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Tokenization Explained: Assets and Crypto Projects

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In this Article

Max Frilot delves into Tokenization and how one is to go about converting rights or asset-ownership into a digital token.. Find out more about these concepts and also how be can help your business achieve a greater audience with MK Fintech Partner’s expertise!

What is Tokenization?

The concept of tokenization may be regarded as the process of converting rights or asset ownership into a digital token. At the core of this model is blockchain technology, which permits data to be secured across a network of authorised stakeholders. Tokenization has several distinct applications including, but not limited to, the tokenization of real estate, precious metals, shares or even the copyright of intellectual property! This novelty introduces many benefits through its functions, typically apparent through assets which are not traded electronically, such as exotic cars. Aside from this, it may also aid in improving liquidity, traceability and tradability in payments and data flows.

When assets become tokenized, they are opened towards new possibilities with previous limitations being removed simultaneously. As an example, if an artist in a fine art market wishes to sell an expensive piece of work, it is needless to say that only a select few individuals possess the opportunity and funds to purchase or invest in it, leaving the majority of retail investors unable to participate.

Tokenization of Assets: What Advantages does it Present?

With tokenization, the piece may become a token(s) which represents fractional ownership over the artwork, giving different investors an opportunity to contribute. The property rights of a painting by Jean-Michel Basquiat sold for $110 million in 2017. If this was tokenized, smaller retail investors would be able to acquire an interest in the painting. Having said so, through tokenisation, market diversification is undoubtedly promoted by allowing investors to expand their investment portfolio into what was previously considered an inconceivable notion.

Another critical advantage that tokenisation brings is safety and security. A significant portion of payments being conducted recently have been made through mobile phones, via means of Apple or Google Pay. Credit card data is stored on the mobile phone as a token, featuring several security measures like biometrics and two factor authentication. Tokenization has become a cornerstone to eCommerce through paving the way for safer payments and an enhanced user experience regardless if it is conducted online, through a mobile device or in-app.

How can I Tokenize my Assets?

The opportunities which tokenization presents are being understood by leading financial institutions, and while establishing such a project may seem like a daunting task, it is relatively straightforward. The first step in the process would be to identify which asset you would like to tokenize. Once this has been accomplished, one must then create a tokenomics model to adequately mould the underlying economics of such a crypto project.

Now that the tokenized asset has been declared and a tokenomics model has been constructed, one may proceed with choosing a blockchain platform for the asset to be tokenized, developing any smart contracts necessary, integrating a crypto wallet, then the token may be launched for trading. It is worth mentioning that cost and average time frame to establish it may vary depending on the scale and complexity of the tokenisation project.

After the implementation of such a venture, if successful, one may notice significant financial gains in the form of increased revenue as a result of enhanced liquidity, a reduction in costs due to the lack of third-party services and human involvement would be significantly eliminated due to processing transactions on automated smart contracts. All of these variables cohesively increase financial gains at low risk, simply due to the asset being tokenized.

Through the analysis of all the points mentioned previously, it can be seen how tokenisation has several novel uses, significant benefits and is not difficult to implement.

How Can We Help?

Will you consider tokenizing any of your assets? If so, get in touch with us for specialised assistance.

More about MK Fintech Partners Ltd

Michael Kyprianou Fintech Partners Ltd is a Maltese licensed VFA Agent (virtual financial assets agent) composed of a team of dedicated experts who provide services such as advisory, licensing and registrations of activities related to Fintech, Crypto, Blockchain, Investment and other ancillary services including accounting, company incorporations and banking. MK VFA Fintech Partners is an entity that forms part of the group of companies belonging to the Michael Kyprianou Advocates & Legal Consultants. Michael Kyprianou is a top-tier International Legal Consultancy Firm with offices in various jurisdictions such as Cyprus, Dubai, London, Greece, Ukraine, Frankfurt and Malta. The firm is top ranked in the Legal 500 and according to Gold Magazine is the 2nd 3rd largest in size in Cyprus.

The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on a specific matter before acting on any information provided. For further information, please contact us at MK Fintech Partners via email at contactmkfintech@kyprianou.com or by telephone +356 2016 1010.