The impact that cryptocurrency has on the traditional financial industry is massive, and not nearly fully understood as of yet. This is not surprising, given that cryptocurrency is still young, still evolving — still far away from what it will eventually become.
However, the impact of crypto and blockchain industries is much larger than many may realize.
What is Asset Tokenization and Why is it So Important?
When most people think about cryptocurrencies, they think of digital money, and how it could be used in everyday life. Do you want a cup of coffee? You pay for it with crypto. You saw a new pair of shoes that you like? You pay for it with crypto. Do you want to treat your friend to lunch? Crypto.
But, what many still do not realize is that crypto can do more than simply be used as a means of payment. Thanks to blockchain technology, its transparency, immutability, the ability to store vast quantities of data, and other attributes — it can be used in a nearly unlimited number of different ways.
So far, tokenization is one of the biggest use cases for this technology in combination with crypto that has nothing to do with payments and transactions. At least, that is not the point.
You see, tokenization is the process of translating real-world goods into digital space. It is a way to share ownership of something in an easier way.
In a way, tokenization is similar to owning the company’s stock, only it doesn’t only apply to companies, but to artwork, real estate, jewelry, and anything else of value. Essentially, the value of an asset is decided, and then it is split into smaller units, presented in the form of tokens. These tokens are unique, and owning each of them means owning a portion of an asset.
This can come in very handy when it comes to the assets that are impossible to split apart. In other words, the real-world asset gives these tokens their value, while the tokens represent the ownership of the asset.
This is a clear advantage, and one of a few that security tokens have when compared to traditional cryptos. While many are still wondering why Bitcoin has value, securities’ value is clear and unquestioned, as it is tied to the underlying asset.
Not to mention that tokenizing assets allows people to split ownership of expensive assets that they would not be able to afford otherwise. This is called fractionalized ownership, and it lets you become a partial owner of something like artwork or an entire property without having to spend millions of dollars to buy it in its entirety.
Several cryptocurrency exchanges like FTX, Currency.com and others have already launched tokenized assets trading. So far, these are only the first experiments, but it is likely that in the near future tokenization will be one of the main trends in the economy.
“Digitalization has already changed the idea of money and investments. Our goal is to create a platform for asset tokenization and trading, where users will have access to their assets in a few clicks. Swiftness, accessibility, portability and customization are what users need today.” – said Oleg Kurchenko, CEO and founder of the digital assets platform Binaryx.
Asset Tokenization Holds Great Potential
In essence, the tokenization of real-world assets is undoubtedly going to stick around. It is simply too convenient, and not really that difficult to do. There are challenges such as trading securities, as mentioned, as well as making them regulatory compliant, adequately securing them, and alike, but those are all issues that can be resolved.
Useful as it is, tokenization can be a major use case of the crypto industry, and something that will not go away, regardless of what happens to utility coins like Bitcoin. It is certainly an area of the crypto/blockchain industry worth pursuing, as those who are entering it right now have a clear first-mover advantage.