Introduction
Blockchain technology continues to offer new ways of doing things. Disruption has been a frequent word used to describe the positive changes that many industries experience once they adopt blockchain solutions. The world of finance is one that has seen biggest innovations and solutions powered by blockchain. One of the features of blockchain driving the biggest changes in finance is tokenization.
In this discussion, I want to talk about the current state of traditional finance and investment. Then, we will also see how much innovations and opportunities tokenization has brought to the world of finance. Now lets take a background look at the state of traditional finance and investment today.
Finance and investment before tokenization
The nature of finance and investment before the emergence of blockchain technology was most brick-and-wall. Established financial institutions mainly banks handle every transaction related to money. Everyone must own and operate a bank account in order to participate.
Financial institutions are mainly governed by central bodies like governments or owned by individuals. Cash transactions are the most popular in financial transactions as people exchange fiat money for goods or services. People often come to deposit or withdraw money. Or they came to make or receive payments. Each bank is known to offer some specific products, but generally all are money related.
For investments, there are usually central bodies that control investment instruments. Banks again remain a big player. Banks offer many investment products like interests for savings, loans and other products like that. Beyond the banks, there are stock markets that allow companies to list shares and invite the public to buy them. Again, the stock market like banks have a central body that controls it.
The above represents the state of finance and investment before the arrival of blockchain technology. More than a decade after blockchains arrives and introduced tokenization among other things, finance has been transformed drastically. The same could be said of investment. Lets see some noticeable and innovative changes in these sectors.
Tokenization brought disruption
Various aspects of blockchain technology contributed to the massive innovation of the finance and investment sectors. One of the key drivers of this disruption is called tokenization. This feature of blockchain technology makes it possible to create tokens whose value represent real-world assets that could be bought, sold or held as investment.
Through tokenization, a lot of thinks could take on digital forms. It includes intellectual property like works of art, music or written text. Physical assets like land, building, machinery and other commodities could also be tokenized. Even physical activities like participating in an event or being an active member of a project could all be tokenized. Tokenization has made it possible for participants to do trading of values, assets and other assets on the blockchain digital space. Consider some possibilities:
- Fractional ownership: One of the biggest changes that came to finance and investment through tokenization is the opportunity to acquire assets in fraction. Assets with massive value was formerly out of the reach of investors or buyers with small budget. Such assets were usually reserved for big spenders like wealthy individuals or large organizations.
A massive property like land, expensive machinery or even company shares is now possible to be purchased by anyone that is interested through tokenization. Once a token is created to represent that asset, anyone that is interested could purchase some of the tokens based on their budget. Now instead of just one customer buying the complete asset in bulk, multiple participants could simply purchase fractions of it and become part-owners.
Fractional ownership opens up finance and investment markets to all. There are now so many opportunities to get involved because everything that was once traded as a bulk asset could not be tokenized and get many people involved in the purchase or investment.
- Globalization of markets: Another great innovation which tokenization brought to finance and investment is expanding the market scope of these sectors. Before now, location was a big challenge to participating in finance or investment markets. Banks are usually operative in countries, and the same could be same of investment instruments. Only people within the jurisdiction could participate.
Tokenization made finance and investment markets limitless in scope, enabling people everyone to connect and participate. Because blockchains are hosted on the internet, people with internet access could now become investors or users of a particular finance product or participate in investment. Location is no longer a limitation because the internet is a global network where blockchain projects are hosted.
With a global access to finance and investment markets, project owners could access a very large market that was not available before tokenization and blockchain. And for the users that join from all over the world, there have never been a time like this when it was possible to safely invest in projects across the world.
- Round-the-clock markets: Time was one limitation of traditional markets even till this day. Banks have their opening and closing times. They often do not work on weekends and holidays. The same of true of stock trading markets. These traditional markets often operate only during work hours. They are not accessible all the time. But assets tokens markets are different.
Crypto token markets are always 24/7 trading markets. They are hosted on the internet, a network that knows no holidays or weekends. Hence, the market operates round the cloth. Also, users can always have access to their tokens from any point so long as they are connected to the internet. They are able to check their crypto wallets, access markets and do trading. This ease of access and constant availability gave token markets a big edge over traditional markets.
Conclusion
Today, there is a huge disruption going on in the traditional finance and investment markets big thanks to tokenization. At no other time has these markets been so inclusive, allowing everyone that wishes to participate. Tokenization makes asset markets to be liquid. That allows everyone to purchase tokens that represents real-world assets and make fractional ownership possible.
People can now invest in digital assets from all over the world because of tokenization. These markets are always available for trading and welcomes everyone. These are innovations made possible by tokenization.