What is Tokenization?
The concept of tokenization is process of converting rights or asset-ownership into a digital token. At the core of this model is blockchain technology, which permits data to be secured across a network of authorised stakeholders. Tokenization has several distinct applications; including, but not limited to, the tokenization of real estate, precious metals, shares or even the copyright of intellectual property! This novelty introduces many benefits through its functions. Typically apparent through assets which are not traded electronically, such as exotic cars. Aside from this, it may also aid in improving liquidity, traceability and tradability in payments and data flows.
When assets are tokenized, they are opened towards new possibilities with previous limitations being removed simultaneously. As an example, if an artist in a fine art market wishes to sell an expensive piece of work, it is needless to say that only a select few individuals possess the opportunity and funds to purchase or invest in it, leaving the majority of retail investors unable to participate.
Tokenization of Assets: What Advantages does it Present?
With tokenization, the piece may become a token(s). This represents fractional ownership over the artwork, giving different investors an opportunity to contribute. For instance, the property rights of a Basquiat painting sold for $110 million in 2017. If this was tokenized, smaller retail investors would be able to acquire an interest in the painting. Having said so, through tokenisation market diversification is undoubtedly promoted by allowing investors to expand their investment portfolio into what was previously considered an inconceivable notion.
Other critical advantages of tokenization are safety and security. A significant portion of payments conducted recently have been made through mobile phones, via Apple or Google Pay. Credit card data is stored on mobile phones as a token, featuring several security measures such as biometrics and two-factor authentication.
Consequently, tokenization has become a cornerstone of eCommerce. It is paving the way for safer payments and an enhanced user experience, regardless of whether it is conducted online, through a mobile device, or in-app.
The opportunities which tokenization presents are being understood by leading financial institutions. Especially since, while establishing such a project may seem like a daunting task, it is relatively straightforward.
How Can I Tokenize my Assets?
The first step in the process is to identify which asset you would like to tokenize. Once this has been accomplished, one must then create a tokenomics model to adequately mould the underlying economics of such a crypto project.
Now that the tokenized asset has been declared and a tokenomics model has been constructed, one may proceed with choosing a blockchain platform for the asset to be tokenized. Seubsequently, one needs to develop any smart contracts necessary, integrate a crypto wallet, and then the token may be launched for trading. It is worth mentioning that the cost and the average time frame to establish it may vary depending on the scale and the complexity of the tokenisation project.
After the implementation of such a venture, if successful, one may notice significant financial gains in the form of increased revenue as a result of enhanced liquidity. Together with this, there can be a reduction in costs due to the lack of third-party services. Additionally, human involvement would be significantly eliminated due to processing transactions on automated smart contracts. All of these variables cohesively increase financial gains at low risk, simply due to the asset being tokenized.
Through this analysis, it can be seen how tokenisation has several novel uses, significant benefits, and is not difficult to implement.
More about MK Fintech Partners Ltd.
Michael Kyprianou Fintech Partners Ltd is a Maltese licensed VFA Agent (virtual financial assets agent). It comprises a team of dedicated experts who provide services such as advisory, licensing and registrations of activities related to Fintech, Crypto, Blockchain, Investment, company incorporations and banking. and other ancillary services. MK Fintech Partners forms part of the Michael Kyprianou Group, a top tier international legal and advisory firm. It has established an enviable reputation as a broad-based legal practice over the years. Mainly by keeping at heart its principle to always exceed its clients’ expectations. MK has grown to become one of the largest law firms in Cyprus with offices in Nicosia, Limassol and Paphos. The MK Group’s international presence also includes fully-fledged offices in Greece (Athens and Thessaloniki), Malta (Birkirkara), Ukraine (Kiev), the United Arab Emirates (Dubai), United Kingdom (London), Israel (Tel Aviv), and Germany (Frankfurt).
The content of this article is valid as at the date of its first publication. It intendeds to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided. For further information, contact us at MK Fintech Partners via email at firstname.lastname@example.org or by telephone +356 2016 1010.