image created with Night Cafe Studio
Following this thread with @aljif7 , I decided to write a post about tokenization.
What is Tokenization?
Tokenization is the process of issuing a digital representation of an asset on a blockchain. The digital representation are called tokens which are tradable. A blockchain is a decentralized, forgery-proof database. Tokens can represent many different assets such as real estate, art, equities, bonds and even music. The advantage of tokenization is that it can enable fractional ownership and allow more people to participate in investments that were previously inaccessible. If you are familiar with the stock market, tokens operate the same way as stocks or a representation of fractional ownership in a large company like Apple or Google.
As an example of tokenization, Pablo Picasso's painting "Fillette au beret" was tokenized in 2021 with a minimum investment of $6k. The painting was priced at $3.68 million. Investors can own a piece of the painting for investment purposes but they cannot hang it in their living room.
image from artemundi.com
In summary, tokenization offers the following benefits:
Digital Representation
Tokens are created on a blockchain to represent a real-world asset such as real estate, art, or financial instruments.
Fractional Ownership
Tokenization allows the division of assets into smaller units, enabling more people to invest in high-value assets like luxury properties or artworks.
Enhanced Liquidity
By creating a marketplace for tokenized assets, investors can trade their ownership stakes more easily compared to traditional asset classes.
Transparency and Security
Blockchain technology ensures that transactions are immutable, traceable, and secure.
Potential of Tokenized Assets
Estimates vary on tokenization of assets. It could reach from $2 according to McKinsey to $16 trillion estimated by Boston Consulting Group by 2030. These estimates highlight the power of tokenization to transform the markets for real world assets.
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