The term “tokenisation” has been all the rage in the last few years across all regions of the world. It’s not only the crypto community that has recognised the digital mapping of almost all assets is possible with blockchain-based tokens.
Anyone can become a shareholder in a company or a ski resort by buying tokens and consequently reap the rewards of business’s success.
Key milestones of the asset tokenisation trend development
The trend for asset tokenisation goes back to 2016 when a number of companies perceived the benefits of blockchain. They mainly used the Ethereum blockchain, allowing anyone to create tokens of the ERC-20 standards, which was first utilised during the ICO hype in 2017.
Around the same time, tokenisation was pioneered in the banking sector. Thus, the Visa and Mastercard payment systems started implementing Token Service – an original security technology that replaces the cardholder’s data with a unique digital identifier (token). It can be used for payment without disclosing bank card credentials.
During 2017-2018 an easy access to the information and willingness of masses to invest in digital assets created new momentum for tokenisation of various real assets, from real estate and art objects to company shares. Elevated Returns demonstrated the most successful cases (deal with St. Aspen Ski Resort), as well as logistics company CargoX (innovative bill of lading – Smart B/L).
Among the most well-known tokenisation platforms are:
- Polymath Network is an all-in-all solution for creating security tokens
- Templum is a comprehensive solution for raising capital and trading tokens on private markets
- Harbor, a platform for tokenising funds, private equity, and commercial real estate
- Tokeny, a platform, which offers to digitally issue, manage and transfer security tokens
However, there are few successful cases, since not every business trusts cryptocurrencies and blockchain.
In recent months the fundraising platforms, offering small businesses the opportunities to grow, have proved to be the hottest trend.
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For instance, launchpads, the decentralised VC investment platforms, are known for promoting new token sale models. One of them is DYCO, the Dynamic Coin Offering, which presents the opportunity for participants to get a refund in case they are not satisfied with the deliverables of the project they supported. Binance Launchpad, Pokastarter and Duck Starter caught up at the beginning of 2021.
Another fundamental concept is combining tokenisation services with other functionality, which is convenient for startups. This is how digital asset exchange Binaryx decided to stand out.
The project offers tokenisation services plus the functionality of cryptocurrency exchange – available on the same platform. It means, businesses can tokenise their assets, list coins on the exchange and distribute them among the community using one platform.
Why tokenisation is such an attractive concept
Naturally, there are many benefits of digitising assets that can drive the growth of businesses of all types. Let’s have a closer look at some of them.
Fast and affordable
Traditional financial instruments, like initial public offering (IPO) can take more than a year. The tokenisation of assets, in the meantime, happens in a matter of hours, as the transactions are carried out almost instantly.
IPO has a number of requirements that many small businesses don’t meet, such as independent audit or a certain level of return.
Tokenisation on the blockchain offers low-cost and fast solutions for transforming physical assets into digital ones and allocating them all over the world.
Accessible for masses
In previous decades a lot of investment opportunities have only been accessible to accredited investors. Today regular people can invest in many products and services through technology.
The same applies to businesses – they do not necessarily need qualified investors. There are currently avenues to attract investments from people, who are willing to support their products from any part of the world.
Impact of the asset tokenisation on businesses
The primary goal of tokenising assets is to increase liquidity. Businesses are now faced with the major challenge of low liquidity, which gravely hampers their development.
Lately, big companies have been trying to bring liquidity through securitisation. However, this method has significant drawbacks, such as preparation time (from six months or more) and cost (US$300,000 and more). Hence, the creation of security tokens is not suitable for small and medium-sized businesses.
There is an alternative option. Businesses can use the blockchain system. It’s much cheaper and can attract the maximum number of assets into the total turnover. Even assets that were previously considered illiquid will be able to generate revenue.
Also read: Are CBDCs better than Bitcoins? Here’s why Asia should bank on them
Adoption: what’s taking so long
It’s also worth considering some of the nuances that slow down the widespread use of tokenisation.
Poor access to financial services in some countries
Financial integration is underway at a relatively slower pace than expected. According to the 2017 Global Findex report, about 1.7 billion adults worldwide are still not using mobile banking.
Therefore, the main objective is to make the Internet available to everyone, especially in developing countries, and educate the population on mobile apps.
Dealing with cryptocurrencies requires efforts and skills
Not everyone appreciates the need for cryptocurrency, as most people do not have a good grasp of the issue. It’s no surprise so many people still recoil at the mention of the word “cryptocurrency”.
The first step that should be taken in this regard is to implement educational programs to raise awareness and help anyone interested to gain knowledge or upgrade their skills in operations with cryptocurrencies and tokens.
The tokenised asset market has an increasing impact on the entire economy. However, there is no unified approach for the implementation of tokenisation yet, and clearly, this process will require compliance regulation.
It’s entirely possible to expect the achievement of consensus between blockchain projects in a few years. Their interaction with existing government institutions should also be improved.
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