Tokenization is a process where the form of an asset is converted into a token that can be moved, stored or recorded on a blockchain. As mainstream attention turns towards the blockchain sector, users will be looking for examples of how this technology is actually used everyday. The following article will share with investors about stablecoins and whether investing in tokenied assets backed by real assets is as safe as Stablecoins.
What Is Stablecoin?
Stablecoins are cryptocurrencies the value of which is pegged, or tied, to that of another currency, commodity or financial instrument. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies including Bitcoin (BTC), which has made such investments less suitable for wide use in transactions.
What is a tokenized real-world asset?
Through a process known as tokenization, financial assets are turned into tradable digital tokens backed by cryptocurrency and secured by blockchain technology and immutable distributed ledgers.
The tokenization of physical assets has added another real-world use to blockchain technology. One can tokenize any real-world object, allowing it to become a fully tradable asset similar to a cryptocurrency.
Compare stablecoins and tokenized real-world assets
In general, stablecoins and tokenized real-world assets are highly liquid, safe, transparent, accessible to a wide range of audiences & blockchain applications.
On different points,
|Content||Stablecoin||Tokenized real-world assets|
|Collateral property||Fiat, cryptocurrency, precious metals or no collateral (Algorithmic Stablecoins)||Real-world assets: Property, commodity, gold, share, etc.|
|Pros||– Offers stability in a volatile market;
– Driving payment innovation.
|– Suitable for profitable investment;
– Supported by a third party (Asset management company, bank, insurance).
|Cons||– Not suitable for large investments;
– Dependence on traditional financial markets;
|– Depends on the real-world asset market.|
It can be said that the main benefit of stablecoins is that the price volatility is minimized by the uncorrelated asset used to back the stablecoin, diminishing monetary hazard. Stablecoins allow you to exit your position in volatile cryptocurrencies without leaving the market or exchanging into a fiat currency. However, algorithmic stablecoins no longer maintain their inherent stability over time and lose value. Over the past time, regulators around the globe are also working to establish rules for the crypto environment. According to Reuters, some lawmakers have recommended stablecoins as a particular risk to financial stability. For example, if too many people try to withdraw this currency simultaneously, it will cause panic and drastic price fluctuations. Although seen as a “safe haven” for investors, stablecoins have a profound effect on traditional finance when it comes to devaluation.
As for tokenized real-world assets, while you may think tokenization is a market sector only for the crypto community, the truth is it has distinct advantages for real-world asset classes as well. Since Blockchain technology and distributed ledgers eliminate the intermediaries involved in the transaction process, meaning asset transactions are processed immediately without a centralized party’s approval. This results in a secure yet instantaneous transaction process meaning real-world assets on the blockchain have unprecedented liquidity. Asset tokenization is blurring the lines between traditional finance and decentralized finance. It’s an innovation that offers retail investors a chance to tokenize real-world assets via the blockchain, tapping into an emerging market ripe with opportunities for massive gains.
Like any other type of investment activity, you must conduct in-depth research and pay attention to market activity as much as possible. An excellent place to start your due diligence, read your project reports & investment recommendations for real estate and related properties is GIGEX, which focuses on tokenizing real-world assets.
It is expected that, in the second quarter to third quarter of 2022, GIGEX will launch the first real estate project with carefully appraised information publicly disclosed to platform participants. Sign up for an experienced account here: https://gigex.io/ and join our community to keep up to date with the latest news.
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