What are Asset-Backed Tokens and Which Assets can be Tokenized?

grimreap (25)in #crypto • 3 years ago

The revolution caused by blockchain technology is no longer in doubt. Blockchain has dramatically impacted the global financial industry. It has become one of the leading technological innovations of the decade. Its transparency, process rate, and anonymity are just some of the reasons for its fast global adoption. The benefits derived from blockchain are yet to be fully known and can only evolve with time.

One of the new innovative ways by which blockchain has been deployed recently is the tokenization of assets, usually referred to as Asset-backed tokens (ABT). Assets-backed tokens have proven to be a gold mine so far. It has provided a new way for projects and corporate organizations to raise needed funds. At the same time, it has given everyday individuals the avenue to hold meaningful investments.

This article delves into what ABTs are, how they function, and the kinds of assets that can be tokenized.

What are Asset-Backed Tokens?

Tokenization is the process of converting things of value into usable tokens on the blockchain. It is a way of moving the value of things into digital forms. Typically, tokenization involves converting such assets into smaller pieces in digital forms that can be purchased in smaller units.

Blockchain technology generally enables a system where it becomes easy to tokenize assets that are not readily convertible or easily traded. Additionally, blockchain has become the preferred alternative to traditional paper markets in terms of speed, accountability, and transparency.

How does Tokenization work?

Digital tokenization has come to be with blockchain technology. Still, the concept of tokenization has been around for a while now. Similarities to tokenization were first adopted in the financial service industry in the 1970s.

The idea then was to convert valuable and sensitive clients’ details into a series of alphanumeric compositions, which are converted into tokens through cryptography. Some of the common details that were tokenized back then included clients’ credit card details, social security details, among other things.

Today, the concept has moved beyond being a tool for information encryption. Tokenization has become a means to drive the value of all forms of assets online. Platforms like BlockX are specialized in digital assets settlement, helping organizations, projects, and institutions raise funds through asset tokenization. There are lots of assets whose value cannot be easily divided (Non-fungible assets). For this class of assets, tokenization simplifies divisibility while maintaining such assets in their original state. Artworks, real estate, and NFTs typically fall into this category.

Simply put, tokenization works by giving digital value to assets that cannot be easily divided. This way, tokens represent the asset class, and such tokens can be easily bought and sold across multiple traders.

Also read: How Tokenization can Close the Blockchain Security Gap |

Which Assets can be Tokenized?

There are virtually no restrictions to the kind of assets that can be tokenized. But generally, tokenizable assets can be categorized into two classes. The classes are intangible assets, fungible assets, and non-fungible assets.

Tokenizable intangible assets are assets that do not have physical forms but are essential, especially in the operational aspect of an organization. This class of tokenizable assets includes organizational voting rights, copyrights, and patents.

Tangible asset-backed tokens are tokens derived from assets that are not readily tradable or exchanged. This set of assets are increasingly receiving attention in crypto tokenization for their high-value potential for growth and investment. These classes of tokenizable assets include real estate, arts and paintings, gold, and other precious metals.

Tangible asset-backed tokens can also include paper assets such as government bonds, private equity, hedge funds, and stocks.

Stages of Asset Tokenization

The decision to tokenize an asset is usually the easy part. Having a standard and flawless asset tokenization process is another thing entirely. That is why they recommend that your organization make use of certified and trusted platforms like BlockX .

There are three crucial stages that every successful digital asset settlement and tokenization must follow. The stages are token issuance — which must be done in a compliant manner; initial sale market — which must be done transparently on a recognized regulated exchange; and security exchange — all tokens must be globally available for trade.

You might be interested in: What are Smart Contracts and How Do They Work? |

Where to Tokenize Your Asset

BlockX is the one and most reliable platform for asset-backed tokens. It is the first-ever digital investment and banking platform in the world. BlockX is the DeFi settlement and payment chain specializing in the issuance and settlement of digital assets such as CBDC, Digital securities, real estate, Arts, Hedge Funds, NFTs, and more.

Asset tokenization is rapidly changing the way they interact with assets with value. Through blockchain technology, it has become effortless to tokenize assets that were once considered indivisible in a transparent and accountable manner.

It is expected that asset tokenization will eventually become the norm among establishments and the preferred way for investors to invest in promising projects.

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About BlockX

BlockX is the Digital Assets & CBDC Settlement and Payment Blockchain transforming traditional finance into the Blockchain ecosystem. BlockX aims to make investment possible for assets that would otherwise be hard to invest in. BlockX is committed to bridging the gap between traditional forms of asset investment and the new investment trends created by the evolution of blockchain technology.

BlockX is involved in many different projects and services for blockchain uses and applications. Tokenizer is a blockchain investment banking system that champions accessible, transparent, and safe financial services, powered by BlockX. They believe that everyone deserves equal access to investment and fundraising opportunities. Thus, Tokenizer aims to democratize investment and banking through asset tokenization. Click here to discover STOs with Tokenizer.