Right from the times of Aristotle to Newton to Einstein to Feynman, ‘everything’ has always been a constant quest. There is no phenomenon across the different periods of history that has been spared from this endeavor. Talking about the world of the tokenization, it has been through its share of crests and troughs in its progress towards engulfing everything.
2017 and 18 - The ICO Duo
The years 2017 and 2018 were seen as the year of Initial Coin Offerings, with the first quarter of 2018 alone accounting for more than $6 Billion in ICOs. However, with increasing instances of bad players absconding and going off the radars with the collected cash, ICOs have never been able to recover from the blows it suffered.
Nevertheless, the ‘abstract’ backing of the ICOs have given way to a more tangible backing without compromising on the advantages like cutting of middlemen and security. STOs or
Security Token Offerings have been able to almost-conclusively solve the problem of abstract backing that ICOs had been suffering from.
STOs call us to understand what tokenization is in the first place. Tokenization is splitting a tangible asset into multiple digital tokens in a representative form which signifies either ownership or access to a physical or a digital asset. While securitization based on which the stock market is created has already addressed this issue of splitting big tangible assets into smaller units, it also presents a problem of middlemen like brokers who increase the cost of acquisition. Tokens, on the other hand, cut down on these costs as well.
What All Can Be Tokenized?
Literally, everything! this answer might seem a bit far fetched but it has to be agreed that it is the binding truth. Everything right from real estate to art has been tokenized. There are a few advantages that tag along with tokenization.
Liquidity
One of the greatest advantages of the tokenization is enhanced liquidity. The inertia associated with the trading of stakes in illiquid assets has been greatly eliminated by tokens. Since the tokens reduce the third party involvement and also keep a constant record of the ownership on the blockchain, the possibilities are literally infinite! the advantage of liquidity is one of the biggest reasons why capital intensive set like real estate, collectible art, and Diamonds have been quite accommodative and welcoming towards the revolution of tokenization.
Transparency
Any asset that can be traded in a secondary market has always faced an issue of trackability. However, digital avenues have solved this issue in a very effective fashion, including digital marketing. With the onset of tokenization, tracking has never been easier! If we could take concert tickets for an example, there are people who procure the tickets from distributors in bulk and sell them at highly exaggerated prices. Tokenization will help track the ticket to the last users who attend the concert and would also help program stipulated increase in the cost which would reduce the possibility of unwarranted exaggeration of prices. Visibility in the world of tokenization also paves way for intelligent analytics which can help shape better products, or at the least, help better distribution of the tokens in the next offering.
EfficiencyEfficiency seals the deal for the constant question on why things need to be tokenized. Tokenization effectively cuts down on the middlemen involved in the financial transactions. The smart contract allows the programming of specific ownership rights within the tokens themselves on the blockchain. This introduces and autonomy in the execution which automatically eliminates the need for multiple entities including lawyers and bankers.
Will it happen?
Tokenization might seem like an amazing idea but the initial resistance to accepting any drastic change always persists. Tokenization shakes the basis of certain building blocks of financial management today, and it also has its own share of challenges. However, even if a part of some illiquid assets is tokenized, it will represent a huge chunk of money. For example, there is about $256 trillion worth real estate today across the globe. Even if 1% of the entire
real estate market is tokenized, it will represent a market worth $2.56 trillion. The cryptocurrency market, in itself, is worth about $338 billion, which is considered to be the biggest bubble in history!
Before we dismiss the idea of financial intermediaries and the cost involved, it is important to think about why they came into existence in the first place. Tokens have been notoriously difficult to custody in a safe and secure way. While financial intermediaries cost us, they have also been proportionately bearing responsibilities, which will shift to the buyer and the seller alone in case of tokenization.
Tokens are more like keys to the asset rather than the asset themselves, which means that losing the key is losing the access to the asset. The ‘key’ in this case is the private key which is quite congruent to a password. If the private key is lost or breached, then the assets are just gone without a trace. There is no help desk in place, and even if there is, there is nothing much that they can do about the lost access!
Until these minor flaws are solved, tokenization will remain to be a fanciful idea but anything said, all it takes is just the solving of these problems and it won't be long before tokenized trading becomes the order of the day! Sometimes, it might be a good idea to catch up before the risk are totally mitigated and the market becomes too tight. If you would like to tokenize your assets in the most secure way possible, count on Blockchain App Factory to create the tokens and to facilitate an offering in such a way that you get the choicest of investors to buy your tokens in the first phase of your STO!
Originally published in our Quora Account :
https://blockchainappfactoryblog.quora.com/The-Tokenization-of-Everything
