The introduction of cryptocurrency ushered in a new era of possibilities for revolutionizing the way investments and assets are issued, maintained, and traded. Blockchain, the technology driving cryptocurrency, is a distributed ledger technology that has opened the gates to a large variety of investment opportunities.
Blockchain will change the financial sector by allowing an asset to be easily broken down into smaller parts that indicate ownership, democratizing investing in previously illiquid assets and bringing about more fair markets. Illiquid assets are assets that cannot be easily or readily exchanged or sold for cash without heavy discounts. Everything can be tokenized on a distributed ledger, including paintings, trade assets, bonds, real estate, firm shares, and collectables.
This begs the question, what exactly is asset tokenization?
Understanding Asset Tokenization
Asset tokenization is the process that produces digital tokens which represent digital or real assets on a distributed ledger or blockchain. Once you buy tokens representing an asset, blockchain ensures that no one authority can remove or change your ownership — your ownership of that asset is completely immutable.
As asset tokenization is getting increasingly popular in the Defi sector, the need for platforms that enable asset tokenization has increased. This gives rise to asset tokenization platforms.
What is an Asset Tokenization Platform?
A platform for asset tokenization transforms physical assets into digital tokens. Tokenization as a Service is the name of the procedure (TaaS).
Financial institutions and institutional investors employ asset tokenization platforms. Tokens transform art into a commodity, enabling venture capital investors to track their investments without the need for an intermediary, and provide liquidity for crypto exchanges when tethered to an external reference (eg. stable coins).
Every asset tokenization platform has certain characteristics and features developed to help investors and consumers easily navigate and work on it. Let’s now discuss these features and understand them in depth.
Asset Tokenization Platform Features
Built On Blockchain Technology
Blockchain Technology is the driving force for Asset Tokenization as well as its platforms. As discussed at the beginning of this blog, blockchain technology is a distributed ledger technology. Distributed ledger refers to multiple independent computer nodes all used to record, share, and synchronize data and transactions.
Creates Lawful Digital Tokens That Reflect Real-World Assets
Any asset, including real estate, venture capital funds, precious metals, stock shares, physical items, intellectual property, sports teams, music, art, and collectables, can be tokenized. Tokens allow certain assets to be transferred quickly between digital platforms or networks. As geographic obstacles are reduced, opportunities for cross-border trade expand.
Built-in Smart Contracts
Smart contracts preprogrammed to run automatically when certain market conditions are fulfilled guide asset tokenization platform decisions. Smart contracts eliminate the formality and expenses associated with using a third party to monitor and verify interactions by making them public and auditable to everyone.
Fully Decentralized Settlement Of Trade Transactions
The tokenization platform must provide a fully decentralized settlement of assets that will help borrowers and lenders trade in a trustless environment with complete security provided by the atomic swap execution capabilities of the smart contract.
Support Collateralized Token Offering For Eliminating The Credit Risk
The tokenization platform must provide the ability to the borrower to tie up with a credit insurer or underwriter who is ready to collateralize the tokens on behalf of the token issuers. The collateralized tokens provide mitigation of credit risk for the investors.
Support Direct (P2p) Lending As Well As Pool Financing For Tokens Issued On The Platform
The tokenization platform must provide the ability to the borrower to opt for the P2P (direct lending) model or be able to tap into the liquidity pools available on the chain.
Issuer/Investor Fund Management Dashboard
Asset Tokenization platforms include a highly functioning dashboard, which makes it easier for the issuer and the investor to manage the assets and the tokens.
KYC (Know Your Customer) and AML (Anti Money Laundering) are two of the most highly used verification protocols in the finance sector. Asset Tokenization Platforms, for example, the Yodaplus Asset Tokenization Platform provide highly functional KYC/AML capabilities.
Security Token Offering/Token Asset Offering
An STO is a digital representation of asset ownership (such as gold or real estate) or economic rights (such as a portion of earnings or revenue). Security Token Offerings (STOs) combine blockchain technology with the demands of regulated securities markets to facilitate asset liquidity and finance accessibility.
More features also include Fundraising, Regulatory Compliance, Token lifecycle management, and Security Management.
Is There Any Platform That Includes These Features?
Today, technology and trading corporations all over the world are learning and developing platforms to get into the asset tokenization sector. However, there are only a handful of these fully functional platforms leading the race right now. One of them is the Yodaplus Asset Tokenization Platform.
Yodaplus is a corporation that specializes in technology solutions. The company was founded to satisfy the demand for secure and scalable solutions at the crossroads of technology, finance, and blockchain.
Yodaplus Asset Tokenization Platform includes all the features mentioned above, along with additional features like address whitelisting, Enterprise App Integration, custody wallet integration & many more. This Asset Tokenization Platform supports the XinFin (XDC) Network.
As asset tokenization is still relatively new, we can hope to see some significant changes in the world of finance as it grows into its potential. And I, for one, cannot contain my excitement to see it evolve.