Blockchain technology and particularly cryptocurrencies made quite a splash in 2017 and 2018. Initial coin offerings (ICOs) proved the potential of blockchain as a distribution channel; businesses all over the world raised billions of dollars from a global pool of investors. And there is a high probability that these events foreshadowed the future of blockchain.
While utility tokens and store of value tokens came and vanished, security tokens have taken centre stage as they offer regulatory compliance, distribution power, and a network impact that gives investors confidence. In this article, we will discuss how the democratization of access to investments, unlocking the value of illiquid assets and eliminating intermediaries and value extractors is making asset tokenization appealing to investors.
Elimination of middlemen and value extractors
Assume you want to transfer money from China into your UK bank account. To begin with, you will be required to pay a certain fee to have a checking account. The exchange rate you are given is not the real exchange rate, but one boasted with several convenience charges. You will be charged to receive your money on the other end. Still, there is a high probability of extra unforeseen and baffling costs if the bank uses a third-party financial institution to complete the transaction.
Trading activities are not an exemption. For instance, Charles Schwab charges about $50 to carry out one fund trade. Broker-based trades have a fee of more than $25. Some financial companies even have redemption charges when a customer sells a mutual fund within two to three months after opening. All these are clear illustrations of a legacy system designed to reward ‘unnecessary’ middlemen and institutions who are after extracting value instead of offering it.
Tokenization ensures that trades and settlements are made permissionless, securely, quickly, and cheaply on a blockchain network. And since blockchains are immutable and easily auditable, there is no need for third parties. Besides, most corporate activities are automated by smart-contracts. Thus, there is no need of traditional gatekeepers, unnecessary intermediaries, or central controlling parties, aiming to extract value from transactions.
The democratization of access to investments
Traditional private capital markets are exclusive, and cut off from the majority, and can only be accessed by accredited investors. In the US, for example, this constitutes about 10% of all families. The remaining 90% are categorized under retail investors and are, legally, not eligible to take part in these deals-financial exclusion.
Tokenization of real-world assets eliminates such barriers and creates a truly global system, where everyone can invest in any business anywhere 24/7/365 at cost-effective transaction charges- simply with the click on your smartphone app- financial inclusion.
Unlocking the value of illiquid assets
Illiquid assets refer to those assets that cannot be traded or transferred easily. Unfortunately, more than 60% of assets in the world are classified as illiquid assets. Let us consider real estate as an example. Buying or selling a piece of real estate entails a lengthy, complicated, and costly process that mostly calls for many external parties, like realtors, layers, and government agencies to complete. Besides, you cannot buy a ‘piece’ of a real estate property.
Security tokens are already disrupting this restrictive system. With fractional ownership brought by tokenization of assets, you will avoid lengthy paperwork, complex processes, and all-or-nothing ownership. Asset owners are now able to break their assets into smaller fractions and sell off as many of those fractions as they wish- unlocking value.
Tokenizer Blockchain Banking Platform
Tokenizer is a blockchain investment banking system that champions accessible, transparent, and safe financial services. We believe that everyone deserves equal access to investment and fundraising opportunities. That is why we are democratizing access to capital for investors and fundraisers by making investing and fundraising efficient, safe, and accessible to everyone.
Are you in need of raising funds or investing in security tokens? Apply to raise funds through Tokenizer by filling this application form. If you want to invest in security tokens, sign up for a Tokenizer Investment Account today, and if you want to liquidate and trade-in Asset-Backed Tokens, we have a decentralized exchange designed for you! You can also contact us to order a metallic crypto card at $149 only.