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Asset Tokenization
Everything there is to know about Asset Tokenization
Asset Tokenization also referred as "Asset Backed Tokens" or "T_okenized Assets"_ is a new concept that uses digital tokens to fractionalize ownership of assets such as property, jewellery or fine art and uses contracts on blockchain to manage these ownership rights.
On Nexus Asset tokenization is the process by which an issuer creates an "Asset which represents a digital or physical asset, a fungible token and then links them together (Tokenizing). The tokens now represents that particular "Asset.
Watch this video below, which explains Asset Tokenization.
Nexus Blockchain provides lot of benefits for every type of user who is looking to tokenize an Asset. Firstly any user can tokenize an asset using the Wallet Interface and is abstracted from code, writing smart-contracts or dealing with a third party tokenizing service.
It allows direct onchain asset creation and sale using the on-chain Peer-to-Peer P2P Marketplace module in the Interface. It is cheap to mint assets, tokens and free to transfer tokens. When a user sends a payout to the asset, It automatically pays out the asset token holders in proportion to the tokens held at that point of time.
Asset Tokenization can transform many industries and the way investors interact from the existing intermediary system to a P2P system. This can enable the creation of borderless networks where investors, businesses, and communities can interact with each other without a central authority.
The main benefits of tokenization come from automation via advanced contracts, algorithms that start actions only if certain conditions are met. Advanced contracts make intermediaries redundant, which saves costs, additional IT infrastructure to manage the records of fractional ownership and the overheads.
Generally, bonds and equities are high liquidity assets, in electronic form controlled by the establishment. In contrast assets such as vehicles, real estate, jewellery, art and collectibles lack access to high trading volumes, trading opportunities on exchanges, and liquidity.
With Nexus Advanced contracts it will be cheap and fast. The P2P marketplace will enable users to buy / sell onchain, this will bring more security and give access to a lot more people.
Tokenization is poised to become the next big thing in the financial markets because it provides the following benefits:
- Fractional Ownership Enables Low Minimum Investment Threshold: In the traditional financial world, investment barriers can be extremely high. Think about the amount of investment required to buy a real estate asset or a piece of art. Tokenization, enables fractional ownership of an asset, which in turn lowers the minimum investment threshold, allowing even small retail investors to diversify their portfolios and enter the previously exclusive markets that were only available for large investors and beyond their reach.
- Liquidity – By converting real-world asset to token backed, issuers can secure greater liquidity. For example, private securities are typically illiquid, which affects the trading process on secondary markets. Thanks to tokenization, this problem can be addressed to give investors more freedom to implement various strategies on scarcer assets. This enables anyone to tokenise their asset.
- No Territorial Barriers: An investor can invest in a property located in any part of the world without visiting there physically. Investment becomes secure, fast and easy with asset tokenization on the blockchain.
- No Administrative Burden: Tokenized assets allow faster transactions with no administrative burden. Through the use of Advanced contracts cumbersome manual processes, clearing and settlement processes will be automated, streamlined, efficient and simplified.
- Real-Time Traceability and Validation: With an immutable record of ownership, tokenized assets allow for improved traceability and transparency. Each record is documented on an immutable shared ledger that contains the whole history of activities performed over an asset. This ensures that relevant parties have a clear view of the updated ledger of ownership records. This also helps anyone verify themselves before they invest preventing fraud.
- Fast and Cheap: Modern blockchains not only enable fast and low-cost transactions, but also removes the intermediaries and this relates to the tokenized assets as well. Nexus is designed for high throughput with free simple transactions and low asset minting fees. This could speed up the adoption of tokenization as the main approach to deal with real-world assets.
- Transparency: Blockchain has become one of the most important technologies thanks to its unique attributes, including immutability and transparency. Once a blockchain transaction has achieved finality, it cannot be reversed, canceled, or tampered with in any way. Nexus ensures that anyone can cheap the authenticity of the assets being sol
- Convenience: Today, everyone can get exposure to stocks by buying shares or speculate on their price via derivatives through online platforms operated by intermediaries. The internet has transformed the way we invest, but blockchain can do even more by making the investment process more convenient, direct, secure and accessible.
- Equal Opportunity Provider: Asset Tokenization will give an opportunity for ordinary people, banked or unbanked to take part in investments. Today the more lucrative investments are not available to the general public and limited to accredited investors. Asset Tokenization will get rid of intermediaries which will create a more level playing field.
The possibilities are endless as tokenization allows for both fractional ownership and proof-of-ownership. From traditional assets like venture capital funds, bonds, commodities, and real-estate properties to exotic assets like sports teams, race horses, artwork, and celebrities, companies worldwide use blockchain technology to tokenize almost anything.
Assets: An asset is any item of value that someone can transform into cash. It’s further divided into two classes: personal and business. Personal assets can include art and property. Business assets include assets that are present on the balance sheet.
Equity: Equity (shares) can be tokenized; however, the assets remain in the digital form of security tokens stored online in a wallet. It's similar to how investors typically buy shares on a stock exchange.
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 which represent their share of the fund.
Services: A business can offer goods or services as a way to raise funds or conduct business. Investors can use tokens to purchase goods or services provided by the supplier.
Commodities: Many commodities will benefit from tokenization. The assets with strong value propositions are the ones to benefit from this process the most. Precious metals like palladium, platinum, and rhodium are currently being tokenized.
Startups: Startups are a risky bet, but if they take off there is a lot of money to be made. Today normal people do not have easy access to invest in startups. They need a lot of capital and being risky it is difficult to secure capital in the traditional setup and this space is ruled by Venture Capitalists. Tokenizing a startup will make it easier to secure capital and also cater to a bigger populace and also it will make genuine startups to make a real difference.
Asset tokenization opens a new avenues for a lot for people to monetize illiquid assets, and at the same time give people new opportunities to invest conveniently. Users can tokenise their personal assets like private properties, art, music, videos and a lot of other things. Asset Tokenization on Nexus brings cost savings, security, convenience, peace of mind for the issuer and the investor.
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Last modified 4mo ago