Tokenization is the act of taking an asset and transferring it onto a blockchain. Recently, the tokenization race has increased with more firms and projects focused on these tasks entering the market over the last year than any time prior. Notably, tokenization is one of the ways that blockchain technology can help improve efficiency and security. Consequently, it’s one of the fastest-growing sectors in the blockchain industry.
How Does Tokenization Work?
There are many different ways to tokenize an asset. For example, you could tokenize your vehicle by creating a smart contract that represents ownership of the vehicle. Once the token is created, it can be transferred, stored, or traded as easily as any other cryptocurrency. This approach brings with it some major benefits. Here are the top reasons why tokenization is on the rise
Create New Markets
One of the coolest things about tokenization is that it creates new markets. For example, if you tokenize video game assets, you now have a scenario where regular users own digital assets. They need some way to trade these assets to ensure the funds don’t remain locked. Here, users can trade, collect, share, and HDOL their favorite digital assets.
The same goes for other industries. Let’s take cooperate debt. A firm could tokenize thier debt and then it could be traded between investors securely. The creation of these new markets improves the overall liquidity of the markets and provides regular users with more ROI opportunities.
Remove Regulatory Boundaries
Along the same line of thought is the removal of regulatory restrictions. Let’s take your home for this example, If you wanted to sell your home today, you would need to fill out a lot of paperwork. Additionally, your potential buyers would be subject to a variety of regulatory checks and standards. These requirements only grow when you seek to work with an international clientele.
Now, if you tokenize your home, you gain the ability to sell it in fractional shares. A person could literally buy a few tokens in a variety of tokenized properties to obtain a high level of diversification in their real estate property. This approach also has the added benefit of reducing all financial barriers.
Smooth Payment Experience
The peer-to-peer nature of tokenized transactions helps to streamline the average user’s payment experience. When compared to spending fiat currency, there are far fewer fees and delays. A normal international transaction can go through +30 third-party verifications and fraud protections. Each of these groups adds a small fee and delay to the overall transaction. In the end, these fees can add up to over 7% of your funds.
Lower Financial Barriers
Stocks, real estate, and other high-ticket investments can create unnecessary boundaries for the average investor. Let’s look at your tokenized home again. If a buyer wants to purchase your home in a traditional sense, they will need to qualify for enough funding to cover the cost of the property in its entirety. This requirement can be difficult for the average investor to accomplish.
Additionally, the required credit and regulatory checks are hindrances that add to the overall cost of real estate investing. However, a tokenized property could be sold in smaller tokens equaling whatever the homeowner desired. There have been tokenized real estate sales where the average cost of a token is $100. In this way, tokenization provides a more democratic option to the market.
Access Global Funding
Tokenized assets can be traded freely internationally. As such, it makes sense to utilize tokenization to open your assets up for international funding. If you have ever attempted to buy a home in a foreign country, you know it can be very difficult to meet all the requirements. In some instances, it can be impossible when the area or region you reside in has some sort of political or military issue with the country you want to invest in.
Sadly, these geopolitical boundaries often hurt the average citizen much more than the governments of these countries. Tokenization provides a way for the average user to escape being the pawn in these situations. Tokenized assets know no boundaries. They can be traded internationally 24 hours a day, 365 days a year.
NFTs and Tokenization – A Match made in Heaven
The introduction of NFTs (non-fungible tokens) to the market has had a resounding effect on the way developers tokenize their assets. NFTs are tokens that represent a unique asset. NFTs can be made to represent anything from a video game avatar to fractional ownership of your home.
NFT tech enables users to quickly and efficiently validate the authenticity of an asset. For memorabilia and other collectibles, this is a real game-changer. Sadly, reports have shown that the sports memorabilia sector suffers from huge counterfeiting rings. It has been estimated that over 50% of all classic sports memorabilia is fake. Recently, the tokenization of digital sports memorabilia has helped to reduce this percentage significantly.
The same goes for artists and other content creators. There are real benefits obtained by tokenizing their digital creations. For one, it enables these content creators to secure more profits for their labors. For example, the popular NFT artist Beeple recently sold an NFT for $60 million.
Today, there are large markets dedicated to supporting NFT content creators. Some of these markets enable the NFT creator to continue to earn royalties every time their NFT sells. This feature is another example of why tokenization continues to see more adoption.
META1 Exchange Supports NFTs
The META1 Exchange will support all types of NFTs. The platform will enable anyone to easily issue and trade these digital collectibles via its public peer-to-peer marketplace. In this way, META 1 continues to pioneer tokenization in the market.
Tokenization – The Next Step in the Markets Digital Evolution
The benefits of tokenization are undeniable. The added liquidity and efficiency gained through the process is enough to drive further innovations in the sector. Additionally, the recent surge of tokenized digital assets adds another layer of adoption to this technology. For these reasons, you can expect to see a lot more tokenization moving forward.