The process of converting information about assets, objects, or rights into a digital format within the blockchain is known as tokenization. It is a new trading or exchange scenario that works as another investment alternative.
The primary purpose of tokenization is to transform sensitive information into tokens to protect the data of users and the asset in question. As it is an investment vehicle, it generates profitability and appreciation from the asset represented by the token.
This technology facilitates investing in a simple, efficient and international way. In addition, it opens the doors for everyone to enter this market without the need to have high amounts of capital.
Some benefits of the tokenization:
● Gives the possibility of making transactions faster and with less friction
● Increases trading security since they have less sensitive information from users
● Removes duplicate information
● Decreases exposure in the transactions, reducing risk (theft or attacks)
● Breaks down geographical barriers and makes investing easier with any currency, even crypto
● Generates liquidity
There is also detokenization, which consists of reversing the process to extract the original information. It can only be done through the system with which the original tokenization was done.
TRANSACTIONS THAT CAN BE MADE WITH THE TOKENS
The swap is a mechanism that allows token holders to make transactions of two types of tokens directly and automatically. It works as an agreement between two parties exchanging tokens of different categories, say token A and token B. One user will pay the negotiated amount of token A to another user in exchange for receiving the agreed-upon amount of token B.
Tokens can be exchanged in primary markets right after they are issued and even in secondary markets, better known as ATS (alternative trading system), which are responsible for automatically connecting the buyer and seller. Tzero and INX are examples of ATS.
TOKENIZABLE ASSETS
Nowadays, you can tokenize almost anything. Some examples include the following:
● Funds
● Bonds
● Stocks
● Raw Materials
● Art
● Real Estate
● Even horse racing
● Equity can also be tokenized, as in the case of company shares. This is called tokenization of institutions; what they do is issue tokens directly, without doing it first in the traditional way. However, some companies tokenize their shares; therefore, they exist both in the traditional market and blockchain.
REAL ESTATE TOKENIZATION
For the specific case of this market, real estate tokenization consists of creating digital fractions of a property, so token holders are actually owners of a fraction of the property. It gives the investors the possibility of buying the entire property or a fraction equivalent to any other value depending on a budget of each buyer.
This gives investors from all over the world the possibility of diversifying their portfolios and having part of their assets distributed in fractions of different properties. In addition, lowering the barriers to entry requires less investment capital and makes it more affordable for anyone (from only $100 in the case of BRET).
This process allows transactions to be carried out automatically and without intermediaries, which reduces sales times and transaction-related costs.
From the property seller’s point of view, who decides to tokenize it, the main advantages of doing so will be the liquidity in their assets and the efficiency of the transaction.
Here are more details about tokenization in this market and how you can be a part of the evolution of investments in the real estate market with BRET Real Estate Tokenization.