Assets Tokenisation

While living in a world where digital technology is conquering literally every aspect of our life, the concept of asset tokenization opens completely new horizons for investment and property management. In the simplest words, tokenization means digitizing the rights to assets with the help of blockchain technology. This will simplify and bring more transparency to transactions of titles to assets, adding more opportunities for such assets to become available to a wide circle of investors.

What is tokenization?

Tokenization of assets refers to the process by which digital tokens are issued, representing ownership of physical assets such as real estate, artworks, and precious metals, among other ventures. These tokens are issued on-chain, making them freely tradable or exchangeable on cryptocurrency exchanges. Each token is unique and contains all ownership information, ensuring a highly secure and transparent transaction for every exchange.

Benefits of the tokenization of assets

Accessibility

Tokenization allows for expensive assets to be divided into numerous small shares, providing investments accessible to a wide class of investors. That opens up an opportunity to take part in high-yielding projects that previously were accessible only for big capitalists.

Liquidity

In this form, these assets can be sold or exchanged with other assets more easily because now they are in digital format and can be traded on global platforms 24*7. This increases the liquidity of conventionally considered illiquid assets, such as real estate, manifold.

Transparency and security

That ensures a high level of transparency and security of the transactions. That is because all of the transactions are recorded in some kind of distributed register that all the participants of the network can have access to, and that even excludes the very possibility of data falsification.

Efficiency and cost reduction

Tokenization eases and quickens all processes that concern buying, selling, and the exchange of an asset while limiting cases of intermediaries and reducing administration costs for all parties concerned. In this case, the process of investment for everyone concerned is now smooth, quicker, and less expensive.

Some Possible Risks

Tokenization of assets does not mean it is bereft of risks. Probably the biggest risk pertains to the uncertainty in regulations because many aspects of tokenization have not yet been ruled upon at a legislative level. There is also the menace of losses on account of volatility in cryptocurrency markets and possible technological failures on the blockchain.

The tokenization of assets is the new stage of property management and investment, making it more liquid, accessible, and transparent. At the same time, it is too new technology that needs thoughtful regulation and the elaboration of standards of security with the purpose of minimizing the risks. Soon, we can also expect further development and integration of tokenized assets into the global economic system, opening new opportunities both for investors and entrepreneurs.

What is the basis of asset tokenization?

Asset tokenization is a treatment of securities, precious metals, real estate, commodities, and other kinds of assets into digital tokens that can be bought, sold, and exchanged. At the same time, the value of such digital tokens is provided by a real-world asset-in the market this type of cryptocurrency is considered as one of the most stable and protected from volatility.

Asset tokenization uses blockchain technology, and so all the transactions performed over it are secure and crystal clear. That means, once you bought tokens representative of real-world assets, no individual or organization could affect your ownership since the blockchain network is decentralized.

We’ve been hearing so much about tokenization lately, and for all great reasons: this process is useful both for investors and a business. Well, it’s simple-the mechanic opens many opportunities.

Among the major benefits asset tokenization would give to a business is the fact that it has a way of raising capital without necessarily going through the IPO or private placement process. This will enable a company to tokenize their business or assets in order for them to raise investment in their project, rather than merely issuing ordinary shares or bonds which tends to dilute ownership in the Company.

In turn, tokenization opens access to the markets that, until now, were unreachable for investors, it provides a low threshold for entering the investment circle and creating an opportunity for portfolio diversification. At the same time, the investor will get all the benefits of working within a blockchain system: it is a transparent settlement model, and one cannot falsify the ownership over an asset. The above is what tokenization can give.

The most interesting applications of asset tokenization are an opportunity to form a fully decentralized asset trading platform. It already presupposes a possibility for direct sales and purchases of assets by participants with the exclusion of intermediaries like brokers and exchanges. The described concept provides a chance to decrease commission costs and speed up the time needed for a transaction.

A second reason for its popularity is reliability and low volatility. Unlike the great majority of cryptocurrencies, whose values are constantly jumping up and down, the digital tokens connected with a business or some valuable asset are more stable.

Tokenization can, therefore, finally make investing in and transferring assets even more frictionless for both individual and institutional investors. Indeed, according to Deloitte, 29% of financial services companies are already using tokenization in one form or another, while this figure is going to increase over the next few years. Therefore, the market of tokenized assets may reach $2 trillion by 2030 according to the report by PwC.

Tokenisation is something worth paying close attention to: the process of value conversion of some asset into a form of digital token on a blockchain, able to be held in private hands. The underlying assets that this could be applied to could quite literally range from anything to everything-from tangible physical things such as art and real estate to financial things such as stocks and bonds, or intangible ones like intellectual property or personal data and identity. Tokenization can issue, among others, stablecoins-those cryptocurrencies that are coupled with conventional money with the purpose of keeping stable price levels-and NFTs or non-fungible tokens, one-of-a-kind digital items that represent ownership and which can be bought and sold.

Indeed, this is so huge that the industry is forecasting that tokenized digital securities will reach a volume of US$5 trillion in trade by 2030. Given the hype associated with digital asset tokenization since its very beginning back in 2017, in reality, digital asset tokenization has happened gradually.

What is Asset Tokenization?

Consider Bitcoin the key that opened up a whole new dimension to remaking how we issue, manage, and trade assets and investments. At the heart of Bitcoin and what’s making these transformations possible, there is blockchain technology-a very special type of digital ledger that opens up a whole world of investment opportunity.

What blockchain is doing, in part, to the financial landscape is making ownership of assets more granular. This, therefore, opens up access to assets that were hard to sell piecemeal, such as art, digital platforms, real estate, company shares, or collectibles. In other words, it levels the playing field for investing in just about any kind of asset. But what exactly is asset tokenization?

Understanding Asset Tokenization

Asset tokenization is basically a process wherein the rights to an asset get digitized into tokens on a Blockchain/Distributed Ledger. This essentially means that, for a particular asset, investing in the token secures ownership on the blockchain, which can never be tampered with at the hands of any one single authority.

Simpler example:

You own a house worth $500,000. The beauty of tokenization of assets lies in that you may divide, say, the ownership in your house for 500,000 tokens, with each representative token to be representative of 0.0002% ownership in your home. So, you needed to get $50,000 and did not want to sell your home; you might issue these tokens on some blockchain platform. This opens up avenues for investors to start buying and selling your tokens across exchanges. Buying a token essentially means the owner acquires a small fraction of the property, but one can buy a whole property with 500,000 tokens. The beauty of blockchain is that it’s unchangeable, immutable-meaning no one can take away or adjust the share of ownership which someone has bought.

There are two types of tokens: fungible and non-fungible.

With these innovations, digital asset tokenization democratizes access to investment and reimagines modern-day asset ownership.

What can be some definite benefits of the Asset Tokenization Process?

Indeed, tokenization is increasingly regarded as a truly disruptive innovation by industry pioneers—one that finally has the potential to shake up the face of financial services and capital markets. With the capability of tapping into the real benefits of blockchain technology—always-on and the appeal of data becoming freely available—asset holders will devise new ways whereby they can manage their assets and process transactions. Blockchain makes transaction processing faster because of faster settlement, and processes are more automated. Automation can occur with the use of smart contracts: pieces of code that execute transactions when given conditions are met.

Expected advantages of tokenisation in this sense are legion. These are going to include, among others:

Speedier settlement of transactions

Whereas traditional settlement involves some two-day delays after the actual transaction, tokenization can provide the opportunity for real-time settlement. This is a particular benefit in high-interest-rate environments, affording financial institutions a full opportunity to cut costs literally and dramatically.

Operational efficiency:

The fact that data will be available 24/7, and programmability of the assets is going to simplify operations in asset classes known for their manual and error-prone operations, such as corporate bonds. Putting operations such as the calculation of interest and coupon payments inside the smart token contract means these activities will happen by default, thus limiting the need for heavy manpower.

Democratization and accessibility:

Tokenization may create the potential for small investors to access investments that are otherwise more cumbersome or more labor-intensive to deal with, given the multifarious process involved. Therefore, such a service would be more economically viable for financial service providers where this democratization can be realized only if there is significant scaling of tokenized asset distribution.

Increased transparency:

Smart contracts have the potential to encode the rules of transactions directly into the tokens issued by the blockchain. An automated response may be triggered when conditions have been met. In carbon trading, for example, the blockchain provides a transparent and indelible record of transactions.

Less expensive, more flexible infrastructure:

Open blockchains are cheaper and flexible compared to traditional financial infrastructure. Thus, developers can iterate and innovate with much speed.

The future of tokenization in financial services and capital markets indeed looks very bright with updates of relevance. Believing in tokenization for seamless and transparent transactions, the democratization of access to new assets may just disrupt the traditional financial system by making it increasingly efficient, accessible, and adaptable to the new and evolving demands of the digital era.

How does Asset Tokenization Work?

One path to tokenized assets is multistep. First, it includes the decision on whether this asset is going to be fungible—interchangeable—or non-interchangeable—unique. Then comes a proper blockchain choice on which the tokens will be issued. It involves hiring a third-party auditor who verifies the assets that exist outside of the blockchain, and then goes on to actually issue the tokens.

In this respect, the blockchain technology makes sure that the record of who has ownership of the assets is tamper-proof through an internally decentralized architecture. In this respect, blockchain allows users to have more trust in the integrity of the system.

The common steps generally followed for tokenization of an asset include:

• Asset Sourcing: Understand the most appropriate way to tokenize any particular asset. This can be very different, from a money market fund to a carbon credit or other assets. Identifying whether the asset is under security or commodity and the regulatory requirements applicable is also part of this.
• Issuance and Custody of Digital Assets: If the asset has a physical analogue, it shall be safely deposited in a neutral secure location. Following this, an appropriate token, blockchain network, and compliance mechanisms for creation of a digital twin of the asset are selected. Keeping the Digital Asset under Control until Distributable.
• Distribution and Trading: This requires the investor to set up a digital wallet for holding the digital asset. Depending on the nature of the asset, it can be traded on secondary markets, which are freer to regulate than traditional exchanges.
• Asset Maintenance and Reconciliation: After distribution, an asset must be continuously maintained to enable regulatory tax and accounting requirements to be processed, as well as corporate activities and any other updates that may become necessary.

What can be tokenised?

The digital revolution brings partial ownership and tangible proof of ownership to a huge variety of assets. From more traditional investments—venture capital funds, bonds, commodities, and real estate—to pure unique and exotic assets, such as sports teams, racehorses, artworks, and even shares in the careers of celebrities, companies around the world are using blockchain technology to tokenise just about everything.

We have, however, categorized tokenised assets into four main groups for a better understanding of the broad spectrum, as follows:

• Assets: Generally speaking, an asset is something that can be converted into money. Assets then break down into one of two camps, personal or business. Personal assets include cash, real estate, etc. Business assets include everything that may appear on a company Balance Sheet. Any of these may fall under either the Tangible or Intangible categories.
• Equity: This is also an issuance of tokenised share capital or firm shares. The tokens of these shares are kept in the form of Digital Security Tokens, which are then securely held online in wallets on the Internet. This digital form allows the investors to purchase, sell, and trade the shares just like in traditional exchanges but now with added security and efficiency using blockchain.
• Funds: A very suitable asset class for tokenization is investment funds. Schemas like this tokenize an investor’s interest in a fund, making it easier to both buy into and sell an investment; it can even reduce entry barriers to include smaller investors. Each token gives representation of a percentage of an investor’s interest in the fund, democratizing access to investment opportunities that might not have previously been available, or out of reach, to many.
• Services: Other than physical or monetary, businesses can tokenize goods or services. In this new way, it is possible to raise funds or run a transaction by giving away tokens exchangeable for goods or services. This leads to newer ways of investment or customer engagement because investors can thus directly support and benefit from the success of the same business that they believe in.

Such categorization has the added utility of putting the scale and depth of opportunity brought about by tokenization into some sort of context. Tokenization is more than one tool of financial innovation; it is one mechanism by which property, capital, finance, and service delivery may be reconceptualized in a digitized world. The employment of blockchain technology in this respect makes the transaction secure and transparent; hence, it ensures fair contribution to an inclusive and accessible marketplace for investors and consumers alike.

Before we get into tokenization per se, let me just start with what a “token” exactly is. Unless you knew, the word and concept predated Bitcoin and cryptocurrencies, so it’s not inherently a cryptocurrency thing: a token is essentially just something that is a visible or tangible representation of something else, and that’s it. Casino/gaming token, voucher token, token of our appreciation, etc.

We might say that, in cryptography, the world token is some kind of digital object, a line of code representing some value—money, real things, works of art, etc. In such a sense, one can define tokenization as the process of transforming an asset or its ownership right into individual units, so-called tokens, within a crypto network.

Or, in other words, it is any kind of asset digitization-cum-registry process, whether physical or otherwise.

Tokenization seeks to enhance liquidity, allow equity ownership, and optimize the trading of all kinds of asset classes at better levels for the wider universe of investors.

It provides a digital form of real estate, a piece of art, or a financial instrument, hence making the use of such assets more effective and decentralized across various crypto networks worldwide without any kind of bureaucratic hindrance.

Types of tokenisation

The tokenization of crypto registries could be differentiated based on interchangeability, non-interchangeability, control, and utility. Interchangeable tokenization includes standard tokens with identical values to interchangeable currency units.

In contrast, non-fungible tokenization involves ownership of unique assets such as digital art and real estate, wherein the value of the token is determined solely by the underlying asset.

Overall, this form of tokenization works well for shared ownership of assets. Many investors in any part of the world can own the same house, wherein the ownership is equal to tokens that can be interchanged.

Governance tokenization gives the right to vote to the owners so that they can take part in decision-making processes via a digital medium, while utility tokenization offers access to certain products and services in a particular chain, enabling the carrying out of such activities as paying transaction fees and managing decentralized market systems.

More broadly, we can classify tokenization as tangible or intangible, due to the assets involved. These assets can thus be either tangible, such as gold or real estate, or intangible, including examples like voting rights or licensing of content.

In other words, it applies to literally everything that possesses value, is owned, and is to be included into the extended asset market.

Why tokenize your products?

Product tokenization on a cryptocurrency network offers several ways out for benefits of both individuals and businesses. Let’s check out some of them ahead.

• Liquidity and Access: Tokenization of physical or digital assets enhances the trading on crypto platforms by facilitating equity ownership and access to a wide class of investors.
• Ownership Record Being Transparent and Secure: Distinctively decentralized and immutable distributed registries provide a very secure and transparent record of history that reduces fraud and builds trust between stakeholders.
• New business models: Utility tokens will unlock access to a product or service, with new models emerging because of this. Decentralized markets will rise due to transactional efficiency and intermediary elimination.
• Community and governance: Governance tokens give people a sense of community and shared responsibility while empowering stakeholders to contribute meaningfully to decision-making processes. Participation will pay off for the user, too.
• Sleeker and less costly transactions: The use of crypto-tokens would bypass the presence of traditional intermediaries, reducing transaction cost and processing time; hence, a far more optimized and cost-effective means of transferring value.
• Global Availability: Since cryptotokens reside in digital registries, they could be traded and traded to anyone in the world 24×7, removing constrains of time zones and broadening access, offering a vibrant and efficient marketplace in the global economy.

In other words, the tokenization of a product is changing the classics of doing business because it provides a more inclusive, transparent structure that is effective in sharing one’s assets anywhere in the world at any moment.

Possible use cases

Tokenization may have various use cases on different verticals. Take real estate, for example; ownership is expected to change the game with the decomposition of big assets into tradable tokens.

Among these, art objects and collectibles can be tokenised. This increases the participation in the art market and, above all, facilitates trading in shares of valuable works. It is just this democratization of hitherto exclusive markets that is one of the most potent drivers of tokenization.

Supply chain management will also see benefits in the form of transparency and traceability when it comes to registry-based tokenization. Tokenization throughout a supply chain offers the potential to provide added transparency, less fraud, and authentication of products.

Just like healthcare, information given by a patient can be kept confidential but still securely shared among the different persons authorized to have such information in a tokenized form.

In addition, tokenization is picking up great speed in the financial industry, with representative tokens taken up for traditional assets like equities and bonds to have faster and cheaper deals.

Moreover, loyalty programmes and reward systems in various sectors could be further optimized by issuing tokens that provide a common and transferable value form for consumers. Tokenization of paper currencies and commodities like gold and other precious metals can be done into stablecoins.

This gives way to stablecoins, pegged in value to such assets and allowing for their safer and more efficient representation. The evident advantage of stablecoin is stability without such extreme price volatility common in cryptocurrencies.

Notable examples include Tether (USDT) collateralized by US dollar reserves and PAX Gold – (PAXG), which represents one troy ounce of gold.

Tokenisation can also be used in admission tickets, certificates, and digital twins. In the event industry, tokenization of admission tickets reduces not only costs but also opens up opportunities for secondary markets where the tickets can be resold and traded.

Moreover, it will be possible for certificates to be stored and managed securely in a distributed registry through tokenization; thereby, tamper-proof records of the credentials of individuals are created.

This innovative approach is easy to manage and verify, allowing both individuals and organizations to keep sensitive information more securely.

Digital twins will be virtual versions of physical assets. Tokenization will bring in fully new ways for enterprises to administer such assets but also trade them in the crypto-ecosystem. The unprecedented possibilities of new revenues created and managed by them will be unparalleled.

Tokenisation of Athletes’ Rights: New Era in the Sports Industry

The sports world continuously seeks out new ways to engage fans, enhance income, and boost worldwide impact. In this regard, tokenization of athletes’ rights serves as a new tool-one that has the potential to affect the core structure of relations between athletes, clubs, and fans. This article explores how tokenization of athletes’ rights works, the potential benefits, and challenges to be faced by the sports fraternity.

What does the tokenization of athletes’ rights entail?

Tokenisation of athlete rights essentially denotes the representation of rights to athletes’ earnings, salaries, win bonuses, and advertising contract revenues among others, in digital tokens on a blockchain. It can therefore be sold to investors and fans, earning them a portion of an athlete’s future earnings. This is not only a novelty in self-financing for sportspeople but also offers fans a new opportunity to come closer to their idols and even to capitalize on their success.

Benefits of Tokenization to Athletes and Fans

For athletes:

Financial Endorsement: Tokenization gives athletes the chance to raise funds directly from their fans and investors, which is very important at the beginning of the career or during the periods of recovery from injury.

New monetization opportunities: Besides the traditional sources of income, through digital assets, new ways to earn money are open for the athletes.

The strengthening of the connection with the fans: Tokenization means a new level of involvement of the fans, who become directly involved with an athlete’s career.

For the fans:

Sharing in the success of your favorite star: Purchasing tokens gives fans a share of the respective future earnings of that athlete.

Exclusive content and privileges: Token holders can be granted special offers, like meeting athletes, attending private events, and receiving autographed merchandise.

Liquidity of investment: The possibility to sell tokenised assets on the secondary market, as opposed to less liquid traditional ways of investment in sports.

Challenges and risks

Despite the significant benefits, tokenisation of athletes’ rights faces a number of challenges and risks. Among them, the following are most important:

Regulatory uncertainty: Most countries lack well-developed legal parameters to govern the trading of tokenised sports assets, thus carrying accompanying legal risk for participants.

Revenue Volatility: Earnings of athletes are highly unstable due to a host of factors contributing to token value, such as injuries, form, and team transitions.

Ethical and moral issues: The tokenization of human talent is very controversial regarding ethics and possible exploitation of athletes.

Tokenization of the rights of athletes is a promising novelty in the sports industry, opening new ways of funding an athlete’s career and closer engagement with fans. However, many regulatory, financial, and ethical obstacles will have to be overcome before this development achieves its full potential. In the nearest future, sports stakeholders are likely to be actively exploring the tokenization opportunity in their respective spheres, adjusting to new realities provided by the digital economy.

Tokenisation of real estate

Real estate tokenization is, in fact, an advanced technology that can further change the way one buys, sells, and invests in real estate. By combining real estate with blockchain technology, this innovation opens up new and exciting opportunities for investors and owners alike. In this paper, we will dive deeper into what real estate tokenization is, its benefits, possible risks, and what the future may hold for this technology.

What is real estate tokenization?

Real estate tokenization entails the process in which an ownership right or interest in real estate is converted into a digital token on the blockchain. In essence, the tokenization of a real estate asset represents interests in that particular asset, and such tokens can be bought, sold, or otherwise exchanged over some blockchain platform. Tokenization increases access, liquidity, and flexibility in real estate investment because it allows an expensive asset to be divided into many smaller shares.

The future of real estate tokenization

The future of real estate tokenization looks promising, with the potential for widespread adoption as the technology matures and legal frameworks evolve. Tokenization could bring increased liquidity and access to the real estate market for a broader audience of investors.

Tokenisation of art objects

Art tokenization translates the ownership of artworks into digital tokens on the blockchain. This allows investors to buy and sell shares in high-value art objects, making art investments more accessible and liquid.

The Basic Principle of Work of Art Tokenization

Art tokenization involves issuing a virtual ownership certificate on the blockchain for a share in the ownership of an artwork. This includes the valuation of the art object, due diligence, and the creation and sale of tokens representing ownership interests.

Advantages of Tokenization to Investors and Owners of Art Objects

1. Accessibility: Tokenization enables a wide range of investors to invest in high-value artworks by purchasing stakes in works of art.
2. Liquidity: Tokenized art is easily traded on blockchain platforms, providing high liquidity for invested capital.
3. Transparency and Security: Blockchain ensures transparency in transactions and guarantees the authenticity of art objects.
4. Portfolio diversification: Tokenization offers a new avenue for diversifying investment portfolios through art investments.

Risks of tokenization of art

1. Market volatility: The value of tokenized art can fluctuate significantly, introducing risks for investors.
2. Regulatory issues: Legal frameworks governing art tokenization are still under development, creating potential legal uncertainties.
3. Valuation challenges: Estimating the value of artworks remains complex, complicating token pricing.

The future of tokenizing the arts

Art tokenization is still in its early stages but holds great potential for transforming the art market. As technology matures and regulations adapt, it could democratize art investment and increase liquidity in the art market.

What is the best country in Europe to open an asset tokenization company?

Choosing the right country for an asset tokenization company involves careful analysis of several factors, including legal frameworks, tax policies, the availability of qualified professionals, and the overall business climate. Lithuania and the Czech Republic are emerging as attractive options for fintech and blockchain projects, including asset tokenization.

Comparative analysis

When choosing between Lithuania and the Czech Republic, the decision should be based on specific project requirements. Lithuania excels in regulatory support for fintech projects, while the Czech Republic stands out for its innovation ecosystem and active blockchain community.

Other aspects to be reviewed may be the language barrier, local business culture, and availability of expertise needed for the particular line of business. Both countries represent competitive advantages, but the choice depends on what consideration a business deems most important for the operations in question.

In any case, a proper and careful market and opportunities analysis provided by each country is highly recommended; advice from local legal and fiscal consultants is also well worth considering.

Gold tokenization

Gold tokenisation is the process of converting physical gold assets into digital tokens based on blockchain technology. This innovation opens up new opportunities for investors and companies by providing a more flexible, affordable and secure way to trade and store gold. This article explores the concept of gold tokenisation, its benefits, risks and potential to transform financial markets.

Gold Tokenisation Concept

Gold tokenisation involves the creation of digital tokens, each equivalent to a certain amount of physical gold stored in secure vaults. These tokens can be freely traded on various platforms, allowing users to own, buy or sell gold without having to physically transfer it. Blockchain technology provides transparency, secure transactions and the ability to easily authenticate assets.

Advantages of Gold Tokenisation

1. Liquidity: Tokenisation increases the liquidity of gold assets, making them more accessible to a wider audience of investors.
2. Affordability: Lower entry barriers for investors who can acquire stakes in gold assets without significant upfront investment.
3. Transparency and security: Blockchain provides a continuous history of transactions and guarantees security of ownership and transfer of assets.
4. Cost reduction: Reduced costs of storing, insuring and transporting physical gold.

Risks and Challenges

1. Regulatory uncertainty: The lack of clear rules and standards for tokenisation may hinder the widespread adoption of this technology.
2. Technological risks: Potential vulnerabilities in blockchain systems can put the security of assets at risk.
3. Market volatility: Fluctuations in gold prices can affect the value of tokens, which adds risk for investors.
4. Adoption challenges: Resistance of traditional financial institutions and investors to new technologies may slow down the integration of tokenised assets.

Potential for Market Transformation

Gold tokenisation has the potential to radically change the precious metals market by providing new mechanisms for investing, hedging and diversifying portfolios. It can also facilitate the development of new financial products, such as loan instruments secured by tokenised gold and derivatives based on tokenised gold.

Conclusion

Gold tokenisation is a breakthrough innovation that could offer significant benefits to investors and change the paradigm of gold asset management and trading. However, a number of technological, regulatory and market obstacles must be overcome for its successful implementation. In the future, with a stronger regulatory framework and increased confidence in blockchain technology, tokenisation could become a key driver in modernising the financial sector.