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Recent years have widened the conversation around cryptocurrencies and NFTs and the awareness surrounding digital assets is growing in line with widespread adoption. At the same time, retail investors have flooded the many online trading platforms that are now available, wishing to participate in financial markets which had traditionally only allowed access to a limited number of insiders.
Broadening access to stocks, assets, and commodities is not always straightforward, however. The total value of all assets globally hit over $400tn in 2021, yet many of these are illiquid, hard to access, and difficult to trade. Some efforts to create liquidity for assets like mortgages, debt, and commodities were made in the 1980s, when these were transformed into securities, making it easier for investors to diversify their portfolios.
Now, the next step is presented by tokenization, an easier, safer, and faster way to create liquidity and allow retail investors to access an enormous range of assets with the click of a button.
Liquidity and fractionalization
Blockchain technology is now firmly mainstream, though headlines are usually dominated by cryptocurrencies, DApps, or digital collectibles in the form of NFTs. But the technology opens the door to an almost unlimited number of innovations. Chief among these is the concept of tokenization.
Using blockchain technology, any asset can be linked to a digital token, which represents its real-world value. This works equally for physical assets such as real estate or artworks, as well as with less tangible resources such as stocks and bonds. This brings with it the potential to unify all asset classes and make them easily tradeable in exchange for fiat or cryptocurrencies.
Through tokenization, the laborious task of converting illiquid assets like property into cash is simplified significantly, as the trading parties only need a digital representation of the asset to establish ownership. Moreover, tokenization allows assets to be fractionalized, making it easier for investors to access resources that previously required considerable amounts of capital.
By fractionating an asset into multiple digital tokens, investors can buy smaller fragments of a product and see their investments gain value in line with the overall asset. This is especially useful for objects such as valuable artworks and property, creating further liquidity on the market and opening access to a significantly wider share of investors.
Transparency and efficiency
While traditional models of share trading rely on protracted and lengthy verification processes, token trading is executed on the blockchain, making it a near-instant and automated process. This increased efficiency also brings with it an increased level of security and transparency. As transactions of digital tokens are recorded automatically on a distributed ledger, tokens provide an immutable record of ownership that is visible and verifiable by all.
This negates the possibility of human error or falsification, making the transfer of sensitive assets more secure and transparent. One of blockchain technology’s biggest strengths is the ability to cut out intermediaries, making tokenized asset trading much more efficient, cheaper, and safer.
Trading and investing made simple
While tokenization makes a variety of previously illiquid assets available to more investors, the concept naturally requires platforms that can offer trading and investment opportunities to a wide customer base. The true strength of tokenization is the possibility of unified access to a diverse market made up of stocks, bonds, digital assets, artworks, real estate, and many more, and platforms capable of providing this access will be essential to transforming the market.
StrikeX is launching its flagship platform TradeStrike later in 2022, with a view to provide just that benefit to as many investors as possible. Tokenised assets will be available alongside cryptocurrencies, making it possible for users to trade efficiently and cheaply, 24/7, and across borders.
Putting power into the hands of retail investors lies at the heart of tokenization and providing access to the widest possible range of assets without geographical restrictions is the primary motivation behind our products. Combining traditional and crypto markets can democratize the entire financial ecosystem, making trading and investing a fairer and more inclusive activity.
The financial sector has already experienced a substantial transformation with the rise of online retail trading platforms in recent years. The time has come to take the next step and transform the market through the revolutionary potential of blockchain technology. The future of finance is within reach, let’s make it accessible to all.