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Asset Tokenization: A Guide to the Future of Investment!

WHAT IS ASSET TOKENIZATION

Tokenizing assets is to create, in a blockchain, an encrypted digital file – the token – that will be used to trade the asset in question – for example, to tokenize a property so that it can be traded in a different way than the traditional offer – advertisements in media and brokerage websites.

The goal of tokenization is to provide companies, groups, or individuals with the ability to trade their assets with a number of benefits over known ways of transacting.

WHAT ARE TOKENS

Token is an encrypted digital representation of goods that can be offered to the market – tangible or intangible assets, future rights, products or services, business projects, and even cryptocurrency offerings.

It is considered to be a financial digital asset, along with cryptocurrencies. However, while digital currencies are a means of payment and also an investment in themselves, tokens are the electronic way of representing assets that have their own market value.

The token increases the efficiency of fundraisingbut does not impact the valuation of the asset that is attached to it.

SECURITY TOKENS

Also called security tokens, these are the crypto-activities used to trade assets that are quite common among companies to raise funds among investors, paying dividends in return. This is the case with stocks, debentures, guarantees, gold positions, future obligations, and others.

The security tokens correspond, on the blockchain, to IPO offerings on exchanges and brokers, but with a much greater speed, the possibility of raising more investors in less time with the fractionation and, consequently, obtaining greater liquidity.

UTILITY TOKENS

Utility tokens already demonstrate their purpose in the name itself: they are cryptoactive tokens created to grant exclusive services, benefits, or credits at the companies issuing the tokens.

In this way they are business tokens in the broadest sense, as they support the relationship between brands and customers and are not an investment token per se, although they can become speculative and highly valued assets in some segments, such as blockchain gaming tokens.

FAN TOKENS

Fan tokens, if we can translate it this way, are also utility tokens, but they are given a different name given the proportion that their purposes are taking on in the sports, arts and entertainment market.

These are tokens with the specific purpose of generating engagement between fans or supporters and personalities from the art world, sports teams, and celebrities, granting exclusive rights and content. A good example are the tokens of supporter programs.

HOW ASSETS ARE TOKENIZED

The tokenization process follows these main steps:

  1. Feasibility study: BLOCKBR together with the client will analyze the characteristics of the asset – value, ownership conditions, accounting and legal aspects – and of the tokenization – value, term, form of investor compensation, revenue potential, and other aspects;
  2. Structuring of tokens: the legal contracts that will support the operation between BLOCKBR and the client are created;
  3. Issuance of the tokens: is the actual creation of the tokens, as well as the smart contract that contains all the tokenization conditions;
  4. Distribution of tokens: is the availability to the market, through a token sales platform such as BLOBCKBR’s marketplace or other means through BLOCKBR partners or even through distributors (buyers) that customer;
  5. Governance: in this stage the blockchain together with the smart contract will manage in a 100% electronic way the transactions, negotiations, remunerations, and legal conditions of the offer.

CAN EVERY ASSET BE TOKENIZED?

Yes, all assets, whether tangible, intangible or financial, can be represented by tokens and traded. However, one must evaluate the cost and benefit ratio before deciding to tokenize an asset.

What’s more, the tokenization market may surprise with the diversity of opportunities.

  • Real Estate Developments
  • Collectibles
  • Trademarks and Copyrights
  • Loyalty Programs
  • Stocks, future crops and metal reserves
  • Financial Assets (stocks and bonds)
  • Receivables, loans and other obligations

Tokenização de Imóveis BLOCKBR

HOW BLOCKCHAIN TECHNOLOGY WORKS

A blockchain is a distributed database – without a server or central control – composed of countless computers(network nodes) of very high processing power that electronically validate transactions with tokens.

To do this, it uses a consensus protocol – all nodes keep a copy of the transactions they have made and must unanimously approve the conditions of a new transaction. This is decentralization, a concept fundamental to the high level of security and transparency that blockchain provides.

After being approved by all points, the operation receives a unique mathematical code identification – the hash – and is inserted in a chain of sequential information blocks, which form a chain where the movement can no longer be altered.

This process is 100% digital and fully encrypted.

Learn more about blockchain technology and its key terms.

MAIN ADVANTAGES OF TOKENIZATION

COST REDUCTION

In the tokenized asset market, the negotiations are peer-to-peer, directly between the asset holder and the investors, without traditional financial market intermediaries, allowing to eliminate the cost of intermediation and custody of values.

In addition, tokenizing does not require employees to manage customer contacts and proposals or to perform the financial and administrative routines of managing the sale of assets. Everything is done electronically.

DEMOCRATIZATION OF INVESTMENTS

This is undoubtedly one of the most important advantages of tokenizing assets: the technology allows one to fractionate any asset and small value shares, which makes it possible for small investors to get interested and participate.

In this way you democratize access, increasing attractiveness and creating an even larger potential investor base for upcoming offerings.

HIGHER LIQUIDITY

This is a natural consequence of democratization: with more people interested and with the potential to buy lower-value tokens, the speed of reaching the goal is much faster. Your company negotiates a good and raises funds faster.

TRANSACTION SECURITY

Besides the innovative data architecture we talked about earlier, on the blockchain it is impossible to make a transaction with invalid data – for example, to tamper with the balance of a virtual wallet on one of the network’s computers.

This is because all computers have the same balance. To succeed, one would have to fraud the balance on everyone else, which is not technically possible – and would take months or years if it were.

The encrypted block structure strengthens security, and the networks use the latest anti-intrusion protocols, since network security is the basis of credibility where data is decentralized.

This reinforces the blockchain as a highly secure environment, with no records of cyber attacks.

TRANSACTION TRANSPARENCY

All the movements are saved in a digital ledger that can be accessed by those involved at any time. No matter how many transactions a token has, it is possible to track the data for each one.

With high-level security preventing intrusions and fraudulent use, the network can provide the transparency that token sales and purchases require.

MAIN ADVANTAGES OF TOKENIZATION

TRADITIONAL AND INNOVATIVE: IS THERE ROOM FOR EVERYONE?

Yup. Tokenization has come to occupy an important space in the economies of countries, as digital media are becoming more and more present and necessary in people’s lives. And this will positively impact all businesses.

Whether tokenizing company stock or a cryptocurrency portfolio – yes, it is possible to tokenize crypto-assets – the future with tokenization will be one of more agile and efficient business, regardless of the nature of the asset.

There will be room for everyone on blockchains!

MAIN TOKENIZATION SEGMENTS (Real Assets and Financial Assets)

Tokenizing is a verb that is being conjugated with increasing frequency in many different industries and even in homes – you can tokenize artwork with great results.

Let’s talk about some segments where tokenizing is both a trend and a reality around the world.

TOKENIZE REAL ESTATE (Real Assets)

The real estate market is the engine of the economies, and in Brazil it is in the process of recovery. However, real estate is an asset with low liquidity and a small audience. At Real Estate Tokenizationtokenization, fractional value is the solution for quick deals with great results.

It is possible to turn an apartment into a thousand shares, which attracts many more people willing to gain from appreciation and a future sale. We can also tokenize land, houses, commercial spaces in condominiums, parking lots, and even building facades.

There is still the double gain in many cases, with the appreciation of the asset in the market and the rent.

TOKENIZATION OF MINERALS (Real Assets)

This is a sector with enormous potential for well-structured, high-value business, because the menu of possibilities is very large, especially with the mineral wealth in Brazil and because they are commodities for export and perennial appreciation and high turnover.

Tokenizing minerals is an effective way to raise funds and one of the industry’s strengths is the tokenizing mining projectsThe tokenization of minerals is an effective way to raise money, and a strength of the industry is that it allows many people to participate in an investment that would be out of reach through traditional market channels.

TOKENIZATION IN AGRICULTURE (Real Assets)

Agribusiness is the flagship of the Brazilian economy and could not be far from technological innovation, something that has been a routine in the sector for decades, one of the ones that has evolved technologically. A tokenization of future crops new projects brings the market closer to the people.

An extremely positive point is the proximity of populations from entire agribusiness regions at the tip, an affinity that further increases the potential of token business.

TOKENIZATION OF RECEIVABLES (Financial Assets)

Differently from the market sectors, here we are talking about a potential present in all companies: to tokenize receivables anticipation, an activity that has a high cost by traditional means, besides the time and the bureaucracy.

Your company can convert receivables into tokens and offer them on the market instead of dealing with banks. Again, the fractioning facilitates the access of those who bet on the credibility of the brand and the very low risk of receiving fixed and programmed remunerations.

Learn all about decentralized finance!

CHALLENGES AND OPPORTUNITIES OF THE TOKENIZATION MARKET

CRYPTOACTIVE REGULATION IN BRAZIL

The regulation of digital assetsdigital currencies and tokens – in Brazil is fundamental for more companies and people to take advantage of this important transformation in the way business is done. Fortunately, the current path is positive.

There is already a bill approved by the Senate and awaiting approval by the House of Representatives to regulate the use of cryptocurrencies in the country. Although it deals only with fiat tokens, the positive impact on business tokens is even greater.

This stems from the fact that tokenization is not a speculative investment but rather a vehicle for asset offerings to reach farther, faster, and to more people.

In this way, regulating cryptocurrencies increases people’s sense of security, favors those who buy and those who sell, and increases the credibility of the responsible companies in the crypto-active market, in particular tokens of real assets. .

MAIN SEGMENTS OF TOKENIZATION (Real Assets and Financial Assets)

GROWING MARKET

Gross revenue from tokenized transactions in the country reached R$100 million in 2021, about 2.4% of the world market. A significant number, especially considering the markets’ resistance to technological innovations such as blockchain, smart contract, and digital assets.

The lack of regulation still prevents many companies from investing in tokens for business. However, the numerous successful experiences and high visibility help to increase market confidence.

The outlook is positive with the regulation of cryptocurrencies and the popularization of the perceived benefits of tokenizing.

WELCOME TO THE FUTURE OF MONEY!


BLOCKBR Digital Assets
is a web 3.0 native fintech that brings together technological innovation and digital knowledge to transform physical assets into digital assets, in the process of tokenizing assets.

Get ready for the new economy, transform your assets, and be ready for the changes that will bring more success!

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