Tokenization: Making Illiquid Accessible to Investors
Many traditional investors have been sitting on the fence watching their dream assets changes hands without getting involved in the transaction. Lack of asset fractionalization has kept many would be investors away in many industries including supply chain, real estate, precious metals and fine art. However, the market is set to open to all, thanks to blockchain and tokenization.
Tokenization is opening up those rigid markets where only the wealthy had easy access. To participate in a token economy, you do not have to be banked since you are covered by a decentralized economy. However, there are many benefits that the token economy offers compared to traditional illiquid economy.
Limitless Investor Base
Tokenization has only been able to scratch the surface; the investor base out there is limitless. Breaking down assets to a fraction means more investors will come onboard. What’s more; your tokens in form of shares are not tied down, you can trade them anytime you wish.
Simply put, tokenization opens up the market for small retailers to invest in the economy. This makes it easy for retailers to diversify their investment portfolios. Middle level investors will be able to interact freely with high end investors and this will expend the market opening doors for more funding through increased trading activities.
It is no longer a secret that blockchain traverses all borders. This helps create a 24/7 global market where anyone can buy and sell assets. All you need to participate in the global tokenized economy is a functional digital wallet funded with the right token.
However, the current crypto adoption has been slowed down by several requirements including Know Your Customer (KYC), and Anti-Money laundering (AML) among others. These are checks to ensure user experience is enhanced and traders are protected against fraud.
Improving Investment Management
Tokenization automates process will the aim of improving investment management. This drastically lowers settlement times which work perfectly with a 24 hour global economy. Transactions are taken care of smart contracts which follow a set of predetermined parameters.
Smart contracts lock out third parties who slow down processes and inflate transaction costs. In a tokenized economy, transactions are instant and you do not have to wait for days for these to clear. This saves the investor both time and money.
Traditional trading and fundraising have always been slow. With tokenization, infrastructure optimization has been achieved for a wide range of asset classes. There is no room for paperwork since assets are digitalized thanks to the deployment of DLT infrastructure.
Automation is the future and asset tokenization has a huge role to play in making this dream real. Blockchain ca be integrated easily with many financial systems and this will increase token economy participation.
Finally, it is clear that tokenization of illiquid assets is possible. This comes with a wide range of benefits and will open up the market for more investors. Asset tokenization is the next generation investment vehicle and making all asset classes accessible by anyone, anywhere and anytime across the globe is the next big thing.