Asset Tokenization 101 | Tokenization From Inside Out

To tokenize or not to tokenize, that is the 
question — and not the only one by the way.  Let’s explore asset tokenization 
and answer some popular questions. What is asset tokenization? Tokenization is the process of creating digital 
tokens on the blockchain that represent ownership   of real-life assets such as investments, precious 
resources, collectibles & art, or access to a   company's services. A token can represent a part 
of the asset, plus people can also be allowed to   buy fractions of the token. This allows to create 
a much stronger economy around trading assets. What are the benefits of asset tokenization? Blockchain technology is what's 
behind the value of tokenization.  It enables greater accessibility and liquidity 
of assets, transparency, immutability,   fractional ownership, and cost savings. Literally 
anyone in the world can tokenize their assets and   openly trade them without boundaries.
Owners can trace the entire history   of a particular asset, verify its origin, and 
see how its ownership has been transferred. Are there any risks behind asset tokenization? Tokenization is gaining a lot of traction 
but there are still areas for improvement.   Some of the challenges include: Lack of standardization.   As more and more platforms emerge, 
the lack of protocol standardization   makes it difficult for third-party applications 
such as wallets to interact with the platforms.

Regulatory issues. Legislators are still wrestling 
with how to best regulate blockchain-based   financial services. No doubt, asset tokens will 
gain more regulatory interest as popularity grows. Cyber attacks.   We have to admit that there is still no technology 
in the world that is 100% immune from attacks.   Yet blockchain developers are working hard to 
enhance security. There is a downward trend in   the number of cyberattacks on platforms, wallets, 
and other services running on the blockchain. Asset-backed tokens — what are they? Tokens are digital records of ownership, 
giving you exclusive rights over an asset   or a fraction of the asset.
For example, a token could   provide ownership of one theater ticket, 
one square meter of a house, one digital   picture, or even 1/100th of a work of art.
Compiled and built with regulatory compliance,   tokens can also represent securities 
and be traded in a public market.

Is there a difference between owning an asset 
directly and owning an asset-backed token? The difference lies in the physical location 
of the asset: exchanging tokens does not   entail the transportation of the asset.
For instance, if the owner wants to sell   their diamonds, they won't actually have to 
make the trade in person and bear the risks   of such a delicate exchange. A transaction 
on blockchain is all that needs to be done. How do tokenized assets trade 
on the secondary market? When a security is tokenized, the issuer 
can track where the tokenized assets go.   They will always know who is holding their asset 
at any given moment thanks to blockchain-powered   tools. Stakeholders have complete control over 
how investors trade their tokens in the secondary   market. They can verify purchases and sales, 
or even restrict secondary market trades. What are the industries that are 
embracing the concept of tokenization? Tokenization has already entered many 
industries, from the financial sector,   real estate, precious metals, 
to sports and entertainment.  In finance, issuing equity tokens, running 
crowdfunding campaigns, trading shares of   renowned brands are not just opportunities, 
but the pillars of a new Fintech world.  Real estate is also being transformed with 
the introduction of tokenized property.   It pushes the minimal limit of an investment 
and allows buying small shares of a property.   This way, if someone wants to sell a property 
that's worth $100 million, they don't have to   wait for one buyer to match that price.

They can 
tokenize it and divide the property into shares,   with one share per every square foot. Tokenized 
precious resources such as gold bring about   many benefits as well. Investors don’t just buy 
tokens, but purchase the rights to real assets   stored in secure vaults. It rids the owners 
of the burdens of storage and transportation   and allows them to openly trade their gold 
assets just as easily as any other currency. In sports, blockchain digital assets can 
be introduced to tokenize anything from the   teams and clubs themselves to memorabilia, 
merchandise, stadiums and even equipment. It is a great tool for attracting investments and   funding the development of 
global sports communities. What are the reasons why the 
market is shifting to tokenization? Tokenization is set to disrupt the 
foundations, frameworks and workflows   of the current financial system with a 
domino effect on every other industry.  The shift to tokenization is 
driven by several factors: It enables businesses and the community to 
define the valuables and their worth. People   can monetize their creations and be rewarded for 
their contributions. For instance, a person's   participation in market research could be rewarded 
with a tokenized share of the developed product.

It unlocks previously frozen markets 
(like banking in developing countries)   by giving everyone access to financial services. 
It also allows business startups to easily attract   initial investments and engage a wider 
audience in developing their projects. It can inspire innovative 
marketplaces and business ecosystems,   where consumers and enterprises with similar 
preferences could connect and interact   in more sustainable, effective ways. 
For example, businesses can motivate   customers to make achievements using their 
products and reward them for their successes.

It increases trust across all market participants 
by taking third parties out of the picture,   and making chances of arbitration, manipulation 
and corruption of data slim to none. What should be considered before 
participating in the token economy? There are several factors that 
should be taken into consideration:   the business model, cybersecurity, platform 
integration, jurisdiction, and compliance.  In terms of the business model, companies have to 
figure out the value chain. For example, they can   choose to advise issuers on the token's design 
or serve as the safe keeper of tokenized assets.  When it comes to cybersecurity, keep in mind 
that though distributed ledgers are intrinsically   secure, any design has its weak points at the 
edges. A trusted blockchain development company   can help close all the back doors.
Selecting the right platform depends   on the regulations to be followed, types of 
products and services offered to the clients.   The infrastructure needs to support the 
business model as well as be fully compatible   with downstream systems.
As regulatory and legislative   frameworks can differ from jurisdiction to 
jurisdiction, Businesses should ensure tokens   are compliant with regulations both 
on the investor’s and issuer’s sides.

Is the asset tokenization process 
difficult and time-consuming? Asset tokenization is less 
complicated if you partner   with an experienced blockchain company. Let's 
take a look at the steps you will need to take.  Step 1. Choosing an asset
It's easier to tokenize an   asset that has its own market so you don't have 
to worry about proving its value to investors.   If your asset is not very popular 
and it's difficult to evaluate it,   you should request a valuation 
from an auditing company. Step 2. Developing a business model and strategy
Designing your business model, you'll have   to think about sources of income, financing 
details, and evaluate the token's user base.  Step 3.

Learning about 
regulations in your jurisdiction  You'll need to understand the 
laws relating to digital assets   and blockchain technology and strictly 
comply with them. Sometimes it's best   to contact an experienced legal advisor 
and ask for a professional consultation. Step 4. Creating the platform
You’ll need a good team of developers.   And if your code is open source,   other passionate crypto coders can look 
through the code and make suggestions. Step 5. Publishing a whitepaper
A whitepaper describes why your token has   been created and how potential buyers can benefit 
from purchasing your asset-backed tokens. Include   an analysis of your work and the conclusions 
that you came to when preparing the project. Step 6. Attracting investors
After publishing the whitepaper   and testing your new platform, you can start 
working on attracting potential investors.   This is where your marketing skills come 
into play. Providing limited time offers   and other incentives, such as airdrops, 
could draw people to using your tokens.

Tokenization is already playing a 
transformative role in asset management,   slowly but surely entering numerous 
markets, democratizing them,   and making them safer and more equitable. 
Asset tokenization is no longer perceived as   a temporary phenomenon as companies, startups, and 
individuals keep finding new objects to tokenize. Eager to find out more about asset 
tokenization? — Read our blog article   “Asset Tokenization From A to Z: Explanation, 
Benefits, Limitations, and Real-Life Use Cases”.  Thank you for watching this video. Hit the bell 
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