks need to consider is the interference of the intermediaries. Therefore, one would expect a significant rise in the cost of the process.
Asset management issues
The traditional asset management approach comes with some loopholes and downsides. There are many people who have been complaining about the errors of this approach.
It has been challenging to trace back the source of the errors in the first place. It is also hindering the process of the business because conventional asset management has never been simpler. The complex procedure also creates barriers to interoperability and accountability.
The traditional way of asset management is still prone to hackers and cybercrimes.
The Asset tokenization solution
The advantages of blockchain technology in tokenization will improve the security of the information.
To some extent, blockchain tokenization differs from prior approaches to tokenization. Traditional techniques to asset-backed tokenizationsolely focused on data, but blockchain-based asset tokenization included assets as part of the tokenization process.
A blockchain token can represent any tradable asset. You can exchange even little sums of money thanks to it. Many newbies nowadays mistakenly believe that fractional ownership is the same as investing in securitized debt. However, using blockchain to tokenize assets varies considerably from the other two methods.
It’s important to realize that tokenization and securitization aren’t interchangeable terms. Tokenization is the process of converting all physical assets into a digital token that can be traded more easily. Turning low-liquidity assets into highly liquid security instruments is known as securitization.
It is possible to trade security tokens over the counter or on exchanges. Disconnected parties can meet and trade in the digital world thanks to blockchain tokenization, which differs from fractional ownership.
Comprehending the asset tokenization with an example
Let’s take a look at an example from the real estate investment.
For instance, you might have smaller capital compared to other people. Therefore, you are not able to purchase the fraction of property or make the flexible installment for you. However, you can nowadays purchase the ownership of the real estate without having to prepare an enormous amount of money to get the entire unit. Instead, you could purchase a fraction of that.
For instance, if you only have $10,000 to invest, the asset tokenization will convert your money into 10,000 tokens. Each token would carry a certain percentage share of the apartment. And yes, you will share the ownership with the other people who have different numbers of capital to start investing. You don’t need to worry about the agreements or contracts. The smart contracts backed with Ethereum can help you from top to bottom.
Types of Tokens Used in Blockchain Tokenization
There are several types of tokens in the blockchain. And you will need to know some of them before proceeding.
Tangible token – The valuable assets with their physical form.
Fungible tokens – fungible tokens are digital assets that come with the same value.
Non-fungible token – this token type is usually relevant to a certain token that has unique traits and is non-interchangeable.
Why is it important for my business?
Tokenizing your assets will bring a lot of benefits for you and all relevant parties.
First things first, the assets will have much better liquidity. As we know, old-fashioned asset management is not liquid. Liquid assets can help businesses to make quick and appropriate decisions.
That also means that there will be no intermediaries that can jeopardize your business. You don’t also need to deal with the extra fees when transferring your assets.
Digital asset tokenization will also result in automation and boosted productivity.
Consider reaching out to INC4 now to see the available opportunities for your business or a particular project.