Asset Tokenization and its Benefits
Asset tokenization is a new concept that uses digital tokens to fractionalize ownership of assets such as property, jewellery or fine art and smart contracts on block chain to manage these ownership rights. Being able to tokenize assets opens up new alternative investment opportunities for asset managers and their clients, but today, the business and technology infrastructure is not in place to be able to manage tokenized assets within the portfolio Management System.
There are about Four Kinds of tokens:
1. Payments or Platform Tokens
These are cryptocurrencies used as a means of payment in the digital space, the likes of Bitcoin, Ether, and Lite coin etc.
2. Utility Tokens:
These tokens are simply app coins or user tokens. They enable future access to the products or services offered by a Company. Therefore, these tokens are not created to be an investment and does not require strict levels of Compliance .This is very rampant in the World of ICOs i.e. Filecoin.
3. Security Tokens:
This is refers to tokens whose value is derived from real physical entities.i.e Company shares, Real estate ,Certificates,Bonds,Money etc. Securities are a liquidized form of a real-world asset, therefore, these tokens are subject to federal laws that govern securities in their base of operation and must be Compliant.
4. Non –Fungible Tokens:
A Crypto-Collectible is a cryptographically unique non-fungible digital asset. Unlike Cryptocurrencies which require all tokens to be identical, each Crypto-collectible token is unique and can not be equally exchanged for another.Decentraland With Tokenization, an owner of a masterwork painting could offer digital shares of ownership in it.
Benefits of Ownership Tokenization:
Fractional Ownership: Ownership of anything can be tokenized and each token representing a fraction of ownership which can be transferred easily without any necessary physical transfer of the asset.
Liquidity: This allows for easy trading of assets, as the assets are represented with tokens and this token can be easily traded.
Immutability: Ownership and transfer of tokenized assets can be done with provable history of how such asset has changed ownership over time saved in a decentralized immutable ledger, eliminating any illegal claim of ownership.
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