Which Areas Are Leading in the Use of Tokenisation?
Tokenisation has been a buzzword in the past few years, with various industries looking to adopt it to streamline their processes. Many industries are still in the exploration phase of how the process can help them.
Yet, some sectors have already begun to see massive benefits from the implementation of tokenisation, including healthcare, real estate, gaming and retail, among others.
Lately, there has been a lot of talk about how tokenisation will shape the future. People are speculating about the blockchain technology’s potential to support a tokenised economy. But what exactly is tokenisation and why are people so excited about it?
Tokenisation is the process of taking a real-world asset and turning it into a digital token. These could range from physical assets like gold to intangible assets like patents.
A classic example is a company share. Dividing the ownership of a company into small units makes it easier to trade those shares. It also allows for more liquidity in the market. When it comes to tokenisation, the same concept applies to data.
Tokenisation has been around for a long time. The first tokenised assets surfaced in the early 1990s. But it has only recently become popular.
There are a few reasons why tokenisation has become so popular in recent years. First, it makes transactions more secure. By turning assets into digital tokens, you reduce the risk of fraud or theft. Second, it makes transactions faster and easier. Tokenisation eliminates the need for intermediaries. Since there is no middle person, transactions are a lot faster and cheaper.
And finally, it allows for easier fractionalisation of assets. This means that you can own a smaller piece of an asset and still have all the benefits of owning it.
There are a few famous examples of tokenisation that have made headlines in the past. Let’s take a look at some of them.
A non-fungible token (NFT) is a type of unique digital token. Each NFT is different from the next, just like a physical object.
NFTs are a useful application of tokenisation. They are currently making waves in many industries. The most prominent one is gaming, where people are using NFTs to sell digital artwork or game assets.
One of the most famous examples of this is CryptoKitties. In this game, you can buy and trade unique characters – digital cats. Each CryptoKitty is unique and the ownership of each can be verified on the blockchain.
With a market size of more than $40 billion, NFTs are becoming widely popular. They are perfect for representing digital assets like collectibles, art, etc.
The popularity of NFTs gave birth to platforms like OpenSea. These platforms allow users to conduct transactions with digital assets from various games.
Tokenisation is not only for gaming, however. It also applies to great effect in the real estate industry. Many startups are offering tokenisation as a way to invest in real estate. They create digital tokens that represent a fraction of the asset and offer them for sale to the public. This leads to liquidity in the market and easier access to investment opportunities.
An ideal example of this is the REITCoin project. REIT is a decentralised platform that uses blockchain technology to invest in property. The REITcoin is a token that represents ownership in the fund and is tradeable on the open market. Startups like REITcoin are paving the way for a future where tokenisation is the norm for real estate investment.
The application of tokenisation also extends to real estate funds. Real estate funds have been around for a long time, but they are usually unreachable for the average investor.
Tokenisation is changing that. It is making real estate funds more accessible and more liquid. Now, real estate funds can invest in an asset, divide it into smaller units and sell those units to investors. An average investor can invest in these funds without having to cut through a lot of red tape.
Tokenisation is also becoming popular in the financial markets. And for good reason. When most people think about tokenisation, they think about digital assets. But tokenisation has many other applications in the financial sector, including fractionalised ownership.
Tokenisation of financial assets is the process where a physical asset (eg, a stock) becomes a digital token on the blockchain. This is similar to the concept of cryptocurrency. The only difference is that a tokenised asset has some value tied to it, for example, an underlying physical asset.
In this way, tokenisation facilitates fractional ownership of assets. It also brings more liquidity to the market while making them more secure.
Let’s take a look at an example. Let’s say you want to invest in Tesla, but you can’t afford one stock. Tokenisation would allow you to invest in Tesla by buying a fraction of a stock. This is an excellent way for people to invest in assets that are otherwise too expensive.
And it’s not just stocks that can be tokenised. Bonds, commodities and other financial instruments can also be turned into tokens.
Debentures are a type of debt instrument. They differ from other types of debt like loans, mortgages or bonds – they have no security. This means that the holder of a debenture will lose their investment if the company defaults.
For this reason, debentures are often seen as high-risk investments. And they are generally only taken up by experienced investors. But what if there was a way to reduce the risk? What if there was a way to make debentures more secure?
Enter blockchain technology. Debt tokenisation turns a debenture into a digital token on the blockchain. This makes the debenture more secure as it is now backed by blockchain technology. It allows small investors to take part in the purchase of issued debt. This activity increases the total pool of investors and helps issuers reach their funding targets. This means high liquidity and increased investment opportunities.
Debt tokenisation is a relatively new concept and has only been around for a few years. But it is already gaining traction in the financial world. Last year, the cryptocurrency exchange CoinFLEX introduced debt trading on its platform. And this is just the beginning. Expect to see more debt tokenisation in the future as blockchain tech becomes mainstream.
It is clear that tokenisation is growing in popularity every day. This is due to the many advantages that it offers. Several major global players are already exploring tokenisation, including IBM and JP Morgan.
If you are looking to invest in bitcoin and other cryptos, you should also invest in tokenised assets, as they are likely to be the key trend of 2022.