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Tokenization is a process that is becoming popular because it’s applicable for many business models with fundraising strategy. We are slowly shifting towards a decentralized economy that rises new opportunities. Token issuance affects many companies in a positive way, extending their assets to a goods represented by tokens on a blockchain. What are the benefits of it?
Tokenization in progress
The process of tokenization refers to the token issuance that is based on a blockchain technology. It is transferred into the digital world, where it is usually stored and traded. Tokens are often used interchangeably with cryptocurrencies, but a general difference between those two is that tokens are non-mineable and serve as digital units of value on an existing blockchain.
Tokenization allows to put physical assets into a digital investment environment by using blockchain technology. Suddenly, certain aspects of economic activities have been decentralized, allowing businesses to trade cars, collectible beverages, artworks, services online or even virtual assets, such as securities.
Lower minimum investment threshold
Before the appearance of token issuance the investment barriers were extremely high. In traditional world of finances, it would take a lot of money to buy a real estate or precious stones assets. Since tokenization stepped in a couple of years ago, a minimum investment threshold has been significantly lowered. Nowadays, even small companies or retain investors can enter the marked that has been previously perceived as an exclusive one that were meant only for large investors. With token issuance, there are no assets that are above someone’s reach.
Real-time traceability
Tokenization and online trading make the transactions transparent. All token assets are processed in the blockchain and recorded on a digital ledger within the network. Each record is documented on a ledger that is commonly shared and immutable. This means each asset has a history of activities and gives a clear view for potential shareholders.
Simplified paperwork
Tokenization and token issuance make all transactions go faster with less administrative burden. A few years back, every investment transaction was based on manual processes that were cumbersome and time-consuming. Now, with the tokenization process and smart contracts, the administrative part is simplified and more efficient.
Unlock of the illiquid assets
Tokenization allows for fractional ownership that includes many investors. This has unlocked the potential of illiquid assets, meaning the assets that cannot be easily sold without a substantial loss in value (such as real estates that lack a ready pool of buyers). Such assets unlocked its liquid potential and became tradable on tokenization platforms.
What is more, tokenized assets, with its digital form, removed all geographical barriers and infrastructural limits. Enterprises all over the world are now able to achieve greater interoperability, defeating the fragmented borders.