Introduction The Decentralized Finance (DeFi) Revolution is taking over traditional finance (TradFi) and centralized exchanges (CEX), with billions in...
The term Asset Tokenization has been a topic that is in constant discussion today. With the rapid growth of the digital era, more and more traditional companies are looking for ways to expand their business digitally, and Asset Tokenization is one of the ways to do so.
However, tokenizing assets isn’t as easy as it seems. Without the proper support by professionals, there can be many legal implications that could affect the business negatively.
What Is Asset Tokenization As A Service?
Asset tokenization is when a secure, digital version of a real-world asset is being minted, making it easier to transfer and divide the asset as needed. Furthermore, tokenizing assets creates more transparency due to the data trail it produces, which can be easily tracked and monitored.
Building digital assets via tokenization requires a deep understanding of cryptography, specific financial laws, and technical skills to deploy secure, compliant, and working asset-backed tokens. It is better to engage a company that specializes in providing asset tokenizations as a service.
The Benefits of Asset Tokenization on the Blockchain
Tokenizing assets on the blockchain opens up various opportunities for a company to grow and diversify its assets in the market. The tokenization process transfers rights from a physical, financial, or intellectual asset into a digital token. An easy example is when you want to deposit money into your bank account with fiat currency. The process of depositing physical fiat into the ATM that shows your asset’s digital value is called tokenization. The received digital money shown in your bank account is the tokenized asset.
Based on this example, we can safely say that tokenization can be broken down into three elements:
1) Incoming asset (fiat currency)
2) Vehicle for asset substitution (the bank infrastructure)
3) The digital balance is shown in the bank account (Digital asset)
When an asset is tokenized using the blockchain, the only difference is that the blockchain infrastructure is the vehicle of asset substitution instead of the bank infrastructure.
There are many reasons why tokenizing assets will benefit a company, and here are a few key ones:
In this day and age, anyone can shop online and buy products from overseas with ease. However, when it comes to certain assets like precious metals like gold, a person can’t just purchase gold online effortlessly. One has to go through various intermediaries to buy gold, worst if that person wishes to buy gold from an overseas company.
With tokenizing assets like gold, it can be transferred to anyone worldwide, as long as they are prepared to receive the transfer. Thus, one of the main benefits of tokenizing assets is that they are borderless.
2) Fractional Assets
Another benefit of tokenizing assets into the blockchain is splitting any asset into an unlimited number of virtual shares. For example, an asset is worth $100,000. The seller can create 1,000 digital tokens backed by the asset, which is worth $100,000—this lowers the entry to purchasing the asset to $100 per token, enabling more people to buy the asset.
Unlike traditional databases like the intranet or a standard cloud database service, data stored in the blockchain is nearly impossible to change or delete. This is due to the nature of blockchain infrastructure and how it records information in multiple layers or blocks.
When tokenizing an asset, immutability is crucial because it allows you to track the history of tokens (i.e., assets): who created it and when; who, to whom, when and at what price sold. Due to this, buyers or investors need not worry that their products or investments might be lost due to fraud, theft, system errors, or corruption.
In addition to immutability, the records on a blockchain are secured through cryptography. Network participants have their private keys assigned to the transactions they make and act as personal digital signatures. If a record is altered, the signature will become invalid, and the peer network will know right away that something has happened. Early notification is crucial to preventing further damage.
Another reason why blockchain is secure is its nature. Blockchains are decentralized and distributed across peer-to-peer networks that are continually updated and kept in sync. Because they are not contained in a central location, blockchains do not have a single point of failure and cannot be changed from a single computer. It would require massive amounts of computing power to access every node and alter them all simultaneously. In any case, the bigger your network is, the more tamper-resistant your blockchain will be.
Look at the article to see how tokenizing asset into a stable coin can benefit your business: https://www.stably.io/post/the-benefits-of-stablecoins-for-your-business/
What can be tokenized?
As asset tokenization allows for both fractional ownership and proof-of-ownership, it creates endless possibilities for which assets can be tokenized.
The range goes from traditional assets like Bond, real-estate properties, venture capital funds, and commodities to assets like artwork, celebrities, sports teams, and more.
Since the list is long, we have broken it down into four groups:
Any item of value that a person can transform into cash. An asset can also be broken down into two parts which are business and personal.
Equity or shares can be tokenized. However, tokenizing equity or shares means the token remains a security token and cannot be publicly traded.
3) Investment Funds
An investment fund is a type of asset that investors can tokenize — these tokens represent an investors’ share of the fund. Each investor is provided tokens that represent their share of the fund.
A business can tokenize its services by issuing a digital token that clients or consumers can use to purchase its goods or services.
Stably Offers Asset Tokenization As A Service
Whatever asset your company may be thinking about tokenizing, Stably is the best in the business. Stably’s asset tokenization as a service team is well known in the industry for creating amazing and secure products in a short period. In fact, for most products, they offer a 3–4-week turnaround complete with wallet design services. They also offer extremely reasonable prices that can fit into any budget. And currently, they have an offer where they can match any competitor’s price on the market.
If you think that your business would benefit from using asset tokenization as a service, contact Stably’s friendly team at stably.io/contact to set up a consultation.
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