Blockchain technology has made the exchange of value easier than ever before, especially in digital assets like cryptocurrency and digital tokens. They have emerged as the top trends that are poised to bring a transformative difference in the fintech world. As per the World Economic Forum, the market capitalization of the tokenized asset is expected to touch the $24 trillion benchmark by the year 2027.
With the market expansion, the blockchain development companies have been emphasizing developing platforms that can make the tokenization of assets easy. The major advantage of using an asset tokenization platform is that it makes the asset market more liquid. The users have access to a diverse range of assets with the ease of buying and selling in a timely fashion.
These platforms have opened the market to a whole new set of investors that could enable them to diversify their investment portfolios into assets that were previously out of their reach.
Let us explore some of the popular use cases of asset tokenization that have been useful in paving the way for future developments.
Tokenization of Agro Commodities
Agro-commodities can be tokenized easily using blockchain technology platforms. If we look at the reports by Markets and Markets, the market size of blockchain in agriculture and food supply was estimated at USD 133 million in 2020 and is expected to grow at a CAGR of 48.1% to reach USD 948 million by 2025. This huge growth shows the wide adoption of blockchain technology in agriculture and the interest with which companies are indulging themselves in proactive development.
Tokenization in agriculture empowers the farmers to upscale their regional agriculture products into agri-based tokens, thereby allowing national and international investors to invest in agro-commodities. Using tokenization, farmers can trade commodities for stable currencies as well. Tokenization of agro-commodities has provided leverage to the farmers over the traditional way of dealing with grains as the value is directly linked to the grains using a blockchain platform. These tokens even allow easy transactions with the direct backing of grains, benefitting both the farmers and the investors.
Decentralized Token-Based Startup Investment Funds
Token-based investment funds act as the middleman between the investors and the startup project. Such investment funds discover and pick deserving businesses as well as ensure that the portfolio companies are managed properly.
No individual retail investor possesses enough time and sufficient technical sophistication to analyze so many types of startups and businesses. This is the reason why retail investors have two routes open for them. One is to not invest in risk startups at all and miss out on significant returns. The second option is to invest in a startup that has a higher probability of losing your money. This is the exact reason why the token-based investment fund can help retail investors to find and invest in an ideal startup.
With token-based investment funds, retail investors don’t have to do the painstaking job of analyzing and assessing investment opportunities. They just have to provide funds, the analysis part is taken care of by an expert who in return gets rewarded by the smart contract for their contributions.
Asset tokenization companies bring down the entry threshold for funds by making investment procedures streamlined, transparent and verifiable. On an operational level, blockchain technology makes businesses with securities more efficient and scalable.
Tokenization of The Distressed or Newly Build Real Estate Property
Some of the obvious applications of the asset tokenization platform are raising capital for the construction of real estate property and fractionalizing the ownership of existing real estate property.
Apart from that, digital asset tokenization services have found several other types of applications of asset tokenization technology in the field of distressed properties. In this model, the first step is identifying the distressed property, then gradually raising funds in order to purchase the property and renovate the property with the help of asset tokens that are distributed among retail investors with a smaller paycheck.
Once the distressed property is in operational condition, quickly selling the asset at the right price in the market help recoup the investments. Accordingly, investors can collect a one-time profit at the time of sale which is usually a few years after the initial investments.
Access to Expensive Investments
Tokenizing expensive investments such as publicly listed companies or pre-IPO shares can be of enormous value to retail investors who can’t afford expensive companies’ shares. With the help of blockchain, asset tokenization companies can represent such stock in hundreds of tokens enabling smaller investors to invest in high-value stocks. Investors consider such tokens as an alternative investment vehicle because of their strong performance, underlying business, and powerful brand story.
With digital asset tokenization services, securities of all shapes and sizes can be easily tokenized. Because tokenizing securities reduces transaction times as well as permits 24 * 7 trading. The transaction speed is attained with the help of smart contracts that generally get triggered by predefined parameters. Tokenized security reduces counterparty risk during the transaction and drastically lessens the possibility of trade damage. Tokenization exponentially improves the ability to manage asset-liability risk through faster transactions and improved transparency.
Tokenization of Fine Arts
With the tokenization of art, the artists can now transform their monolithic paintings into thousands of digital tokens. The asset tokenization companies can fragment the ownership of the artwork using blockchain technology. Artists offering Tokenized art can set the value of their work. On the other hand, buyers can purchase tokens for multiple artworks and create diverse portfolios. Asset tokenization platforms employ reliable methods to authenticate and verify the work of art and the artist behind the art to secure investors’ funds.
Expanding the Horizon of Your Traditional Business
Most traditional businesses do not fall in the category of disruptive businesses so they usually don’t attract venture capital funds – because VCs solely rely on high-risk high-return philosophy. In the case of a newly budding startup accessing capital and scaling up quickly is not that difficult because of the venture funds.
Besides that, accessing capital from private investors often leads to a full business acquisition. On the other hand, raising capital for traditional financial systems such as banks often leads to higher interest rates. But the same traditional businesses can benefit from digital asset tokenization services that open whole new doors of opportunities.
Asset tokenization enables small-scale investors to invest in the traditional business only after thoroughly assessing the business model at the operation as well as potential return in the future. Asset tokenization platform can also be utilized to attain customer loyalty by implementing community tokens which establish a positive influence of the brand on the audience as well as reduces the overall cost of marketing.
Yodaplus is a highly specialized technology solution company. We also offer reliable and trustworthy digital asset tokenization services to businesses of all sizes, across all industries, located all over the globe. We deliver secure and scalable solutions which are at the intersection of technology, finance, and blockchain to all our esteemed clients.