6 Benefits of asset tokenization for businesses
December 6, 2022
To understand how a concept will benefit you, you should understand what it means.
Tokenization refers to turning something valuable or an asset into an electronic token that can be used with a blockchain application. With the need for proof of ownership and data security on the rise, tokenized digital assets are transforming the way we exchange information and value. There are two types of assets tokenized on the blockchain.
1. Tangible assets such as gold, real estate, and artworks.
2. Intangible ones like ownership rights, voting rights, or content licensing.
Here are some benefits this may present for businesses:
Blockchain technology eliminates the need for traditional middlemen and as a result, it reduces settlement times, costs for licensing, and other processes.
With blockchain, bond issuance expenses can be reduced by up to 90%, and fundraising costs can be cut by up to 40% when compared to traditional private placement, thanks to automation, open record keeping, and dependence on the public internet.
The banking sector spends $181 billion annually on compliance, but by directly programming compliance standards into each token, blockchain lowers the chance of error and makes it cheaper and simpler to manage complicated compliance obligations.
There is an estimated $4 trillion in private equity and trillions of dollars in real estate that are locked up, but tokenization makes assets available to a global investor pool and gives people a mechanism to trade assets that were previously illiquid or not fractionable (like private placements and real estate).
The blockchain aims to establish a single, undisputed source of truth that all parties can rely on, which updates the cap table and minimizes record-keeping disputes.
Programmable contracts and shared ledgers can be used to create fractionalized real estate, liquid revenue share agreements, dynamic ETFs, and other previously immense offerings.