What is Tokenization?
Tokenization (tokenization) is a concept used to refer to the process of converting assets into digital form thanks to blockchain technology with many different types of assets.
Theoretically, all existing asset classes have the potential to convert into “tokens”, such as bonds; Real Estate; Luxury goods or simply a valuable item, even a selfie of you, they can all be encrypted.
So why blockchain?
Because blockchain has so many great advantages, reliable, and above all, blockchain has become a new trend.
Blockchain makes the tokenization process transparent. When you perform a token transaction, all components and parameters of that transaction are recorded on the blockchain. It can be understood that blockchain is a public ledger, no individual or organization can affect it, so the information in the blockchain is immutable. The equivalent is that your token ownership cannot be forged by anyone. Your rights and liabilities are directly tied to the token.
The best thing about tokenization is that it makes the efficiency of transactions increase exponentially. No more intermediaries, thick stacks of paperwork, all you need to use a smart contract.
The next benefit of blockchain and tokenization is that it makes the market never rest, tokens can be bought and sold 24/7, regardless of time zones, traded in every corner of the world. .
Being able to easily own “a piece” of real assets gives investors more options to diversify their portfolios. When they undergo tokenization, the traditional “specialty” of some asset classes, which is illiquidity, will disappear, because they are accessible to a large number of people before a lot. Investors will have easier access to more potential projects, even when they are in the growth stage.
Real estate tokenization process:
Imagine you have a high-value building, for some reason you need to collect a large amount of money (but still less than the value of the building), urgent, emphasizing “extremely urgent”, you will do what? You can sell the building the traditional way with full formalities and then recoup the value of the building, which takes a long time, and then do you really need all that money?
Correct understanding of the Real Estate tokenization process
Instead, issue 100,000 tokens under the symbol “X” (name of a building, for example), where each “X” token is worth 0.1% of that building – or any other amount, as long as each token represents a certain portion of the underlying asset (in this case, a building). Then keep any tokens you want, the rest will help raise the capital you need.
Technically, you or the financial company will deploy as a blockchain-based smart contract. The algorithm of the smart contract dictates all the features of your future token: value, quantity, face value, name, etc.
The next question here is how do investors get those X tokens so they can be traded on exchanges? For this, we need a platform that supports smart contracts.
Finally X tokens will be in circulation! Once participating in the market means that their value can increase or decrease according to demand, decrease does not say anything, but what if the value increases and you are holding a large amount of tokens? WAO!
Now have you seen how blockchain can allow us to tokenize everything? A real building with concrete, reinforced, has been represented by digital token units that exist on the blockchain. In short, your building is now a tokenized asset.