Introduction
Tokenization is a concept that provides the ability to convert illiquid assets into liquid assets. The main benefits of tokenization are increased liquidity and increased efficiency. Say’s John JD Mattera, liquidity is enhanced by replacing the long-term, one-time asset sale with repeated shorter sales. Efficiency is improved by breaking up an asset into smaller components that can then be traded separately on an exchange or platform.
Tokenization is a concept that provides the ability to convert illiquid assets into liquid assets.
Tokenization is a concept that provides the ability to convert illiquid assets into liquid assets. Tokenization allows you to sell fractions of an asset, thereby unlocking liquidity in previously inaccessible markets.
Tokenization is often compared with securitization (or “securities”), but there are some key differences between the two:
- Securitization refers specifically to the process by which financial institutions create securities out of loans and other forms of debt (such as mortgages). In contrast, tokenization applies more broadly across all types of assets–not just financial ones–and does not require that an institution be involved in order for it to take place.
The main benefits of tokenization are increased liquidity and increased efficiency.
The main benefits of tokenization are increased liquidity and increased efficiency. This is because tokenization allows investors to buy and sell assets more easily, enabling them to participate in the market without having to wait for a long-term sale of an illiquid asset. In addition, it reduces transaction costs by reducing risk exposure during each trade.
Liquidity is enhanced by replacing the long-term, one-time asset sale with repeated shorter sales.
Liquidity is enhanced by replacing the long-term, one-time asset sale with repeated shorter sales. The market for buying and selling tokens is continuous and open to all participants at any time, providing immediate liquidity. A tokenized asset can be sold in small amounts anytime during its lifetime, which allows investors to make smaller investments or trade more frequently if they choose.
Tokenization also reduces transaction costs through automation and standardization of processes:
- Automation replaces manual processes such as paperwork with machine learning algorithms that make decisions based on data inputted into an algorithm by humans who know what they’re doing; this results in fewer errors from human error (e.g., typo mistakes) as well as faster processing times since computers are much faster than people at performing repetitive tasks like checking that everything looks OK before signing off on something.
- Standardization enables fungibility across different types/sizes/issuers of securities–unlike traditional securities where each security may have its own unique set of rules governing trading behavior (e.g., margin requirements), tokens follow the same rules regardless of issuer or type
Tokenization will create more efficient and liquid markets for the management of investments in real estate, art and other real world assets
Tokenization will make it easier to buy and sell assets. Tokenization makes it easier to raise capital, because token investors can trade their digital tokens just like they would any other digital currency on an exchange.
Tokenization also makes investing in real world assets more accessible, since anyone with access to the internet can buy a token that represents an asset without having to go through intermediaries such as banks or brokers.
Conclusion
Tokenization is a powerful concept that can unlock liquidity and efficiency in asset management. It allows investors to buy into illiquid assets and sell them later on as they please, instead of having to wait until the original owner decides when he or she wants to sell and then find buyers for those assets. This means that investors can get more out of their money than ever before because they no longer have a limited number of opportunities available per year but rather an infinite number of opportunities at their fingertips thanks to tokenization.
