Bitcoin, Ether, and other first-generation cryptocurrencies have long been the face of blockchain technology. Digital currencies have been the first significant use case of technology. Still, now, developers are applying the technology to tokenize assets. This revolutionary idea could solve numerous issues experienced by traditional companies while generating a few new ones.
What is Asset Tokenization?
Tokenization of assets allows issues to distribute tokens through a blockchain platform. Tokens represent a certain number of shares for a particular real-world asset, like loans, bonds, real estate, commodities, and others. Interested parties can buy these tokens, and become partial owners of the underlying asset, enabling them to take part in cash flows and increase their assets.
Besides, investors enjoy the freedom to sell their shares whenever they want. Tokens can be traded on various cryptocurrency exchanges, like the Tokenizer DEX. Let us discuss the major benefits of tokenization before we look at some of the brand new problems that have resulted from tokenization and how Tokenizer is addressing them.
Benefits of Tokenization
- Better Funding Opportunities
Fundraising is one of the main problems facing businesses, and most start-ups lack adequate resources or history required to raise funds via publicly traded shares in an IPO. In the past decade, new and existing companies have sought refuge in crowdfunding as a possible alternative. Still, the crowdfunding method is generally restrictive when there is a poor marketing strategy. Issuing tokens of an asset in exchange for cash is the easiest and most effective way of raising funds.
- Automation through Smart Contracts
Blockchain technology supports smart contracts/computer protocols that perform specific actions automatically. For companies that must abide by several sets of rules and ongoing activities, such as dividend distributions, smart contracts play an integral role in their success. They can fully automate processes, such as quarterly dividend distributions, the return of capital waterfalls, and clawback provisions.
- Heightened Security for Investors
While publicly traded stocks are secure, trading tokens on the blockchain raises the security standard. Fraudulent activities are eliminated, considering the public and decentralized nature of blockchain, and all transactions are systematically encrypted.
- New Ventures
Tokenization also opens the door to new businesses, like autonomous organizations. The concept is to base businesses on a contribution model, enabling employees to work freely and be paid through fractional ownership in the company, with minimal oversight.
- Liquidity and Diversification
Security tokens create liquidity for illiquid assets, and since they are infinitely divisible, diversification becomes easier for investors. Improved liquidity and diversification simplify mergers and acquisitions. It is challenging to accurately value and cleanly divides companies for these high-profile deals, but tokenization makes the process more practicable.
- Cost Savings
One of the primary benefits of digital currencies, including security tokens, is cost-effective transaction costs. With time, these costs are expected to reduce even further, until it is almost free to transact via a blockchain network.
Brand New Challenges of Tokenization
- Developing a Blockchain Infrastructure
The above benefits are theoretically amazing, but they call for businesses to create their blockchain networks. This can be problematic when you are concerned about security, compliance, and developers- who are already scarce.
Tokenizer Solution: Tokenizer is a self-service tokenization platform where issuers can issue tokens without any coding knowledge. We have a team of professionals who are ready to render a helping hand to companies that want to tokenize their assets.
- Complying with Laws and Regulations
Know Your Customer (KYC), and Anti-Money Laundering (AML) rules call for investors to be vetted before participating in security trading. Ensuring that Asset-Backed Tokens conform to all applicable laws and regulations is a challenge to many tokenization companies.
Tokenizer Solution: We carry out on-chain KYC/AML verification of investors and issuers. Besides, we can program rules into tokens, ensuring that jurisdictional rules and regulations are strictly followed.
- Overcoming Barriers to Investor Entry
Purchasing digital currencies is easy for someone already familiar with the crypto space, but to a newbie, the barrier to entry is high. Managing token transactions within a wallet provided by third parties may be challenging to some investors, and may hinder some from participating.
Tokenizer Solution: We offer full-cycle tokenization services, comprising an investment platform, a decentralized exchange, digital wallets, custody, asset tokenization, and debit cards. Instead of introducing third-party management services to issuers and investors, we have kept the whole tokenization experience within our platform.
Tokenizer Blockchain Banking Platform
The 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.
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