Blockchain technology may be used for many functions, including asset tokenization (or asset tokenisation in British English).

Benefits of tokenization using blockchain technology includes decentralization, transparency, distributed structure, and immutability, all of which are ideal for its application in asset tokenization.

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What exactly is asset tokenization?

Asset tokenization converts real-world assets into digital tokens. In this process, an issuer creates digital tokens on a distributed ledger or blockchain, which may be used to represent a fractional share of the underlying asset that can be either digital or physical assets. Blockchain guarantees that once you buy tokens representing an asset, no single authority can erase or change your ownership of that token — your ownership of that token remains entirely immutable.

For example, a $100 million commercial building in New York may be out of reach for most people. Asset tokenization can however convert ownership of this property into 100 million tokens, each representing a tiny percentage of 0.000001% of the property. Asset tokenization divides a high-value asset into many more affordable divisions, in this case, $1 per token.

Each token may also be traded easily, bring us to another key benefits of asset tokenization – improving liquidity. It is much easier to sell properties in denomination of $1 then to sell the whole property at $100 million right?

Let’s say this property generates a net rental income of $5 million per year, an asset tokenization on a blockchain solution can also help to efficiently distribute this revenue participation or profit sharing of $0.05 per token.

Benefits of asset tokenization for asset owners

  • Increased liquidity
  • Fair market price – without the illiquidity discounts of a large asset
  • Reduced management costs – no need for lawyers or other intermediaries for ownership transfers, saving time and cost in the process.

Benefits of asset tokenization for investors

  • Increased liquidity – easily invest a much smaller amount, enabling portfolio diversification
  • Shorter lock-up periods – increased liquidity enables investors to buy and sell tokens quicker
  • Transparency – blockchain is immutable so asset history, past prices, and token holders’ history may not be hidden or changed

Asset tokenization is likely to transform the way assets are managed, bought and sold in future. It enables inclusion and democratizes access to markets while ensuring fairness and security for all participants. The future of asset tokenization is certainly exciting once we bridge the legal concerns, taxations and cross-jurisdictional issues between physical assets and the distributed ledger or blockchain technology as we know it.

The Prestige Asset Tokenization platform

Asset tokenization is definitely an important aspect of fintech. At Prestige Technologies, we strongly believe in asset tokenization and am working to build a trusted and reliable platform that asset owners and investors can use to participate in this technology without having to develop such solution from scratch. We aim to build a frictionless platform with integrated wallets and tokens such so that users do not have to be familiar with the underlying blockchain technology to use it easily.

Prestige provides tokenization consulting and facilitates the technological aspects of asset tokenization for asset owners and investors.